Customers: Friend or foe?

Feb 22, 2002 12:00 PM

The bandwidth glut, high prices, immature technology, inadequate implementation of the Telecom Act and the anemic capital markets have all been cited as the culprits for the recent demise of the telecom market. What we rarely hear about, however, are service providers' sub-par services to their customers. At eTinium, we conducted some random interviews with small businesses and consumers. We are not presenting a statistical sampling of a focus group, but rather some anecdotal evidence of the relationship between telecom service providers in general and their customers. Our interviews clearly point to the fact that all are suffering from an acute case of customer neglect.

High customer expectations

The Telecom Act of 1996 not only opened up the market to competition, but also to high customer expectations regarding quality of service and support. The rude awakening regarding substandard services, coupled with the poor economy, has psychologically pushed users to retrench until they understand what exactly they are spending their hard-earned dollars on. This is no doubt one of the reasons for churn rates ranging between 15% and 40% per year amongst cellular and long-distance carriers.

One would think that in today's economic climate, customer retention (in addition to customer acquisition) should be the major focus and the wisest investment for every service provider. Customer acquisition costs can range anywhere between $400 to $1000 per customer, depending on service type, with break-even points usually 1 to 3 years out. 

CRM and Web-based tools

To address their customer service issues, many service providers have installed fancy customer relationship management (CRM) systems, spending anywhere between $30 million and $120 million over 3 to 4 year period. CRM software typically includes database analysis tools, call-center applications, knowledge bases and Web-based self-help tools including Web-based chat, VoIP and intelligent e-mail processing.

The more carriers push mundane customer inquiries to another channel, the higher the return for both carriers and their customers. Customers will experience reduced wait times, and carriers will save substantial money. According to Telcordia, customer service makes up 18% of the personnel-related expenses in the traditional wireline business, and Web-based tools will help reduce the number of employees interacting with customers by as much as 30%.

However, analysts specializing in the CRM market claim that 70% to 90% of CRM implementations do not deliver on their promise. These are mind-boggling percentages in light of the millions of dollars that are spent on these systems. But when documenting users' negative experiences with customer support, coupled with the fact that CRM systems are often installed for reasons other than true customer support--to improve company processes and workflow, upsell and cross-sell to customers--the relative ineffectiveness of these systems come as no surprise. 

The following are some instances of terrible customer support that has led to customers dropping their service provides.

Long distance

We all know that long-distance margins are low and carriers are suffering, but AT&T's suffering must be particularly painful as evidenced by the recent experience of a small business owner, who changed a residential second line to a business line, retaining AT&T, his long distance carrier of 20 years, and his long-distance plan. For two months, the AT&T bills, always ranging between $100 and $200 continued coming on the ILEC bill. In the third month, AT&T sent its own bill for $960. It took the small business owner five call attempts and a 10- to 20-minute journey through the maze of an automated IVR system, until a CSR finally informed him that he does not have a business long-distance plan, but he was still obligated to pay the due amount. In response to the business owners' confusion, she informed him that AT&T's consumer and business entities were now separate companies, and it was the responsibility of the local carrier to inform him of AT&T's available long-distance plans!

He hung up in frustration but called again in a few days looking for a resolution and once again, after a 20-minute exercise of pushing various buttons through the IVR, falls on a helpful CSR who reduces the bill to $142 but mentions that there will still be a final bill that needs to be adjusted. The nightmare continues into the next month, and this time, the business owner is not lucky enough to fall on a pleasant and empowered CSR. She rudely transfers him to the billing department, which informs him that he received too big of a discount in the first place and this time the $750 bill can only be reduced to $248. He slams down the phone and changes long-distance companies on the spot.

AT&T recently announced that it will spend $2.6 billion to overhaul its customer care systems by co-sourcing with Accenture. This deal will supposedly eliminate 50% of AT&T's costs and focus on revenue generation through improved customer relationship management, Web and self-service technology, and AT&T Lab's "How May I Help You" IVR system.

In our technologically addicted society, CRM is often viewed as the panacea for good customer service. AT&T's new IVR system may cut interaction time by 80%, but it is ultimately a CSR who needs to be empowered to deal with a problem that was created in the first place by AT&T's lack of processes. Today apparently much of AT&T's customer care work force is outsourced--maybe AT&T would have been better off training, retaining and paying its own CSRs. 

Wireless

It is no secret that wireless carriers have spent more on customer acquisition than customer retention. Customer service is consistently rated low in wireless user surveys. Because price and coverage are becoming the equalizers, everyone's advice to the wireless carriers is to focus on customer service. However, try as they might, the currently installed CRM systems are not fancy enough to resolve issues on a first call.

