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  • 1. Convergence and Communications Report 2: Take-up and Use of Communications by Small and Medium Enterprises March 09
  • 2. © Commonwealth of Australia 2009 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to the Manager, Communications and Publishing, Australian Communications and Media Authority, PO Box 13112 Law Courts, Melbourne VIC 8010. Published by the Australian Communications and Media Authority ACMA offices Canberra Melbourne Sydney Purple Building, Benjamin Offices Level 44, Melbourne Central Tower Level 15, Tower 1 Darling Park Chan Street, Belconnen 360 Elizabeth Street, Melbourne 201 Sussex Street, Sydney PO Box 78, PO Box 13112 Law Courts PO Box Q500 Belconnen ACT 2616 Melbourne VIC 8010 Queen Victoria Building NSW 1230 Tel: 02 6219 5555 Tel: 03 9963 6800 Tel: 02 9334 7700, 1800 226 667 Fax: 02 6219 5200 Fax: 03 9963 6899 Fax: 02 9334 7799 TTY: 03 9963 6948 Australian Communications and Media Authority
  • 3. Contents SUMMARY............................................................................................................................1 INTRODUCTION..................................................................................................................3 Research objectives .............................................................................................................................................3 1 METHODOLOGY...............................................................................................................5 2 SME PROFILE....................................................................................................................6 3 TAKE-UP AND USE OF COMMUNICATIONS...........................................................10 SME use of voice communication technologies...............................................................................................11 SMEs and the Internet.......................................................................................................................................12 Factors influencing the take-up of new and emerging communications ......................................................13 Activities performed on the internet................................................................................................................23 Impact of broadband.........................................................................................................................................28 4 ATTITUDES TO COMMUNICATION TECHNOLOGIES........................................34 Importance of services.......................................................................................................................................34 Looking forward: Critical services in the next 12 months.............................................................................36 CONCLUSION.....................................................................................................................37 Australian Communications and Media Authority i
  • 4. SME take-up and use of communications Summary This is the second report in the Convergence and Communications series, which examines changing trends in the take-up and use of communications services by Australian consumers. This report draws on quantitative research examining the use of communications services by small and medium enterprises (SMEs). SMEs are actively participating in the digital economy through the innovative application of communication technologies to their business operations and service delivery, and account for nearly 99 per cent of all Australian businesses. SME innovation in the use of communications therefore has the potential for economy-wide benefits in the form of growth in productivity, and increased participation in the digital economy by Australians in general. Continuing technological innovation, particularly in the areas of broadband internet and wireless communications, is providing SMEs with greater choice in communication. This in turn is providing SMEs with greater flexibility in meeting their operational and customer needs. Approximately 95 per cent of SMEs are connected to broadband internet, demonstrating a growing reliance on the internet as a channel for e-commerce. SME use of communications innovations relates to increasing choice, increased business flexibility and reduced operating costs and is complementary to the use of the fixed-line telephone. While there has been significant substitution within specific types of communication technologies as a result of technological innovation, such as the shift from 2G to 3G and from dial-up to broadband internet, the fixed-line telephone continues to be an important feature of SME communications use. Fifty-two per cent of SMEs in 2008 were estimated to use 3G mobiles, up from 37 per cent in 2007, an increase of 41 per cent. However, SMEs continue to value the fixed-line telephone, 85 per cent identifying the fixed- line telephone as a very important communication technology, compared with 74 per cent for broadband internet and 71 per cent for mobiles. Business characteristics, such as industry of operation and whether or not the business perceived itself to be innovative, affect the propensity of SMEs to adopt emerging communication technologies, such as VoIP. While VoIP was used by an estimated 16 per cent of SMEs overall, its use was significantly higher for certain industry sectors, such as finance and insurance (29 per cent) and communications, property and business services (26 per cent). SMEs in the finance sector in general had the highest level of adoption of communication technologies such as 3G, voice over internet protocol (VoIP) and broadband internet. Australian Communications and Media Authority 1
  • 5. Investigation report SMEs in non-metropolitan areas were more likely to use 3G mobiles, at 65 per cent compared with 45 per cent of SMEs in metropolitan areas. This can be partly attributed to the closure of the CDMA network. A larger proportion of SMEs in metropolitan areas used or owned a VoIP service—18 per cent, compared with 13 per cent of SMEs in non- metropolitan areas. SMEs that export or considered themselves innovative at the time of the survey were more likely than non-exporting or non-innovative SMEs to take up new and emerging communication technologies. SMEs see the internet as a critical business tool for the purposes of dealing with customers, managing supply chains and undertaking activities such as banking and selling products or services. Communication is the largest single business activity undertaken via the internet by SMEs, with 98 per cent having used the internet to communicate with customers and suppliers. Other significant activities undertaken online included: ● searching for information on products and services (89 per cent) ● research (85 per cent) ● banking (83 per cent) ● accessing directories (81 per cent) ● paying for products and services (76 per cent). However, factors such as industry of operation, business size, location and whether a SME exports or not affected the type and level of activities undertaken online. The role of broadband internet in underpinning SME engagement with the digital economy is significant. SMEs have recognised the value of broadband internet in increasing the efficiency of their online operations, with approximately 95 per cent of SMEs connected to some form of broadband service. Furthermore, broadband is seen by the majority of SMEs as having a positive impact on their business operations, with 78 per cent of SMEs reporting a positive impact—usually in the form of increased efficiencies in the speed at which activities can be undertaken, such as banking online rather than in person. 2 Australian Communications and Media Authority
