1. © MORI 2004. Not to be used, reproduced or shown to any third party without the prior written permission of MORI End User Churn in the UK Broadband Market May 2004 Prepared for: David Lowrie Market Research & Analysis BT Wholesale Markets

2. Omnibus Broadband Data Who & Where? Penetration Profiles & Demographics

3. Broadband steady increase since January 2003, dial up access remained relatively constant Source: MORI Tech Tracker (represents GB adults age 15+)

4. Broadband now at just over 4 million households in UK, all home internet access around 12 million Source: MORI Tech Tracker (represents GB adults age 15+)

5. Profile broadband users UK All populationAll home internet users Use broadband at home %% Base:40601983718 Gender Male495456 Female514644 Age 15-24151821 25-34192122 35-44182327 45-541620 55-6413118 65+1963 Source: MORI general public omnibus April 2004

6. Broadband – more likely to be in “family” homes All populationAll home internet users Use broadband at home %% Base:40601983718 Have children in household Yes364553 No645547 Source: MORI general public omnibus April 2004

7. Strongest in London, SE. and West Midlands All populationAll home internet users Use broadband at home %% Base:40601983718 Government Office Region Scotland976 North East456 Merseyside222 North West1099 Yorks & Humberside987 East Midlands775 West Midlands51011 Wales544 South West985 Eastern911 London121115 South East141718 Source: MORI general public omnibus April 2004

8. Suppliers Used

9. Base: All respondents (998) Cable modem users more likely to have just considered one supplier for broadband QWhich of the following statements best describes how you decided what broadband supplier to use? Don’t know I only considered one supplier By region: Telewest 45% NTL 43% Other 35% I considered two or three providers of broadband I considered several providers and chose the one with the cheapest price

10. More than half use the broadband service of an existing supplier Q Which of the following applies to your current broadband provider? Base: All respondents (998) I subscribe to the broadband service of my existing telephone or cable supplier I subscribe to the broadband service of my existing ISP Don’t know I am using a different provider for broadband than my telephone/cable provider or previous ISP

11. Most have migrated from dial up, although a significant number for moved straight to broadband Q What type of internet connection did your household use before you adopted broadband Base: All respondents (998) Ordinary phone line – dial up internet access ISDN phone line Don’t know/Not sure Not previously connected Other

12. On average end users have been using broadband at home for 12 months – a youthful market Q How long have you been using broadband at home ? Base: All respondents (998) 4 – 6 months More than one year Don’t know/Not sure One month or less 2 to 3 months 7 – 12 months

13. These are the ‘hygiene’ factors when selecting suppliers Q How important are the following factors to you, when deciding which suppliers of broadband services to use? Speed of connection available Supplier has good/trustworthy reputation Reliable connection Cheap usage costs Quality of customer helpdesk Cheap installation costs % very/fairly important Base: All respondents (998)

14. These factors are of lesser importance Q How important are the following factors to you, when deciding which suppliers of broadband services to use? (Continued) Cost of phoning helpdesk Length of contract Availability of free modem Content provided by broadband supplier Better deal on telephone/digital TV package Billed on my ordinary phone or cable bill % very/fairly important Easy to sign up Base: All respondents (998)

15. Suppliers Seen

16. % Total awareness % Spontaneous awareness BT leading provider in levels of awareness for broadband Base: All respondents (998) ALL BT NTL AOL Tiscali Freeserve Telewest Virgin Net Yahoo Pipex Demon Bulldog

17. % Current usage % Total Awareness NTL performs well in terms of usage compared to its level of awareness Base: All respondents (998) ALL BT AOL NTL Freeserve Telewest Virgin Net Yahoo Pipex Bulldog Demon Tiscali

18. % Current usage % Seen advertising NTL above average in converting ad spend to usage, BT and Blueyonder also above average Base: All respondents (998) ALL BT AOL NTL Tiscali Freeserve Telewest Virgin Net Yahoo Pipex Bulldog Demon

19. Loyalty

20. Base: All respondents (998) 6% of users have ever switched broadband supplier Yes No Don’t know QHave you ever changed the supplier of your broadband connection?

