Don't let poor voice quality chase away your best customers

Competition for wireless customers is fierce, and the recent advent of wireless number portability (WNP) has only added to the competitive environment. Successful wireless operators know that to compete effectively they need to do three things: increase average revenue per user (ARPU), decrease churn and increase market share. And the key to making all three happen is service differentiation.

Despite continued emphasis on pricing plans, coverage and data service offerings as differentiators, both industry analysts and consumer watchdog groups have noted in recent months that the next important differentiator among wireless operators will be the quality of their voice service.

For many years since the initial introduction and subsequent growth of mobile telephone service for the masses, customers have endured network service issues such as echo, background noise and poor sound quality when using their mobile phones. This tolerance has historically been attributed to a "halo effect" caused by the sheer utility of a wireless phone. However, after more than 10 years of widespread mobile phone use, today's savvy customer has different expectations. Users are now less tolerant, and new research reveals that they're more likely than ever to change operators when service problems occur. In fact, a recent survey by Isurus Market Research, a research firm focused on serving technology providers, shows that network sound quality is a hidden--yet significant and very real--issue that impacts both ARPU and customer churn.

In a phone survey of 450 active mobile subscribers throughout the U.S., respondents cited voice and sound quality as differentiators that could affect their mobile phone usage and choice of operator.1 Specifically, 72% of respondents said they would take and place more calls in noisy environments such as cars, restaurants and city streets if the quality of those calls was improved. Interestingly, the research also notes that more of the customers operators value most--those spending more than $60 per month--say they make most of their mobile calls in these noisy environments. And because these callers are often drowned out by background noise, or put off by annoying static and echo, they said they often either cut conversations short or avoid making calls in the first place. And operators know what that means--lost revenue, lost opportunity and, possibly, lost customers.

Subscribers aren't the only ones who are starting to pay attention to quality issues. Both mainstream media and industry analysts seem to agree that voice quality is the next key differentiator for wireless service providers.

Consumer Reports’ annual wireless study in the magazine’s February 2003 issue concluded, "Cellular telephone service is so bad that nearly a third of customers surveyed are seriously considering switching companies."2 Phil Marshall, director, wireless/mobile technologies with The Yankee Group, notes, "Operators have not paid sufficient attention to voice quality issues, particularly in noisy environments, and, if not addressed, leaves operators vulnerable to customer churn."

Voice quality is even more important now that WNP has removed a significant barrier to changing carriers. Analyst group In-Stat/MDR stated that number portability will have a significant effect on churn in the U.S., resulting in an additional 22.2 million churning subscribers in its first full year after introduction.3 TMNG indicated that 27% of the current 146 million wireless subscribers nationwide--about 39 million--would churn "as soon as they receive a better offer," and that more than 50% of wireless customers who had experienced service quality problems in the past year would switch carriers."4 And iGillott Research predicts a worst-case increase in churn of 10%, costing the wireless industry $20 billion over four years.5 In short, an increase of 25% to 33% in wireless churn is forecast as a direct result of customers' ability to keep their phone numbers when changing carriers.

It is expected that a majority of accounts lost to WNP will be business and enterprise customers, as they have the most to gain from retaining their phone numbers. Since business users have significantly higher ARPU, WNP's negative impact on revenue could be even greater than statistics have indicated.

The enterprise market segment represents about 40% of the total domestic market. In the TMNG study, "24% of large businesses (defined as companies with more than 500 employees) said they are ready to switch carriers once WNP becomes available." In addition, TMNG says that 33% of businesses using more than one wireless carrier said they would likely consolidate all their corporate wireless accounts to a single provider.

Worsening the problem is that corporate clients--mobile's highest-value customers--"spend about $71 per month compared to the industry-wide average of $59 per month."6 If one-third of wireless subscribers--around 50 million--are likely to switch carriers after WNP, and if 44 million of the domestic handsets are in the hands of business users, the implications are, in the words of TMNG CEO Rich Nespola, "staggering."

In addition, as long as wireless network quality lags behind that of landlines, the enterprise market is an unlikely candidate for migration to wireless-only. "The consumer market is one thing, but if the wireless industry expects to break lucrative business customers of their reliance on landline services, they would be well-served spending the next few years ironing out their nagging Quality of Service (QoS) issues and improving customer relations," notes Jason Ankeny, editor of Wireless Review's On the Air.7 Ankeny makes the valid point that because dependable telephone service can be critical to business success, enterprise users are more sensitive than individual users are to QoS issues.

Once wireless customers defect, many wireless providers use price wars as their only acquisition and retention weapon--a dangerous play, according to Yankee Group's Roger Entner. "When an industry enters maturity, the only way of getting more clients is luring them away from your competitors, and this is what your competitors will do if you have no churn-reducing program,"8 according to Entner, Yankee's program manager, wireless/mobile services.

It's an accepted fact within the wireless industry that, even with the growth of advanced services such as data and video, voice is still responsible for 80% of an operator's revenues. It would seem logical that if wireless operators improve the quality of their voice service, they'll improve their core business. Industry experts are now recommending that operators consider this important tenet when laying their business plans for this year--and recognize that by carefully engineering countermeasures into the network, all the major voice quality imperfections can be removed. Collectively, these technologies are known as Voice Quality Systems (VQS). 