  • 6. SME take-up and use of communications Introduction Continuous technological innovation and the widespread use of communication technologies have underpinned economic development, productivity growth and the emergence of the digital economy. This is manifested for example in the development of new content services, business models and alternatives to traditional voice services. Australian small and medium enterprises (SMEs) are increasingly participating in the digital economy through the application of communication technologies to their day-to-day business processes, which is also transforming traditional business operations, supply chains and interactions with customers. In turn, consumer participation in the digital economy is increasing through new and transformed digital services, customer service delivery channels and SME demand for relevant skills. In Australia, SMEs account for nearly 99 per cent of all businesses. They are therefore in a unique position to drive the digital economy through continuous innovative application of communication technologies to their business operations. ACMA has a particular interest in SME take-up and attitudes towards communication technologies, as an indicator of the performance of the telecommunication sector in meeting community needs. ACMA also has an interest in understanding SME demand for communication technologies as part of its broader responsibilities to report and advise on matters affecting consumers of carriage services, including consumer satisfaction and benefits. ACMA also has responsibility to conduct research into issues relating to internet content and internet carriage services and conduct community education (section 94, Schedule 5 of the Broadcasting Act 1992). Research objectives The main objectives of this report are to: 1. identify changes in the level of take-up and use of various communication technologies by SMEs, particularly emerging services such as voice over internet protocol (VoIP) 2. ascertain the essential communications tools used by SMEs 3. gain an understanding of the changing attitudes of SMEs to communication technologies in an environment of increasing choice and service convergence 4. ascertain how factors such as business size and industry sector influence SME take-up and use of communications 5. gain insight into how SMEs are using communication technologies to participate in the digital economy. Through this research, ACMA is seeking specifically to: ● quantify the take-up and use of communications by Australian SMEs ● identify the drivers of communication service use by SMEs ● identify future communication technology needs of SMEs. Australian Communications and Media Authority 3
  • 7. Investigation report This is the second report in the Convergence and Communications series and builds on earlier research undertaken in 2007 by ACMA and published in the report, Telecommunications Today Report 2: Take-up and Use by Small and Medium Enterprises. 4 Australian Communications and Media Authority
  • 8. SME take-up and use of communications 1 Methodology Sensis® Business Index survey data has been used as a primary data source for this research report. In addition to the standard business survey, ACMA commissioned Sensis to field additional questions about telecommunication use, take-up and attitudes. Sensis conducted telephone interviews with 1,800 small and medium enterprises (SMEs) between 28 April and 30 May 2008. Businesses interviewed were drawn from all metropolitan and major non-metropolitan regions within Australia; however, the sample excludes businesses in the agricultural sector. Survey results were weighted by selected ANZSIC1 divisions within the metropolitan and non-metropolitan region of each state and territory to help ensure the sample reflected the actual SME population distribution. The Australian Bureau of Statistics Business Register, as at June 1998, was used to help weight the sample to be representative of the total business population. Data from Sensis® Business Index May 2007 was used to produce time-series comparisons throughout the report. Rounding Discrepancies may occur between the sums of the component items and totals due to the effects of rounding. Definitions For the purposes of this research, a ‘small enterprise’ is a business employing between 1 and 19 people, and a ‘medium enterprise’ is a business employing between 20 and 200 people. The term ‘communications’ includes all voice—fixed-line and mobile telephone, and voice over internet protocol (VoIP) and data services—and dial-up and broadband internet services including ADSL, cable, satellite and wireless. A ‘standard mobile telephone (not able to access the internet)’ refers to a 2G mobile telephone throughout the report. 1 The Australian and New Zealand Standard Industry Classification is an industry classification jointly produced by Australian Bureau of Statistics and Statistics New Zealand. Australian Communications and Media Authority 5
  • 9. Investigation report 2 SME profile According to the Australian Bureau of Statistics, there were 2.01 million small to medium enterprises (SMEs) in Australia at June 2007, making up nearly all actively trading businesses in Australia.2 SMEs make a large contribution to the Australian economy, with three quarters of a million small businesses employing 4.1 million people and a further 1.1 million non-employing small businesses.3 Significant changes in the business practices of SMEs as a result of using communications services have an economy-wide impact on general growth in productivity. Therefore ACMA has a particular interest in SME take-up and attitudes towards communication technologies as an indicator of the performance of the telecommunication sector in meeting community needs. Figure 1 shows that 96 per cent of SMEs are classed as ‘small’, with less than 20 employees. The remaining five per cent have between 20 and 200 employees and are classed as ‘medium-sized’ enterprises.4 Figure 2 shows the distribution of annual turnover for SMEs in 2008. Figure 1: SMEs, by number of employees Small enterprise Medium enterprise 53% 21% 15% 6% < 1% 4% 1–2 3–4 5–9 10–19 20–99 100–200 Number of employees Source: Sensis® Business Index, May 2008 (n = 1,769). 2 This includes 1.17 million non employing businesses. ABS Catalogue 8165.0. Counts of Australian Businesses, including entries and exit, June 2003 to June 2007, released 14 December 2007. 3 Speech from The Hon Dr Craig Emerson MP at the Council of Small Business of Australia Dinner, 20 February 2008; available at < http://minister.innovation.gov.au/Emerson/Pages/COUNCILOFSMALL.aspx >, accessed on 11 December 2008. 4 ABS definition of small and medium enterprise. 1321.0 Small business in Australia, 2001. 6 Australian Communications and Media Authority
