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Cingular cleaning out the TDMA cellar

Cingular caused a big stir today when it revealed it would be charging its 4.7 million remaining time division multiple access subscribers a $5 per month surcharge until they upgraded to a newer GSM model. Consumer groups aren't really happy, as I'm sure neither are the millions of customers who will incur the charge.

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It's a pretty cutthroat way of Cingular telling its customers to either get with the new program or take off. And while it may not win the operator many friends among consumer advocates, it certainly won't hurt its bottom line. Cingular has basically reached the point--it probably reached it some time ago--in which its TDMA and analog networks are no longer a prop it can lean against while building out its new GSM networks. They're now just liabilities.

Cingular's GSM footprint is nationwide and, in many areas, far more extensive than its TDMA network, thanks not only to new builds but also its acquisition of AT&T Wireless. And Cingular is not just maintaining the separate networks. It has to keep separate billing and back-office operations for the two customer bases. In cases like prepaid, Cingular is running as many as five different billing systems, one for each of the GSM and TDMA services run by Cingular and AT&T Wireless and one for the new GoPhone service. As a Cingular spokeswoman pointed out today, for every customer that switches from TDMA to GSM, it makes it that much more expensive per customer to maintain the network for the remaining subscribers.

What's more, those TDMA customers aren't exactly Cingular's most profitable ones. According to Cingular Chief Operating Officer Ralph de la Vega, TDMA customers account for 8% of total subscribers but only 2% of minutes used. Many of them signed contracts years ago but never upgraded phones or service plans when those contracts expired. They don't use the new revenue-generating services like text messaging, gaming or ringtones because their equipment isn't capable of supporting them. They're essentially Cingular's least desirable customers. Although Cingular maintains it will try to keep those customers by upgrading them to GSM phones and plans, I certainly wouldn't be surprised if Cingular was happy to see them go if they offer any resistance.

The fact that Cingular is being aggressive about migrating its customer base to GSM shouldn't come as any surprise to us in the industry. We knew this was coming since 2001 when Cingular and AT&T Wireless announced their transition plans. The operator has to drive people off if it has any hopes of retiring the TDMA system by 2008. But 4.7 million customers are a lot of people, especially considering all of the customers Cingular alienated during its merger with AT&T Wireless in 2004. That's a lot of bad blood.

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