Alltel advocates for the consumer

Alltel Wireless, the country's fifth-largest wireless provider, prides itself on being the “good neighbor” of telecom and the “customers' advocate.” As another bragging right for the rural provider, it was the first to pioneer social network-style calling plans with its My Circle service. Back in 2006, almost six months before T-Mobile came out with its similar myFaves feature, Alltel told customers they could choose any 10 numbers on any network to call for free. Since then, calling networks have evolved into a solid alternative to family plans.

Alltel's My Circle, like T-Mobile's myFaves, combines an icon-driven interface that displays a user's most frequently called people. Last month Alltel announced that it would expand My Circle to offer new and existing customers the option of upgrading to include 20 numbers or downgrading to only five.

“I think that Alltel is really instrumental in providing perceived value for subscribers, and perhaps at this point in the game, it is all about loyalty and reducing your churn,” said Jill Aldort, senior analyst of consumer mobility applications for Yankee Group. “We are at such a high level of [wireless] penetration — about 76% penetrated in the U.S. market — that there's not that much room to grow. It is really a retention game.”

Lesa Handley, senior vice president for consumer strategies for Alltel, said that this change was in response to consumers' diverse wireless needs, as well as an opportunity to regain the attention of consumers who previously had ruled out Alltel as not meeting their calling pattern or wireless needs. She also pointed out that in the larger urban markets where competition is more intense, this service is another way for Alltel to compete effectively with Tier 1 companies.

This may be a smart move, according to Aldort. In many markets, the Tier 2 and Tier 3 players continue to be squeezed out by the bigger operators due in large part to the level of consolidation in the industry, she said. In the past year, the country's two biggest wireless carriers have been on acquisition sprees, with AT&T acquiring Dobson Communications and Edge Wireless and Verizon taking over Rural Cellular.

In light of the growing size of these Tier 1 powerhouses, Alltel is moving its focus elsewhere. According to Wade McGill, senior vice president of product development, Alltel's traditional approach to growth also has been through acquisitions of different wireless carriers. But now, as the industry has consolidated more and more, the company is looking toward growing organically.

“A lot of people thought that because we had traditionally focused on Tier 2/Tier 3 rural markets, that we couldn't compete in some of the larger metro markets,” McGill said. “But really the product offering is the same. … If you are in Shreveport, La., or Cleveland, Ohio, you probably want the same mobile experience.”

The mobile experience consumers want may well be a free one. Aldort noted that as carriers add more minutes to plans, the effective price per minute has come down so far that carriers can't go much lower. Furthermore, according to Yankee Group research, average cell phone users only call around five people on a regular basis.

Alltel allowing subscribers to increase the number in their My Circle may have limited appeal, but for existing customers who've grown attached to the calling plan, Aldort said, it functions well as a “loyalty play.”