  • 10. SME take-up and use of communications Figure 2: SMEs, by distribution of annual turnover 35% 14% 14% 10% 8% 1% 1% 1% 5% 3% 3% 4% on on n on on on 0 0 00 0 00 io ow 00 00 ill i ill i 00 ill i il li i ll ill i ,0 ,0 kn m m m 0, 0, m m 0, m 00 00 $5 $3 $5 $1 $2 0 0 't $1 20 $5 $1 $1 $2 on to to to to er r$ to /D to to to to nd 0 0 on on ve 00 ed 00 00 00 0 on on U 00 il li il li O ,0 us ,0 0, 1, ill i il li m m 01 1, $1 $3 ef 01 m m $5 .1 .1 R $5 $1 $6 1 $1 $2 $1 Source: Sensis® Business Index, May 2008 (N = 1,800). A large proportion of SMEs are family-run businesses (66 per cent). The majority of businesses reported operating from business premises (70 per cent), with a further 28 per cent operating from home offices. SMEs are predominantly located in metropolitan areas (66 per cent, compared with 34 per cent in non-metropolitan areas). SMEs operate in various industries, with the largest proportion in the communications, property and business services sector (24 per cent), followed by the retail trade sector (19 per cent) and building or construction (13 per cent). Australian Communications and Media Authority 7
  • 11. Investigation report Figure 3: SMEs, by industry of operation Accommodation, cafes and Cultural, recreational restaurants and personal Manufacturing services 4% 8% 8% Building/Construction Health and community services 13% 8% Finance and 4% insurance 8% Wholesale trade 24% Communication, 19% property and business services 4% Retail trade Transport/Storage Source: Sensis® Business Index, May 2008 (n = 1,769). According to the Sensis Business Index 2008, 14 per cent of SMEs exported goods or services in the last year. At the time of the survey, the majority of Australian SMEs considered themselves innovative, with 18 per cent self-assessing as highly innovative, 34 per cent somewhat innovative, 31 per cent slightly innovative, and the remaining 17 per cent as not innovative at all. On average, medium-sized businesses generally operate for longer than small businesses. Approximately 71 per cent of medium-sized businesses are estimated to have been in operation for 20 or more years, compared with 36 per cent of small businesses. 8 Australian Communications and Media Authority
  • 12. SME take-up and use of communications Figure 4: SMEs, by size and age of business 13% 27% 17% 0–9 years 10–19 years 27% 37% 20–29 years 30–39 years 14% 40 or more years 23% 30% 7% 6% Small Medium Source: Sensis® Business Index, May 2008 (n = 1,769). Australian Communications and Media Authority 9
  • 13. Investigation report 3 Take-up and use of communications The ubiquitous use of communication technologies is transforming the way small and medium enterprises (SMEs) do business. For example, the adoption of the internet has underpinned the growth of electronic commerce (e-commerce). Consumers are also driving SME participation in the digital economy by increasingly seeking information and purchasing goods and services online—and SMEs have responded to this demand. A new generation of broadband-capable communication technologies are facilitating integrated electronic supply chains, flexible work arrangements in the form of teleworking, and new customer service delivery channels for content-rich applications and services. This section of the report examines the take-up and use of communication tools by SMEs and the adoption of more advanced technologies such as 3G and voice over internet protocol (VoIP). It also explores the factors that influence SME take-up and use of these technologies. 10 Australian Communications and Media Authority
  • 14. SME take-up and use of communications SME use of voice communication technologies High levels of fixed-line and mobile phone use continued to be recorded by SMEs. The take- up and use of these services has remained at a fairly similar level since 2007, reflecting the fact that SMEs largely consider these services to be complementary. Figure 5: Voice communication technologies currently used or owned by business 100% 98% 93% 94% 2007 2008 16% 13% Fixed-line telephone Mobile telephone VoIP (Voice over Internet Protocol) telephone Source: Sensis® Business Index, May 2007 (n=1,668) and May 2008 (n = 1,769). The similar level of fixed-line and mobile telephone take-up since 2007 indicates that SMEs are less inclined to substitute their fixed-line than household consumers, with subscription rates for household fixed-line services peaking in 2004.5 This affiliation of SMEs with their fixed-line telephone may be explained by the nature of particular businesses and by concerns over retaining customers. Overseas research provides additional insight into SME attitudes to the fixed-line and mobile telephone. A study in the United Kingdom and Ireland revealed that SMEs have shown a strong reluctance to switch from fixed-line to mobile phones, citing costs and inconvenience as the main reasons. Other reasons included business image and reliability.6 There has been an increase in the take-up of 3G mobiles by SMEs since 2007, concurrent with a reduction in the number of SMEs recorded having a 2G mobile telephone. 5 ACMA (2008) Fixed-Mobile Convergence and Fixed-Mobile Substitution in Australia, <http://www.acma.gov.au/WEB/STANDARD/pc=PC_311026> 6 Accuris Networks (2007) Research Study into UK & Ireland SME Market, available at < http://www.accuris-networks.com/Files/sme_research_jan08.pdf>, accessed on 11 December 2008. Australian Communications and Media Authority 11
  • 15. Investigation report Figure 6: Businesses that currently use or own mobile phone 81% 71% 2007 52% 2008 37% 3G mobile telephone 2G mobile telephone Source: Sensis® Business Index, May 2007 (n = 1,668) and May 2008 (n = 1,769). New technologies have provided households, consumers and SMEs with alternatives to accessing voice communications. However, VoIP remains an emerging voice communications technology, with only 16 per cent of SMEs using a VoIP service in 2008, compared with 13 per cent in 2007. Survey results also reveal that VoIP services are being used concurrently with traditional fixed-line voice services in line with the view that SMEs see new and emerging communication technologies as complementing the fixed-line telephone. SMEs and the Internet The internet has created new opportunities for SMEs to reach consumers regionally and internationally. SME adoption of the internet reached 97 per cent in 2008. 12 Australian Communications and Media Authority