A family on the West Coast owned three cellular phones, all with service from Verizon Wireless. The son moved back east, and Verizon Wireless was contacted to move the service to New Hampshire. The customer support organizations were not integrated, and the customer was bounced back several times between New Hampshire and the Oregon support centers. Finally a new number was issued, and the son was told to call in to activate the phone, yet he discovered that he did not have proper authorization. After several more attempts, Verizon Wireless informed him that the company could not find the telephone number. The cellular provider issued another phone number, and this time the phone was activated. 

The family was supposed to call within two months to exchange the phone with one that allows national roaming. During the waiting period, the family received bills on the phantom telephone number. After much haggling the charge was dropped and the phone was supposed to be shipped within the next two days. A month later the phone still had not arrived, and the family was still receiving bills for the phantom number. 

The family calculated they had spent a total of 12 hours on the phone with Verizon Wireless and canceled the service for the entire family, swearing to never recommend Verizon Wireless to any of their friends.

If CRM is supposed to track the number of customer calls typically required for problem resolution and customer churn, at what point in this saga did it raise a flag to some supervisor that the company is getting very close to losing a long-time and high-revenue (nearly $500 per month) customer?

Broadband

In the broadband world, DSL installation problems are well known. Service providers have bungled orders, self-installation directions have been a source of constant frustration, and customer service has been inadequate.

Now it seems to be satellite's turn, showing serious signs of customer neglect, even when subscriber numbers are far below DSL subscriber numbers. Earthlink launched Earthlink Satellite, powered by DirecWay, in May 2001, offering broadband connections via satellite dishes to the 32 million U.S. homes that will never have access to DSL or cable modem service. One of these customers was a small business owner in the Northwest.

Because the FCC mandates satellite installation by a professional installer, the actual installation went smoothly and even the original connection to Hughes' network worked flawlessly. The connection speed however was an altogether different matter. Although, Hughes, and thus Earthlink, claimed download speeds of up to 400 kb/s and upload speeds of up to 128 kb/s, they never informed the customer that these advertised rates were actually the signaling speeds and not the experienced Internet speed, since latency affects the actual available bandwidth. However, latency notwithstanding, Earthlink claimed the download speed should never go below 200 kb/s. 

The small business owner was technologically savvy and understood issues regarding latency and time-of-day usage, yet her connection speed never exceeded 80 kb/s. The Earthlink call center never believed her and treated her like a novice until she sent them copies of actual bandwidth speed through CNET and Thebandwidthplace.com. Some 12 calls, 15 emails and three months later, she finally fell on a knowledgeable rep who changed her DNS settings, which brought the speed up to somewhere between 200 kb/s and 600 kb/s.  

Exactly two weeks after she had reached high-bandwidth nirvana, her satellite Internet connection started intermittently connecting to certain sites and not to others. The Earthlink reps blamed it on Microsoft Internet Explorer. In dialup mode however, she was able to connect to anywhere, yet Hughes denied any responsibility. Earthlink claimed that she was the only one having this problem, yet a quick look at the DirecPC chat rooms quickly revealed that this was not the case.

Maybe this is the reason for the anemic 100,000 satellite Internet users, whereas Hughes had expected to have about 250,000 DirecWAY subscribers the end of 2001. Even the forecasters have reduced their estimates: Yankee Group and the Gartner Group both expected around 300,000 installations in 2001. Yankee has scaled back its expectations by at least 1 million subscribers per year through 2005. Compared with the more than 16 million U.S. satellite TV subscribers, less than 1% have transitioned to satellite for broadband.

In addition, although Earthlink's broadband revenues contributed 13% to the company's sales in 2001, it is difficult to understand how Earthlink is making any money on its satellite service. Basic call center metrics indicate that service providers spend an average of $1 per minute for customer assistance, and if the satellite issue for one customer has not been resolved after more than 30 hours (costing approximately $1800), when will Earthlink ever reach its breakeven point before this customer defects?

RBOCs

The RBOCs have their own customer service issues especially with consumers, but they are fortunate enough to have years of service experience to draw from. Industry statistics show that 45% of small and medium businesses choose to stay with their current ILEC because of quality of service.

However, although RBOCs appear to do well with basic services and queries, they falter when it comes to more complex requirements. Another small business owner had contacted Verizon for a T-1 line to his home, because he conducted a large portion of his business activities there. The Verizon rep did not know how to handle this request and was only trained to deal with business locations. Although the business owner documented his requirements in an e-mail, the request went unanswered and Verizon lost an easy $1000 per month. 

Customer service is ultimately a business philosophy of placing the customer at the top of the enterprise pyramid. All technologies including CRM and Web-based processes should revolve around this philosophy. Technologies do not deliver the basic human emotions of customer empathy, a helpful attitude and responsibility. Maybe the tight capital markets and the receding economy is the best thing that has happened to the telecom industry. Maybe the telecom world will now go back to those fundamental human needs instead of spending millions of dollars of easy money on technology. 

Goli Ameri is the President of eTinium, Inc. She can be reached at gameri@etinium.net or (503) 968-8437 .

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