UK: A line on the best phone. (1 of 2)

UK: A line on the best phone. (1 of 2) - Many British businesses are looking forward to the changes in the telecommunications industry. By Philip Beresford.

Last Updated: 31 Aug 2010

Many British businesses are looking forward to the changes in the telecommunications industry. By Philip Beresford.

British Rail, the cable television companies, even British Waterways ... barely a week passes without someone announcing plans to enter the fast liberalising telecommunications market.

Ever since Peter Lilley, the Trade and Industry Secretary, unveiled a consultative document in November outlining his intention to scrap the existing duopoly for voice telecommunications services enjoyed by British Telecom and Mercury, the world has been beating a path to his door.

Well they might. An exclusive survey of the Times Top 1000 companies carried out for Management Today by the pollster MORI shows that many British businesses are itching to change their telecoms habits.

The survey - of the all-important telecom managers in those companies - reveals a high degree of dissatisfaction with the current duopoly. When asked whether they thought that there was too much or too little competition in Britain, an overwhelming 73% of the respondents claimed that there was too little competition. Deregulation had also proved beneficial to 79% of the respondents in their capacity as corporate customers.

But for the potential new entrants to the £9 billion telecoms market the real prize comes with the news that 55% of the telecoms managers reported that they would use a third carrier if it entered the market. The Telecom Managers' Association, representing BT's top 500 corporate customers, reckons that its members collectively provide around 30% of the corporation's profits. Their views are naturally immensely important to telecoms operators.

The extraordinary pace of deregulation in Britain is also revealed in our survey. It is hard to recall that less than 10 years ago BT did not exist and The Post Office had a stranglehold on telecommunications. Even BT's managers recognise that deregulation and liberalisation have brought benefits to their customers. Indeed, the notion of dealing with customers is a fairly recent phenomenon for BT, as chairman Iain Vallance admitted. Customers, he declared, were once simply "subscribers or subs", who "could have any phone - provided it was grey, had a dial and came in our time - the Henry Ford stuff".

Real competition in telecommunications only began when Mercury entered the fray as a serious competitor six years ago. Since then the changes have been remarkable. Mercury has invested one billion pounds in building a modern fibre optic network around the country. In 1989-90 it spent some £273 million, and now claims around 4% of the total UK telecoms market. Its big success has come in the business market, where it has signed up some 30,000 customers, eager to exploit Mercury's cheaper call charges for long distance and international calls. On average these calls cost some 15% less than BT's equivalent charges.

But Mercury has so far failed to make any significant inroads into BT's near monopoly of residential business. With just 70,000 residential customers at the end of last year, Mercury is, and will probably remain, small beer beside BT. Still, its success in the business sphere is well recognised by the respondents to the MORI poll. Some 70% now admit to using both BT and Mercury.

Three years ago BT was the butt of public anger over the state of its phone boxes, the length of time that it took to effect repairs and the lack of itemised bills. BT has pulled its socks up and pumped money into its phone box network, while customers receive £5 a day compensation for every day that a line is down. It proudly boasts that its level of complaints is running at 0.12%, or one from each customer every six years. As a result, BT actually beats Mercury on some fronts. For example, 88% of the telecoms managers polled by MORI said that they were satisfied with BT's service, which was actually 2% more than the number satisfied with Mercury.

Significantly, both BT and Mercury now say that they welcome competition, though before the Government's plans to break the duopoly were unveiled, they discretely lobbied to keep the status quo. "We support the general proposals set out in the Government's consultative document on competition," Mercury says, while Tony Booth, managing director of British Telecom International, claims to be "itching for a fight, and the more competition the better".

The MORI findings also show that cost and reliability remain the chief preoccupations of telecoms managers. When asked what the most important factors were in deciding on a telecoms carrier, a hefty 63% said cost and 68% said reliability of the equipment and system.

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