  • 16. SME take-up and use of communications Type of internet connection Broadband is the most common type of internet connection adopted by SMEs, with 95 per cent of SMEs estimated to be connected to some type of broadband service: 56 per cent using DSL/ADSL, 19 per cent cable and 12 per cent wireless broadband internet connections. Figure 7: Type of broadband connection Satellite Don't know Wireless 1% 12% 12% Cable 19% DSL/ADSL 56% Source: Sensis® Business Index, May 2008 (n = 1,541). Factors influencing the take-up of new and emerging communications This section examines factors influencing the take-up and use of new and emerging communication technologies, such as 3G mobiles, VoIP and broadband internet, providing insight into possible drivers and barriers to increased participation in the digital economy. The main factors considered to have an influence on the take-up and use of new and emerging communication technologies are: ● size/number of employees ● industry of operation ● location (metropolitan or non-metropolitan) ● whether the business has exported goods or services in the last year ● level of innovation ● age of the business ● confidence in the future ● whether the business is seeking to expand. Given the high levels of broadband adoption across the SME sector, an analysis of broadband take-up by the business characteristics identified above was not generally undertaken. Australian Communications and Media Authority 13
  • 17. Investigation report Technologies such as 3G and VoIP offer SMEs greater choice and flexibility in meeting the communication and operating needs of a business. They also offer the potential for significant cost savings through reducing call costs and increasing efficiencies through using electronic payment options (e-payments) rather than paper-based methods. The level of take- up and use of emerging communication technologies also has implications for the telecommunication regulatory framework, both in terms of ensuring that new technologies are meeting community expectations and that consumers in general are able to make informed decisions in an environment of increasing communication choices. 14 Australian Communications and Media Authority
  • 18. SME take-up and use of communications SIZE OF BUSINESS The size of a business has the strongest influence on the take-up and use of communication technologies. Medium-sized businesses had greater levels of adoption than small businesses of 3G mobiles, VoIP, the internet and broadband connection. The majority of medium-sized businesses (74 per cent) used 3G mobiles, compared with just over half of small businesses (51 per cent). The highest level of take-up of 3G mobiles was recorded by SMEs with 100 to 200 employees, with 82 per cent owning or using 3G mobiles. SMEs with 10 to 19 and 20 to 99 employees also recorded high levels of 3G usage, at 71 per cent and 73 per cent, respectively. Figure 8: Take-up of 3G mobiles, by number of employees Medium 74% 26% Small 51% 49% 100–200 82% 18% Yes 20–99 73% 27% Number of employees No 10–19 71% 29% 5–9 55% 45% 3–4 55% 45% 1–2 46% 54% Source: Sensis® Business Index, May 2008 (n = 1,769). Nearly a quarter of medium-sized SMEs (24 per cent) owned or used VoIP, compared with 16 per cent of small businesses. SMEs with 100 to 200 employees had the highest level of VoIP use, at 34 per cent. SMEs with 10 to 19 employees recorded the second-highest level of adoption of VoIP, at 27 per cent. Nearly all medium-sized enterprises are connected to the internet (99 per cent), compared with 96 per cent of small enterprises. Medium-sized businesses recorded a higher proportion of broadband connection, compared with small SMEs. Of those with an internet connection, the level of broadband take-up by medium businesses remained at 97 per cent since 2007, while there has been a four percentage point increase (from 90 to 94 per cent) in the adoption of broadband by small SMEs. Australian Communications and Media Authority 15
  • 19. Investigation report Figure 9: Take-up of the broadband by number of employees, 2007–08 99% 100% 97% 96% 95% 97% 94% 94% 96% 92% 92% 90% 88% 2007 2008 Small Medium 1–2 3–4 5–9 10–19 20–99 100–200 Number of employees Source: Sensis® Business Index, May 2008 (n = 1,645). INDUSTRY OF OPERATION The industry that a SME operates in is an influencing factor in the take-up and use of communication technologies such as 3G and VoIP. Adoption levels for the internet, however, were not examined by industry, given the high levels of internet use among Australian SMEs. SMEs in the financial sector are the highest users of communication technologies, including take-up of 3G mobiles, VoIP and the internet. SMEs in the communications, property and business services sectors also recorded high adoption levels. This is supported by ABS data which found that a higher proportion of businesses from the financial and insurance sector (18 per cent) reported the introduction of supporting activities for business operations, such as systems or processes for purchasing, accounting or computing, compared with the lowest level of seven per cent, recorded by the retail trade sector.7 The finance and insurance sector recorded the highest level of 3G penetration, with nearly two-thirds of SMEs estimated to own or use 3G mobiles. This is followed by the wholesale trade and retail trade sectors, at 57 per cent and 55 per cent, respectively. The health and community services sector reported the lowest level of 3G adoption, at 41 per cent. (Figure 10). 7 ABS (2008), Innovation in Australian Business, 2006-2007. 16 Australian Communications and Media Authority
  • 20. SME take-up and use of communications Figure 10: Take-up of 3G mobile telephone, by industry of operation Finance and insurance 63% 37% Wholesale trade 57% 43% Retail trade 55% 45% Communication, property and business services 55% 45% Yes Accommodation, cafes and restaurants 53% 47% No Building/Construction 52% 48% Manufacturing 50% 50% Transport/Storage 48% 52% Cultural, recreational and personal services 46% 54% Health and community services 41% 59% Source: Sensis® Business Index, May 2008 (n = 1,769). The adoption of VoIP was highest among SMEs in the financial sector at 29 per cent followed by over a quarter (26 per cent) of SMEs in the communications, property and business services sector and 23 per cent of SMEs in the wholesale trade sector. Figure 11: Take-up of VoIP, by industry of operation Finance and insurance 29% 71% Communication, property and business services 26% 74% Wholesale trade 23% 77% Transport/Storage 17% 83% Manufacturing 14% 86% Yes No Cultural, recreational and personal services 13% 87% Building/Construction 13% 87% Accommodation, cafes and restaurants 11% 89% Retail trade 8% 92% Health and community services 4% 96% Source: Sensis® Business Index, May 2008 (n = 1,769). Australian Communications and Media Authority 17
