Tuesday, September 16, 2003

Cellular providers could see upheaval

Survey says millions of users could switch

By Mike Boyer
The Cincinnati Enquirer

One out of every three U.S. wireless-phone customers might switch carriers when portable local numbers begin this fall, new research from Cincinnati's Convergys Corp. found.

After court challenges and several delays, a Federal Communications Commission rule takes effect Nov. 24. It allows cellular customers to retain their phone numbers when they switch carriers in their local calling area. Now, when cellular users switch, they must obtain a new number.

Known as WLNP (for wireless local number portability), the change is expected to mean big changes for the nation's wireless companies.

The Convergys research, based on a survey of 3,077 wireless users this summer, found that more than half - 51 percent - agreed strongly or somewhat with the statement "My wireless number is very important. I'll do anything to avoid changing it."

But with that no longer a concern, wireless customers looking for a better deal or service won't hesitate to search for a new carrier, Mike Cholak, Convergys vice president for market research services, said Monday.

Some analysts think that portable numbers could trigger carrier price wars and much higher numbers of customers switching, known as churn.

Asked their likelihood to switch as a result of number portability, 35 percent in the Convergys survey said they were either extremely likely, very likely or somewhat likely to do so.

The Convergys survey, done through Survey Sampling International, had a margin of error of plus or minus 1.8 percentage points. As part of its business, Convergys provides billing services for wireless phone companies.

Costly for companies

"Industry analysts estimate it will cost more than $1 billion in the first year and $500 million each year after that,'' Laura Merritt, spokeswoman for Verizon Wireless in Columbus, said about the change.

She says Verizon, the nation's largest wireless carrier, has already spent more than $60 million on new systems and a new center in Murfreesboro, Tenn., to handle customer switching.

The costs cover software and systems to allow the carriers to:

• Communicate with each other.

• Process the change from one carrier to another.

• Make changes to billing records.

Verizon expects to employ 1,000 at its Tennessee center.

"For years, all the carriers have been competing with each other; now we have to have systems in place to communicate with each other," said John Willis, director of wireless business development for Cincinnati Bell Wireless.

Bell getting ready

Cincinnati Bell Wireless, which has more than 300,000 customers in the Cincinnati-Dayton area, is expanding its call-center staff and adding systems to handle the increase in customer switching.

Willis declined to say how much the unit of Cincinnati Bell Inc. is investing.

Cincinnati Bell Wireless could be more at risk to switching than other carriers because it offers service without long-term contracts.

But Willis said the company thinks that its lack of long-term contracts is a plus rather than a negative.

''Because we have no monthly contracts, we have to be our best every day," he said.

Cincinnati Bell Wireless' rate of customer switching is among the lowest in the industry. Since launching wireless service five years ago, the company's churn rate has been between 1.5 percent and 1.7 percent each month. The industry average is better than 2 percent a month, Willis said.

What switching means

The possibility of almost 50 million of the nation's estimated 145 million cellular subscribers switching providers when portability takes effect wasn't necessarily the most surprising thing in Convergys' survey, Cholak said.

While most of those surveyed were aware of number portability, Cholak said, "Very few were aware of what it meant."

For example, customers can keep the same number when switching in the same geographic area, but not if they're relocating from, say, Cincinnati to Los Angeles.

For that reason, Merritt said, customers considering switching carriers should look at their existing local calling area and the calling area of the new carrier they're considering.

Initially, the new rule applies to the nation's top 100 markets, including Greater Cincinnati.

Additionally, the Convergys survey found that those most likely to switch carriers are those who spend more on cellular service.

After fighting number portability in the courts, Verizon has done an about-face and is now embracing the change. The company says it won't collect fees from customers who want to switch or any fees in advance of the switch, which some carriers are charging.

Verizon said it will re-examine how to recoup the cost of switching customers after November.

Cellular service providers in the area

• Cincinnati Bell Wireless, unit of Cincinnati Bell Inc.

• Cingular Wireless, joint venture of SBC and BellSouth.

• Nextel, unit of Nextel Communications

• Sprint PCS, unit of Sprint Corp.

• T-Mobile, owned by Deutsche Telecom AG and created through the acquisition of VoiceStream Wireless.

• Verizon Wireless, joint venture of Verizon Communications and Vodafone.


E-mail mboyer@enquirer.com.

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