“I’ve been waiting for this date for a while; I’m glad it is finally happening,” says Thomson, a senior business development manager at a marketing and communications agency, who says she spends between 1,000 to 2,500 minutes per month on her cell phone and has become increasingly frustrated with what she says is sporadic service. “As soon as I know I can keep my number, I am so gone.”
That’s exactly what providers fear. In an already competitive market, number portability will give many consumers like Thomson, who had been reluctant to give up her cell phone number, another excuse to dump their service and sign up with a competitor. Cell phone providers can take some comfort from the Federal Communications Commission ruling Monday that consumers will also be able to switch their home phone numbers to cellular phones, which might help make up for some cell phone company defections to competitors. Still, the Management Network Group, Inc., which provides management consulting services to the global communications industry, says the wireless industry should be prepared to handle about 30 million “porting” (or switchover) requests between cell phone providers in the first year alone after the ruling takes effect.
Complaints about the cellular phone industry more than doubled between 2001 and last year, when BBB offices nationwide processed more than 21,500 grievances. “There were so many complaints it just about paralyzed some office’s operations,” says Ron Berry, senior vice president of the Council of Better Business Bureaus.
Paula Fleming of the BBB in Boston, where Verizon’s regional headquarters is located, says her office received nearly 200 complaints about cellular phones, the most for any category, over the past six months. The office in the Kansas City area, where Sprint PCS is headquartered, registered about 5,000 complaints, primarily concerning wireless service, billing issues and early termination fees. In the first half of this year, the Federal Communications Commission also logged 8,020 customer complaints about the wireless industry–about three percent more than during the same period a year earlier. Most complaints revolved around billing and rates or phone service.
Thomson has some concerns with the quality of service she gets now from AT&T, saying it has been spotty–even dropping service mid-call at times–since she moved to Chicago about two years ago. But what really made up her mind for her was when one of the buttons on her phone stopped working, and she learned she’d have to pay full price for the new phone she wanted, though it was then being offered to new customers for free. “I thought, why stay? If I switch services I can get a free phone with more features,” she says.
Those kinds of offers are likely to increase this month as providers try to lure consumers away from competitors, and convince others to drop their home phones in favor of cell phone service. Many are also increasing efforts to encourage existing customers to stick with their service. Sprint, for instance, is contacting customers whose phone use doesn’t seem to fit their plans (they either overrun allotted minutes each month or fall far short of the maximum) to offer programs that might better fit their calling habits. While companies claim their new specials are linked to the holidays, not the number portability date, the major carriers have all stepped up their promotional deals this month–offering incentives like free plan upgrades for existing clients as well as free minutes and generous cell phone subsidies for new customers.
Providers have also spent millions of dollars training their customer services and sales representatives and upgrading their technology to accommodate the new number portability. “It has required some pretty extensive retooling of our infrastructure, and training across all our sales channels,” says Nextel spokeswoman Karen Miller, who estimates her company will have spent $100 million before November 24.
Verizon puts its tab at $60 million or so. Cingular plans to have spent $210 million by the end of this year, and more than $150 million more next year, on costs related to local number portability, including marketing and training costs, acquisitions, and infrastructure improvements. And Sprint PCS estimates its related costs at “hundreds of millions of dollars,” says spokesman Dan Wilinsky.
Some consumers–particularly those that switch to a new service or plan–may begin seeing “recovery” or “regulatory” fee charges (from about 25 cents to $1.75 a month) on their monthly bills this year or next to cover some of the costs related to local number portability. But that’s small change–literally–compared to some of the savings being advertised this month. “Right now, the consumers are definitely in the driver’s seat and they should try to get as much as they can,” says Parsons of J.D. Power & Associates.
Thomson is hoping to do just that. Though AT&T spokesperson Rochelle Cohen says the company has a wide range of programs in place to reward customers for loyalty and is making renewed efforts to retain its customers, it may be too late to convince Thomson. After shopping around, she says she plans to switch to Verizon, which friends rated highly for its coverage in her area. Verizon also gives customers $100 towards a new phone when they renew after the first two-year contract expires.
Charles Mahla, a senior economist who tracks the wireless phone industry for Econ One, says the expected switch-overs will bring large expenses for the providers moving customers around. But companies like AT&T can take heart. “Once the dust settles, will any [carrier] actually end up with major losses in subscribers? Probably not,” says Mahla. Just as Thomson switches to Verizon, others will probably be moving in the opposite direction.