  • 21. Investigation report LOCATION The location of an SME affects the levels of take-up of new and emerging voice communication technologies. SMEs in non-metropolitan areas recorded greater adoption of 3G than SMEs in metropolitan areas, at 65 and 45 per cent, respectively. This may be the result of the CDMA network closure in April 2008, with many consumers switching from the CDMA network to 3G mobile services in non-metropolitan areas. A larger proportion of SMEs in metropolitan areas use or own a VoIP service. Nearly one-fifth (18 per cent) of SMEs in metropolitan areas recorded use of VoIP, compared with 12 per cent of SMEs in non-metropolitan areas. EXPORT GOODS OR SERVICES The export of goods or services by an SME affects the level of adoption of certain types of communication technologies. While non-exporting SMEs recorded a higher level of 3G adoption than exporting SMEs (53 and 49 per cent, respectively) a significantly higher proportion of exporting SMEs used VoIP compared with non-exporting SMEs (25 and 15 per cent respectively). This difference may be attributable to managing the cost of international calls to suppliers and customers. Figure 12: Take-up of VoIP, by SMEs exporting goods or services Exported goods or services 25% 75% overseas in the last year Yes No Have not exported goods or services 15% 85% overseas in the last year Source: Sensis® Business Index, May 2008 (n = 1,769). SMEs that export products and services are more likely to have an internet connection. Nearly all SMEs (99 per cent) that exported products or services in the last year are connected to the internet, while 96 per cent of SMEs that did not export are connected. SMEs that export goods or services compared with those that do not export have similar levels of broadband connection, at 95 per cent of those that export and 94 per cent of those that do not. 18 Australian Communications and Media Authority
  • 22. SME take-up and use of communications LEVEL OF INNOVATION To some extent, the level of innovation by an SME had an influence on the take-up and use of communication technologies. SMEs that described themselves as highly innovative were more likely to adopt VoIP. However, the level of innovation by an SME had little influence on the take-up of 3G, with similar levels of take-up and use recorded across the different levels of reported innovation. A larger proportion of highly innovative SMEs used VoIP than SMEs that reported that they were not innovative at all—20 per cent compared with 11 per cent. Figure 13: Take-up of VoIP, by level of innovation Highly innovative 20% 80% Somew hat 16% 84% innovative Yes No Only slightly 16% 84% innovative Not at all innovative 11% 89% Source: Sensis® Business Index, May 2008 (n = 1,769). Note: excludes ‘don’t know’. There was marginal difference in the use of broadband internet by perceived level of innovation. Australian Communications and Media Authority 19
  • 23. Investigation report Figure 14: Broadband take-up, by level of innovation Highly innovative 96% 2% Somew hat 95% 5% innovative Yes No Only slightly 95% 4% innovative Not at all innovative 90% 10% Source: Sensis® Business Index, May 2008 (n = 1,645). Note: excludes ‘not sure’ and ‘don’t know’. AGE OF BUSINESS SMEs in operation for between 10 and 19 years recorded the highest level of VoIP use, at 21 per cent. Businesses aged 40 years or more recorded the second highest level of VoIP take-up at 17 per cent. This may be the result of a higher proportion of older businesses being medium businesses, which recorded a higher level of VoIP take-up. Figure 15: Take-up of VoIP, by age of business 0–9 years 15% 85% 10–19 years 21% 79% Yes 20–29 years 11% 89% No 30–39 years 9% 91% 40 or more years 17% 83% Source: Sensis® Business Index, May 2008 (n = 1,769). 20 Australian Communications and Media Authority
  • 24. SME take-up and use of communications CONFIDENCE IN THE FUTURE The level of confidence in the future had a small impact on a business’s decision to take up communication technologies. The level of confidence about the future did not influence the take-up of 3G mobiles and had only a small impact on VoIP take-up. SMEs that were fairly confident and extremely confident about the future at the time of the survey recorded the highest proportions of VoIP use, at 19 and 17 per cent, respectively. Figure 16: Take-up of VoIP, by confidence in the future Extremely confident about 17% 83% the future Fairly confident 19% 81% about the future Neither confident Yes nor w orried about 14% 86% the future No Fairly w orried 12% 88% about the future Extremely w orried 12% 88% about the future Source: Sensis® Business Index, May 2008 (n = 1,769). GROWTH OF BUSINESS The expected level of growth of an SME to some degree influenced the take-up of new and emerging communication technologies. SMEs actively seeking expansion at the time of the survey were more likely to have adopted 3G and VoIP compared with those seeking to become smaller. Sixty per cent of SMEs actively seeking expansion at the time of the survey owned or used 3G mobiles, compared with 40 per cent of SMEs seeking to become smaller. Australian Communications and Media Authority 21
  • 25. Investigation report Figure 17: Take-up of 3G mobile telephone, by business growth We are actively seeking significant 60% 40% expansion We are seeking to 54% 46% grow moderately Yes No We are seeking to 51% 49% stay the same size We are seeking to 40% 60% become smaller Source: Sensis® Business Index, May 2008 (n = 1,769). Note: excludes ‘none of these’. The level of expected growth at the time of the survey also had an impact on the take-up of VoIP among SMEs, with a quarter of SMEs actively seeking expansion using VoIP for voice communications, compared with 17 per cent of SMEs seeking to become smaller. Figure 18: Take-up of VoIP, by business growth We are actively seeking significant 25% 75% expansion We are seeking to 19% 81% grow moderately Yes No We are seeking to 11% 89% stay the same size We are seeking to 17% 83% become smaller Source: Sensis® Business Index, May 2008 (n = 1,769). Note: excludes ‘none of these’. 22 Australian Communications and Media Authority
  • 26. SME take-up and use of communications Activities performed on the internet The internet has led to changes in the way many SMEs communicate and conduct their business, underpinning business transformation and the development of new business models. The internet provides SMEs with an alternative means to undertake key business activities, to communicate, access information and industry knowledge, manage customer relations and perform essential tasks such as banking and marketing in a more efficient and timely manner. Figure 19 shows the top activities undertaken via the internet by Australian SMEs. The most common online activities relate to communication and searching for information for business purposes (98 per cent and 89 per cent, respectively). E-commerce activities such as banking and paying for goods and services are also undertaken by the majority of SMEs (83 and 76 per cent of SMEs, respectively). Figure 19: Activities performed on the internet by SMEs To communicate via email 98% To look for information about products and services 89% To get reference information or research data 85% Internet banking 83% To access telephone directories 81% To pay for products and services 76% To place orders for products and services 72% To access and use online catalogues 72% To receive payments for products and services 68% To streamline communications w ith customers and staff 64% To use a w ebsite to advertise or promote business 58% To take orders for your products and services 57% Source: Sensis® Business Index, May 2008 (n = 1,769). Note: Figure depicts activities performed by more than 50 per cent of SMEs. While there has been little change in the activities performed on the internet by SMEs between 2007 and 2008, there has been a slight increase in the use of the internet for e- commerce. E-commerce refers to using the internet to order and pay for products and services.8 Receiving payments for products and services recorded the greatest increase in activity since 2007 (nine percentage points). Increased online activity was also recorded for the use of online auction sites to sell goods and to place orders for products and services, an increase of eight percentage points respectively over the period. 8 E-business Guide, <http://www.e-businessguide.gov.au/understanding/e-business/what_is>, accessed 29 October 2008. Australian Communications and Media Authority 23
