Customers Using Competitive Local Phone Providers Are On The Rise And Spending More On A Broad Range Of Telecom Services, According to Taylor Nelson Sofres.

Business & Technology Editors

JENKINTOWN, Pa.--(BUSINESS WIRE)--Aug. 5, 2002

Competitive local phone providers (CLECs) continue to increase their penetration in both the consumer and business telecom markets, despite widely reported financial woes in the telecommunications industry, according to telecom market information gathered by Taylor Nelson Sofres (TNS) Telecoms.

Consumer research from TNS Telecom's Bill Harvesting(R) shows that during the 12 months ending March 31, 2002, CLEC penetration of U.S. households grew from 7.8 percent in the first quarter of 2001 to 10.3 percent in the first quarter of 2002 - an increase of almost 32 percent. At the same time TNS Telecom's BusinessWave(R) research shows a rise of 22 percent in CLEC penetration in the business telecom market - from 23 percent in the first quarter of 2001 to 28 percent at the close of the first quarter of 2002.

During the 12-month period, households and firms using CLECs for their local telephone service spent more per month for telecommunications services than households using an incumbent provider (ILEC) such as the former Regional Bell Operating Companies. On average, a residential household using a CLEC spent $142.69 per month on all telecommunications services (local, regional toll, calling card, long distance, wireless, cable/satellite TV and Internet access), while households using an ILEC spent only $136.40 per month, almost a 5 percent difference.

Even more notably, businesses using CLECs spent 110 percent more, on average, than businesses using ILECs, spending an average of $870.48 monthly, while ILEC customers spent an average of $414.02.

A Dichotomy Emerges

Not only are CLEC customers spending more, but they are also spending more on telecom's biggest areas for future revenue growth. Households using CLECs spent more per month for local service, wireless phone service, cable/satellite TV and Internet access, while households using an ILEC spent more per month for services such as regional toll service, calling card calls and long distance services.

     Average Monthly Spending by Households using CLECs vs. ILECs
              (Second Quarter 2001 - First Quarter 2002)

                                     ILEC                       CLEC

Local                               $36.97                     $39.91

Regional Toll                        $2.83                      $2.60

Card                                 $0.90                      $0.56

Long Distance                       $13.41                     $10.14

Wireless                            $31.26                     $35.47

Cable/Satellite TV                  $36.95                     $39.41

Internet                            $14.08                     $14.60

Total                              $136.40                    $142.69

"The data indicates that CLEC users are spending more in telecom growth areas such as wireless, cable and satellite TV and Internet services. While many motivations for this trend come into play, this apparent dichotomy may place the CLECs in a pivotal position as their share of the market continues to grow," said Charles White, Vice President at TNS Telecoms.

CLEC Customers vs. ILEC Customers

In many ways CLEC residential customers are not very different from ILEC households. In terms of socio-economic status and income level CLEC and ILEC customers are very similar, with CLECs showing only a slight skew towards higher income customers. However, CLEC customers are definitely younger than ILEC households, with 47 percent of their customers being under 40 years old compared to only 38 percent of ILEC customers. Further, CLEC households also have larger families, with 52 percent having three or more members in their household compared to only 41 percent of ILEC customer households having more than three members.

"As the number of CLEC customers grows, we are beginning to get a complete picture of the differences between CLEC and ILEC customers," said White. "In general, consumers using a competitive local provider are younger, have larger families and spend more on telecom services when compared to customers using an ILEC. This information will be helpful in exploring the future of a more competitive telecom marketplace and its customers."

About the Research

TNS Telecoms collects responses through its Bill Harvesting(R) database from 32,000 U.S. households that provide their complete set of telecommunications bills, promotional bill inserts and telecom direct mail communications each year. In the business market, TNS Telecoms' BusinessWave(R) research gathers telecom behavior information from small, medium and large businesses across the U.S. Together this syndicated information provides a number of product offerings including databases, reports and online applications allowing national, state, city and micro level analysis across the U.S.

About TNS Telecoms

TNS Telecoms is a global provider of strategic and tactical market information and analysis for telecom service providers and the entire telecommunications industry. Its range of syndicated research solutions and custom capabilities allows TNS Telecoms to meet the changing market information challenges of telecom-related businesses. For more information please go to www.tnstelecoms.com.

TNS Telecoms is the specialist telecoms division of Taylor Nelson Sofres (TNS). Through its international network of 230 offices in more than 50 countries, Taylor Nelson Sofres provides market information services in over 80 countries to national and multi-national organizations. It is ranked as the fourth largest market information group in the world. Further information on Taylor Nelson Sofres is available from the corporate Web site: www.tnsofres.com.

Note: Total dollars spent on services shown come from actual bills submitted by households participating in TNS Telecoms' Bill Harvesting program and are spread across all households receiving their local telephone service from either a CLEC or the ILEC serving their area whether or not they subscribe to the service (e.g., cable/satellite TV). Underlying these overall spending data are: (1) the percentage of households having/using each service, and (2) the actual dollars spent by those households on each service (including all fees, surcharges and taxes).