21. QHow likely are you to switch broadband provider in the next 12 months? Expect to discontinue use of broadband completely = less than 1% Neither likely nor unlikely Very likely Fairly likely Fairly unlikely Don’t know Very unlikely 7% are very likely to switch supplier in the next 12 months Base: All respondents (998)

22. Disloyals – younger, more sophisticated users: 25 – 34 years old Access the internet at home via broadband through: ADSL Base: All respondents who have switched supplier in the past or who are very likely to switch (126) Subscribe to broadband services of: A cable modem Existing telephone or cable supplier Existing ISP Different provider than telephone/ cable provider or previous ISP Survey average % 33% 49% 46% 79% 10% 56% 22% Connection type before broadband: Ordinary phone line ISDN phone line 20% - Survey average+ Survey average

23. What drives disloyalty ?

24. Among likely switchers, value for money is the main driver influencing change: comprising a cheaper deal/faster connection Cheaper deal from other provider Base: All respondents who are likely to switch broadband provider (181) Reasons likely to influence the decision to change supplier over the next 12 months Fast connection from other provider Moving house Combining phone/ digital TV and internet provider High cost/ too expensive Poor customer service/ support/ helpdesk Poor connection/ unreliable Poor quality service Advertising by other providers

25. Among users who have switched supplier though, a cheaper deal from another provider influenced the decision to change, moving is house is also a catalyst for change for around a third Cheaper deal from other provider Base: All respondents who have switched provider (64) QWhich of the following influenced your decision to change supplier Fast connection from other provider Moving house Combining phone/ digital TV and internet provider

26. Around half of users who are likely to change supplier say that cheaper deals from their provider would stop them from changing Better customer service/ support/ helpdesk Better reliability/ connection Speed Cheaper/lower price/ deals Availability Q What could your current supplier do, if anything, to avoid you changing to another provider? Better service Upgrades/ free upgrades available Other Nothing Base: All respondents who are likely to switch broadband provider and gave an answer (144)

27. Overall among those who say they are likely to switch, just over a third say they would consider changing to BT BT (any brand) Base: All respondents who are likely to switch broadband provider (181) QWhich supplier of broadband services do you consider you may change to over the next 12 months Tiscali Freeserve AOL Virgin Net Telewest Bulldog NTL Pipex Don’t know

28. What makes the disloyals different ?

29. The top three most important factors to consider when deciding which broadband supplier to use are reliability of connection, cost and speed – a commodity market... Q Three most important factors when deciding which suppliers of broadband services to use Speed of connection available Supplier has good/trustworthy reputation Reliable connection Cheap usage costs Quality of customer service Cheap installation costs Base: All respondents who have switched supplier in the past or who are very likely to switch (126)

30. There appears to an opportunity to differentiate on quality of customer service and bundled packages Q Three most important factors when deciding which suppliers of broadband services to use Cost of phoning helpdesk Length of contract Content provided by broadband supplier Better deal on telephone/digital TV package Billed on my ordinary phone or cable bill Easy to sign up Availability of a free modem Base: All respondents who have switched supplier in the past or who are very likely to switch (126)

31. What can suppliers improve on ?

32. Having a reliable service is what users like most about the service. Among switchers, responses are not as positive Q What aspects of your current service do you most like? Good/cheap price/deal Speed Reliability/no problems Good/helpful customer service/ support/ helpdesk Easy to use Part of a package/package includes TV and phone Good quality service Base: All respondents who gave an answer (732) Nothing Survey AverageDisloyals (all have switched or very likely to)

33. Switchers are more likely to perceive poor customer service is an issue Q What aspects of your current service provider do you least like? Poor connection/ unreliable Poor customer service/ support/ helpdesk High cost/ too expensive Speed Difficult to access helpdesk / slow phone response Cost of calling helpdesk Nothing Base: All respondents who gave an answer (649) Survey AverageDisloyals (all have switched or very likely to)

34. For all broadband users price and speed of connection are important, customer support is potentially an area that suppliers can differentiate on Q What aspects of service can broadband providers improve on? Speed Customer service/ support/helpdesk Price Reliability/ connection Reduction of spam/ pop ups/ advertising Virus protection Everything Base: All respondents who gave an answer (617) Survey AverageDisloyals (all have switched or very likely to)

35. Conclusions

36. Heaviest users are 35-44 year old family homes, in W Midlands, London & SE To date, churn rates in the broadband market are relatively low. Just 6% of broadband customers have ever changed supplier ( 250,000 lines). However, as users become more confident with broadband, this churn rate is likely to increase. 7% of households are “very likely” to change supplier over the next 12 months. To date, users have been largely conservative in their selection of supplier. Nearly 80% are using an incumbent supplier for telephone, cable or ISP services.

37. Conclusions Consistently the factors end users rate as important to them are: –Reliability of connection –Speed of connection –Supplier with good trustworthy reputation –Cheap usage costs Those more likely to consider switching tend to be younger, more sophisticated end users. Price is an important driver to change. Cheaper deals from other providers is by far the main driver influencing the decision to change supplier among likely switchers Switchers are more likely to perceive poor customer service is an issue. There appears to be an opportunity to differentiate on quality of customer service and bundled packages.

38. Thank You – Any Questions?