  • 27. Investigation report The activities performed on the internet are influenced by the size of the business. Medium- sized businesses use the internet for e-commerce more than small businesses do. Medium- sized businesses use the internet more than small businesses to use a website to advertise or promote business (78 per cent, compared with 56 per cent of small businesses) and to streamline communications with customers and staff (82 per cent, compared with 63 per cent). Medium-sized businesses also demonstrated a greater propensity to promote the business using email marketing than did small businesses (44 per cent, compared with 28 per cent) and were also more likely to access and use online catalogues that list products and monitor markets or competition —87 per cent compared with 71 per cent, and 57 per cent compared with 42 per cent. Small businesses recorded a slightly higher proportion of internet use to access online auction sites to sell goods or services—22 per cent of small businesses compared with 18 per cent of medium-sized businesses. The most common internet activities performed by SMEs were similar across the industries: email, followed by looking for information, and accessing directories. Although a high proportion of SMEs undertake some form of business activity online, there is still considerable variation in the level of adoption of e-business practices between industries. Table 1 highlights this, presenting the top 10 internet activities with the highest level of industry variation for SME adoption. Taking orders online recorded the highest level of variation in adoption levels, with the cultural, recreational and personal services industry recording the highest level of use (76 per cent), compared with the lowest, at 30 per cent, for SMEs in the finance and insurance industry. Table 1: Highest and lowest internet activity, by industry 24 Australian Communications and Media Authority
  • 28. SME take-up and use of communications Percentage Activity Highest score Lowest score point difference Cultural, recreational and Finance and insurance To take orders for your products personal services and services 76% 30% 46% To monitor your markets or the Wholesale trade Finance and insurance competition 63% 26% 37% Accommodation, cafés and Building/Construction To use a website to advertise or restaurants; promote business Manufacturing 72% 35% 37% Accommodation, cafés and Building/Construction To advertise your business on restaurants other websites 44% 8% 36% Communication, property Cultural, recreational and To get reference information or and business services; personal services research data Finance and Insurance 98% 65% 33% Finance and insurance Health and community To streamline communications services with customers and staff 79% 49% 30% Cultural, recreational and Transport/Storage To promote the business using personal services email marketing 48% 16% 32% To receive payments for Manufacturing Finance and insurance products and services 79% 49% 30% Health and community Cultural, recreational and To access and use online services personal services catalogues 82% 58% 24% Source: Sensis® Business Index, May 2008 (n = 1,769). Note: Table displays activities with more than a 20 percentage point difference between the highest and the lowest industry of operation. A larger proportion of SMEs in metropolitan areas use the internet to promote the business on a website, monitor markets or competition and streamline communications with staff, compared with SMEs in non-metropolitan areas. However, a larger proportion of SMEs in non-metropolitan areas than those in metropolitan areas use the internet to place orders and receive payments for purchases or services. Figure 20: Internet activities, by location Australian Communications and Media Authority 25
  • 29. Investigation report To use a w ebsite to advertise or promote 48% business 62% To monitor your markets or the competition 35% 46% To streamline communications w ith customers and 58% staff 67% To promote the business using email marketing 25% 30% Non-metropolitan 18% Metropolitan To advertise your business on other w ebsites 23% To use online auction sites to sell goods or 19% services 23% To place orders for products and services 74% 71% Source: Sensis® Business Index, May 2008 (n = 1,769). Note: Figure displays activities with more than four per cent point of difference between metropolitan and non- metropolitan SMEs. A higher proportion of SMEs that export goods or services used the internet for e-business purposes than SMEs not exporting goods or services. SMEs that export goods or services use the internet to engage with international markets: ● The majority of SMEs that export products or services (76 per cent) use the internet to take orders for products and services, while just over half of SMEs that do not export perform the activity online (54 per cent). ● The majority of SMEs use the internet to advertise or promote their business. SMEs that exported goods or services recorded a proportionally higher level of online advertising than SMEs that have not exported. Figure 21: Internet activities, by exporting and non-exporting SMEs 26 Australian Communications and Media Authority
  • 30. SME take-up and use of communications To use a w ebsite to advertise or promote 78% business 54% To take orders for your products and 76% services 54% 60% To monitor your markets or the competition 40% To promote the business using email 44% marketing 26% To streamline communications w ith customers 76% and staff 62% Exported 83% To place orders for products and services Have not 70% exported To access and use online catalogues that list 79% products 70% To use online auction sites to sell goods or 28% services 20% 28% To advertise your business on other w ebsites 20% To look for information about products and 93% services you might w ant to buy 89% 78% Internet banking 84% Source: Sensis® Business Index, May 2008 (n = 1,769). Note: Figure displays activities with more than five per cent percentage point difference. Level of innovation also influences the activities performed online. SMEs that considered themselves more innovative at the time of the survey were more likely to use the internet for e-commerce activities: ● Seventy-four per cent of highly innovative SMEs use the internet to place orders for products and services, compared with 48 per cent of SMEs that are not innovative at all. ● Sixty-eight per cent of highly innovative SMEs use the internet to receive payments for products and services, compared with 61 per cent of SMEs that are not innovative at all. ● Seventy per cent of highly innovative SMEs use the internet to take orders for their products and services, compared with 43 per cent of SMEs that are not innovative at all. Australian Communications and Media Authority 27