 

 

Two of the most useful and popular features in a voice quality system are noise reduction (which eliminates unwanted environmental intrusions such as echo, static, and background sounds) and noise compensation (which boosts the voice signal so that both parties can hear each other clearly without turning up the volume on their telephone).

The most basic and familiar impairment to be repaired is echo. Echo cancellation has long been performed on long-distance networks. At first, these same processors were deployed to afford some level of protection for digital wireless networks. Today, advanced echo cancellers are available which are optimized for the mobile environment and provide improved silence suppression and noise management. In addition, they can be configured to also remove the acoustic echo, which is common on today's wireless handsets.

A second class of processing capabilities focuses on noise management. Unlike wireline phones, mobile phones are often used on trains, in cars and while walking in urban areas such as on city streets and mass transportation. Here, background noise can greatly reduce the user's ability to have clear, clean, functional communications. By conducting real-time analysis of the signal's frequency content, network-based terminals can remove unwanted environmental noise from the received signal and deliver clear voice signals to the called party.

Simultaneously, the signal level delivered to the noisy end can be modulated in real time to allow the listener to hear beyond the background noise. In field surveys, the combination of these two functions has allowed customer-perceived quality levels for calls made during NCAA basketball games to rival those achieved in a quiet room environment.9 This kind of easily-discerned improvement has the ability to increase the number and extend the duration of calls made by making the phone more functional under a broader set of conditions. And if the customer's phone is more useful while service is improved, chances are excellent that customer loyalty will receive a boost, which often results in increased revenues. Recall that, according to the Isurus study, 72% of wireless customers--nearly three in four--said they would be more likely to make calls if they had daily access to these voice quality capabilities.

Through careful noise processing, these systems can also allow the operator to use more and more aggressive voice compression in the network. As any wireless operator knows, more efficient compression results in increased call capacity in their most precious and limited resource: radio spectrum.

Beyond these classes of capabilities available today, design engineers are working to further combine the technologies of signal processing, mobile telephony and acoustic engineering to improve connection quality. Subjects under investigation include the interworking of disparate vocoders, improvements for working with voice recognition systems and digital messaging stores, to name a few.

In anticipation of the continuing demand for increased wireless telephone functionality, major equipment vendors are deploying voice quality hardware which can be used now and, as technical capabilities advance, can be upgraded in the field to add functionality via remote software download. This key attribute provides wireless operators vast amounts of scalability; they can meet their current needs now, and grow painlessly as their networks become more complex.

Since improving voice quality is high on consumers' and analysts' agendas--and the technology is not only available but highly affordable--why hasn't it been on the top of the wireless operator's to-do list? The keys to understanding this paradox are two simple words: access and awareness.

Access, in that the first hurdle every operator faces is deploying enough radio transponders to offer sufficient coverage of the regions in which they provide service. Without ubiquitous radio access, calls cannot be completed. Without reliable call completion, the quality of the delivered voice connection is meaningless. Awareness, in that many industry managers are still not alert to the quality of service that can be delivered over a well-engineered wireless network. Historically, the convenience of mobile communications has caused many users to learn to tolerate poor sound quality. In the Isurus survey, 63% of the people who had problems with sound quality did not bother to complain since they felt nothing would--or could--be done. 

However, with increasing competition and subscriber saturation, leading-edge operators are starting to deploy voice quality initiatives to tap this latent opportunity for increased customer satisfaction. As these programs are launched, overall consumer awareness will rapidly grow, and the passing grade for wireless calls will be significantly raised. Also, as mobile operators compete with wireline networks for user minutes, the "good enough" wireless strategy will melt away completely.

Given today's challenging business environment for telecom, a focus on voice quality offers a very compelling alternative. It can cost $200 per subscriber to provide increased coverage, but less than $2 per subscriber to provide improved voice quality. At that rate of expense, voice quality has a very quick, measurable ROI; the most conservative estimates put the average time to ROI at under one year.

Once in place, voice quality delivers meaningful value to all network users, day in and day out. Unlike discounts or free handsets, the value of the voice quality products remains in the network for years to come, allowing the operator to deliver differentiated service both now and in the future.

Voice quality. It's not just a hidden issue--it's a hidden business opportunity, with a great ROI.

 

1 Sound Quality Survey, Isurus Market Research and Consulting, September 2002

2 Annual "Complete Guide to Cell Phones," Consumer Reports, February 2003

3 "With LNP Deadline Settled, Search For Scapegoat Begins," Glenn Bischoff, TelephonyOnline.com, 6/16/03

4 "TMNG Study: Business Dissatisfaction Threatens Wireless Carrier Profitability," company press release, 7/28/03

5 "It's the End of the Wireless World As We Know It," Wireless Review, 9/1/03

6 "Study: High-Value Customers Most Likely to Port Numbers," Glenn Bischoff, TelephonyOnline.com, 9/15/03

7  "More Things Change, More Things Stay the Same," Jason Ankeny, Wireless Review's On the Air, 9/3/03

8  "Important to Reduce Churn," Elin Dunas, Contact (internal newsletter, Ericsson Communications), 4/29/02, page 13

9 Technical trials with Leap Communications, NCAA 2003 Women's Tournament: Mideast Regional Semifinal basketball game hosted by University of Tennessee Lady Volunteers, Thompson-Boling Arena, University of Tennessee, March 29, 2003

 

Clarke Ryan is vice president and general manager, Voice Quality Systems, for NMS Communications. He can be contacted at Clarke_Ryan@nmss.com.

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