  • 31. Investigation report Impact of broadband Broadband internet access has had a positive impact on the majority of SMEs, with 78 per cent identifying a positive impact, 21 per cent no impact and only one per cent a negative impact. Time savings, being able to access information or to research, and the general efficiency of broadband were the most frequently reported positive impacts. Figure 22: Positive impacts of broadband It is quicker / speed / time saving 47% Access information / research 20% More efficient 20% Improved productivity 11% It is easier / simplified things user 8% friendly Better communication 7% It allow s clients to access information 7% easier Speeds up the transfer of information 6% to clients Convenient to do business banking 6% Email 5% Communication speed up 5% No w aiting for dow nloads 4% Can receive large files / send large files 4% Source: Sensis® Business Index, May 2008 (n = 1,238). Note: Figure depicts positive impacts that were recorded by more than four per cent of SMEs. While the majority of SMEs recorded a positive impact from broadband, this varied depending on certain business characteristics. In terms of business size, a larger proportion of medium-sized businesses reported a positive broadband impact than did small businesses, at 88 and 77 per cent, respectively. 28 Australian Communications and Media Authority
  • 32. SME take-up and use of communications Figure 23: Impact of broadband, by business size Medium business 88% 12% Small business 77% 1% 22% 100–200 91% 9% Positive impact Negative impact 20–99 87% 12% No real impact Number of employees 10–19 85% 14% 5–9 79% 1% 20% 3–4 83% 17% 1–2 73% 2% 25% Source: Sensis® Business Index, May 2008 (n = 1,541). In terms of industry, SMEs in the cultural, recreational and personal services industry recorded the lowest level of positive impact of broadband, at less than 50 per cent. Furthermore, just over half (54 per cent) of SMEs in this sector believed broadband had had no real impact on their business. This compares with 70 to 90 per cent of SMEs in the other industries reporting a positive impact from broadband internet. While one per cent of SMEs reported a negative impact from broadband, seven per cent of SMEs in the health and community services sector reported a negative impact. However, this sector also recorded the second highest proportion of SMEs reporting a positive impact from broadband, 85 per cent. The variation in responses based on business size and industry may be due to factors such as the scale of the business operation and the type of activities undertaken online by these businesses. As Table 1 showed, there is considerable variation in the type of activities that SMEs across industries undertake online. Australian Communications and Media Authority 29
  • 33. Investigation report Figure 24: Impact of broadband, by industry Communication, property and business 90% 9% services Health and community services 85% 7% 8% Finance and insurance 84% 16% Accommodation, cafes and restaurants 81% 19% Positive impact Transport/Storage 80% 19% Negative impact No real impact Wholesale trade 78% 22% Manufacturing 75% 25% Retail trade 74% 1% 25% Building/Construction 71% 3% 27% Cultural, recreational and personal services 46% 54% Source: Sensis® Business Index, May 2008 (n = 1,541). A slightly higher proportion of SMEs in metropolitan areas recorded a positive impact of broadband than did SMEs in non-metropolitan areas (79 and 75 per cent, respectively). Figure 25: Impact of broadband, by location 79% 75% Positive impact Negative impact No real impact 2% 1% 20% 24% Metropolitan Non-metropolitan Source: Sensis® Business Index, May 2008 (n = 1,541). Broadband has had a positive impact on a higher proportion of SMEs that export goods or services in the last year than of those that did not export goods or services, at 92 and 75 per cent, respectively. 30 Australian Communications and Media Authority
  • 34. SME take-up and use of communications Figure 26: Impact of broadband, by export of goods or services Exported goods or services 92% 8% overseas in the last year Positive impact Negative impact No real impact Have not exported goods or services 75% 1% 23% overseas in the last year Source: Sensis® Business Index, May 2008 (n = 1,541). A higher proportion of SMEs that nominated themselves as innovative believe broadband has had a positive impact on their business than do SMEs that consider themselves not innovative at all. More than 80 per cent of SMEs that self-report as highly innovative or somewhat innovative believe broadband has had a positive impact, compared with 60 per cent of SMEs that do not consider themselves innovative at all. Figure 27: Impact of broadband, by level of innovation Highly innovative 81% 1% 19% Somew hat 85% 15% innovative Positive impact Negative impact Only slightly No real impact 77% 1% 22% innovative Not at all innovative 60% 4% 36% Source: Sensis® Business Index, May 2008 (n = 1,541). A higher proportion of those SMEs that were extremely confident about the future at the time of the survey recorded a positive impact of broadband (88 per cent) than did those that did not express confidence in the future (48 per cent). Australian Communications and Media Authority 31
  • 35. Investigation report Figure 28: Impact of broadband, by confidence in the future Extremely confident about 88% 12% the future Fairly confident 80% 1% 19% about the future Positive impact Neither confident nor w orried about 76% 4% 20% Negative impact the future No real impact Fairly w orried 74% 1% 26% about the future Extremely w orried 48% 52% about the future Source: Sensis® Business Index, May 2008 (n = 1,541). A higher proportion of those SMEs that indicated some intention at the time of the survey to expand the business recorded a positive impact from broadband than did those not seeking to expand. Figure 29: Impact of broadband, by business growth We are actively seeking significant 89% 11% expansion We are seeking to 85% 15% grow moderately Positive impact Negative impact No real impact We are seeking to 67% 1% 32% stay the same size We are seeking to 81% 13% 6% become smaller Source: Sensis® Business Index, May 2008 (n = 1,541). 32 Australian Communications and Media Authority
  • 36. SME take-up and use of communications A higher proportion of more-established SMEs, aged 40 years or more, recorded a positive effect from broadband internet (85 per cent) than did new businesses, those aged nine years or less, which recorded the lowest level of positive effect (73 per cent). Figure 30: Impact of broadband, by age of business 0–9 years 73% 1% 25% 10–19 years 76% 2% 22% Positive impact 20–29 years 82% 18% Negative impact No real impact 30–39 years 77% 23% 40 or more years 85% 2% 13% Source: Sensis® Business Index, May 2008 (n = 1,541). The overwhelmingly positive reported effect from adopting broadband internet provides evidence, together with increasing choice in communications, of the way in which the communications sector is meeting the needs of Australian SMEs (and, more broadly, the needs of the community). Australian Communications and Media Authority 33
  • 37. Investigation report 4 Attitudes to communication technologies Importance of services SMEs regard the fixed-line telephone as the most important communication technology, with 85 per cent regarding it as very important, compared with 74 per cent reporting broadband internet as very important, 71 per cent reporting mobiles and over one-quarter of SMEs identifying dial-up internet and VoIP as very important. The data reinforces the general finding of this report that SMEs regard communication technologies such as mobiles as being complementary to the traditional fixed-line telephone. Questions about SME perception of the importance of individual communication technologies were added to the 2008 survey, so there is no time-series comparison on these matters. Figure 31: Importance of communication technologies Very important 29% 30% Quite important 71% 74% 85% 26% 21% Neither important 13% nor not important 18% Somew hat 21% unimportant 18% 17% 20% 11% 6% Very 6% 16% 2% 3% 6% unimportant 2% 1% 3% Fixed line Mobile telephone Broadband VoIP Dial-up internet telephones internet (landlines) Source: Sensis® Business Index, May 2008 (n = 1,769). Medium-sized businesses placed a higher level of importance on the fixed-line telephone, mobile telephone and broadband internet than did small businesses, for example: ● Ninety-four per cent of medium-sized businesses described a fixed-line telephone as very important, compared with 85 per cent of small businesses. 34 Australian Communications and Media Authority
  • 38. SME take-up and use of communications ● Eighty-three per cent of medium businesses described mobile telephones as very important, compared with 70 per cent of small businesses. ● Eighty-seven per cent of medium businesses described broadband as very important, compared with 73 per cent of small businesses. However, a higher proportion of small businesses believe that VoIP is very important— 29 per cent, compared with 19 per cent of medium businesses. The industry of an SME influenced the level of importance it placed on communication technologies: ● Ninety-four per cent of SMEs that operate in the health and community services and 93 per cent that operate in the cultural, recreational and personal services sectors described the fixed-line telephone as very important, compared with 74 per cent of SMEs in the building or construction sector. ● Eighty-six per cent of SMEs that operate in the building and construction, and the finance and insurance industry sectors described mobile telephones as very important, compared with just over half, 53 per cent, of SMEs in the retail trade sector. ● Fifty-nine per cent of SMEs that operate in the transport and storage industry described VoIP as very important, compared with only five per cent of SMEs in the health and community services. ● Ninety-three per cent of SMEs in the finance and insurance sector described broadband as very important, compared with just over half (59 per cent) of SMEs in the building and construction sector. Businesses in metropolitan areas recorded a higher level of importance on more advanced communication technologies than did SMEs in non-metropolitan areas, for example: ● Thirty per cent of metropolitan businesses believe VoIP is very important, compared with 25 per cent of non-metropolitan businesses. ● Seventy-five per cent of metropolitan businesses believe broadband is very important, compared with 71 per cent of non-metropolitan businesses. By contrast, a higher proportion of SMEs in non-metropolitan areas recorded a higher level of importance for the fixed-line telephone than did SMEs in metropolitan areas, at 91 and 82 per cent, respectively. Australian Communications and Media Authority 35
  • 39. Investigation report Looking forward: Critical services in the next 12 months Just over two-thirds of SMEs regard a fixed-line telephone as an essential service for the next 12 months. This indicates that SMEs continue to have a strong association with the fixed-line telephone, and would therefore be less inclined to substitute the fixed-line for another communication tool. Nearly half of SMEs report a mobile telephone (47 per cent) and 37 per cent broadband as critical services for the next 12 months. Figure 32: Services critical in the next 12 months Fixed-line 68% 32% Mobile phones 47% 53% Broadband internet/ADSL 37% 64% Internet in general 13% 87% VoIP 5% 95% Yes No Dial-up internet 97% Email 99% Fax 99% Website 100% Speedier internet 0% 100% Source: Sensis® Business Index, May 2008 (n = 1,769). Note: excludes ‘none’ and ‘don’t know’. 36 Australian Communications and Media Authority
  • 40. SME take-up and use of communications Conclusion SMEs are embracing communication services and using them to participate in the digital economy through activities such as electronic service delivery, the management of customer relationships and the building of electronic supply chains. However, SMEs still have a strong affiliation with traditional communication services, such as the fixed-line telephone. The level of fixed-line telephone take-up has remained steady since 2007, while there is also a high proportion of SMEs that consider the fixed-line as an essential service over the next 12 months. This indicates that SMEs are less inclined to substitute their fixed-line for communication alternatives such as mobiles and VoIP. SMEs consider these emerging technologies as largely complementary to traditional services providing additional business flexibility. While the fixed-line telephone is still regarded as very important by SMEs, an increasing proportion are adopting 3G mobiles and VoIP services as tools for voice communication demonstrating the increasing communication choices available to businesses. Aspects of an SME’s profile contribute to a variation in the take-up and use of communication tools and the internet. A number of factors such as size, industry of operation, location, the export of goods or services, level of innovation, age of the business, level of confidence in the future and the state of business growth, have been identified as drivers in the adoption of these services. Medium size businesses are more likely to adopt emerging communication technologies, such as 3G, VoIP and broadband internet compared with small businesses. The industry of operation of an SME influences the level of importance placed on communication tools. SMEs in the financial industry reported a higher proportion of use of 3G mobiles, the internet and broadband. Those in the communications industry also reported a proportionately higher take-up of more advanced communications. The internet is an integral part of the business operations of the majority of SMEs with many of these businesses recording an increase in the use of the internet for e-business purposes. This is further demonstrated by the impact of broadband internet which is identified by an overwhelmingly majority of SMEs as positive due to its enabling of increased business productivity and efficiencies and increasing the availability of business information resources. Australian Communications and Media Authority 37