It's the End of the Wireless World As We Know It

The battle was long, costly and hard-fought, but the FCC won. Wireless number portability will finally take effect on Nov. 24, 2003. Mobile customers are ready to begin churning in unprecedented numbers — and carrier executives' stomachs are likely to follow suit. But one carrier's subscriber loss is another's gain. Here are stories of three wireless operators whose commitment to customer care could serve as a model of stability in a newly portable world.

U.S. Cellular

Jack Rooney did not invent wireless customer service. Nor did he come down from the mountain with its commandments carved in stone on tablets nestled in his arms. But he has sung the gospel of customer service longer, louder and more consistently than many of his competitors.

When Rooney first entered the wireless industry as vice president and treasurer of Ameritech Cellular in 1990, he couldn't believe what he saw. Sure, he knew things would be different than they had been in his years at the helm of North American retail operations for tire and rubber manufacturer Firestone. The technology, the competition, the marketplace — he understood that wireless was a whole new ballgame.

But customer satisfaction — THAT was something Rooney knew all about. He had learned it inside out, top to bottom and side to side at Firestone. And keeping customers happy had to be the same, regardless of whether you were selling them steel-belted or cellular.

Didn't it?

“When I came to wireless, I had never seen anything like this,” said Rooney, now president and CEO of Chicago-based carrier U.S. Cellular. “Customers are not valued at all, churn rates are well into 30% and nobody is doing anything about it. That's just the way it is.”

Rooney's disgust with statistics like those turned into a crusade to turn them around. His passion for customer service is borne out in U.S. Cellular's uncommon knack for holding onto its customers — in Q2, the nation's eighth largest wireless carrier reported postpaid monthly churn rates of just 1.5%. The average annual churn rate for wireless carriers is somewhere between 25% and 35%, with acquisition costs now averaging $350 per individual customer.

“Customer service is sound not only from a customer retention standpoint, but because it costs so much money to replace customers,” Rooney said. “It takes a long time before new customers even begin generating revenue.”

Like it or not, with wireless local number portability (LNP) set to take effect on Nov. 24, customer-centric carriers like U.S. Cellular could be in a position to welcome huge numbers of new customers to the fold anyway. According to a recent study by analyst firm The Management Network Group, 39 million U.S. wireless users (roughly 27% of the nation's 146 million total users) are chomping at the bit to change carriers the minute a better offer comes along. Close to 9 million of them said they would move their service to another operator the day LNP takes effect.

In another TMNG study, 24% of large businesses (defined as companies with more than 500 employees) said they are ready to switch carriers once LNP becomes available. Also, 33% of businesses that currently subscribe to services from more than one carrier said they are now likely to consolidate their corporate wireless accounts to a single provider. With average revenue per user for business customers sometimes exceeding consumer ARPU by as much as $6 to $10 per month — and with a total of 44 million handsets in the current U.S. business wireless market — the implications are staggering.

Throughout both TMNG studies, respondents cited their carriers' customer service failings as the primary source of their discontent. In the consumer study, more than 50% of users who experienced service issues in the past year said they would switch carriers, with call quality and billing problems topping their list of complaints. Among large businesses itching to switch, 44% who experienced billing problems said they had to contact their carrier four times before the problem was resolved. And 50% of respondents with billing problems were forced to wait more than a month to see the issue resolved.

“The major differentiator is the way the product is delivered,” Rooney said. “[Other carriers] are just starting to understand that.”

U.S. Cellular preaches customer service across all levels of the company — whether you have a key to the executive washroom or it's your job to clean it, customer service is your top priority. “If you think about this industry, there are five to seven players in any given market and they all do things equitably,” said Jay Ellison, U.S. Cellular's executive vice president of operations. “Everyone can build or buy technology, and everyone can be very competitive in the pricing game. We stepped back and said, ‘How do we differentiate ourselves?’ The answer was customer satisfaction.”

According to Rooney, U.S. Cellular operates under the premise that its most important employees are the ones who interact directly with customers, whether in a retail store environment or in a call center. “In this industry we have more frequent customer contact than a lot of businesses, between speaking to customers over the phone and people coming into our stores,” Rooney said. “Our mantra is that we need to focus our resources on our frontline personnel.”

Call center associates are put through a rigorous four-week training curriculum, followed by ongoing training programs. U.S. Cellular also mandates leadership training for all managers, as well as leadership development workshops. All retail store and call center employees take part in what Ellison calls a “daily huddle” — before workers start their shifts, they discuss with supervisors changes to company policies, procedures and promotions. The idea for the daily huddle came to Ellison a few years back. While dining out during the annual CTIA Wireless conference, he watched a restaurant manager assemble his wait staff to coordinate the evening's shift. “It's a great vehicle for real-time coaching, input and development,” Ellison said.

U.S. Cellular stresses first-call resolution — while that doesn't mean problems are guaranteed an immediate solution, it does mean the customer shouldn't need to make follow-up calls to get the problem taken care of. To keep the machine running smoothly, Rooney said the company measures call center customer satisfaction ratings each month, based on information from customer surveys run by a third party. U.S. Cellular also takes technological steps to minimize potential billing snafus: “I dare say we're one of the few providers with every customer on the same billing system,” Rooney said.

Although Ellison said U.S. Cellular is beginning to consider some software-based enhancements to fight customer churn, the company remains firmly committed to its old-school approach. “Basic human interaction is very important to us,” Ellison said. “We get calls all the time from companies who say, ‘We can save you money with outsourced customer service.’ We will never outsource customer service — that's never going to happen here.”

Customer care literally falls into two categories,” Jeff Maszal said. “Carriers who are really good at it, and carriers who are really bad.”

Maszal, who heads the Research & Churn Management Practices at TMNG, declined to comment on his projections for specific carriers in the wake of Nov. 24, but said he expects changes in the wireless landscape — some clear winners, some clear losers and some companies that stay pretty much the same. “Carriers with customers under contract face the best and worst of all worlds,” Maszal said. “The good news is that contracts give carriers more time to make up for a negative customer experience. The bad news is that kind of experience stays with customers a long time.”

TMNG's carrier neutrality notwithstanding, its basic findings seem to bode very well for U.S. Cellular. Both the major customer gripes TMNG's studies cite (multiple calls to solve service problems, for example) and the likely culprits behind them (e.g., multiple billing platforms) are issues U.S. Cellular has long since pinpointed.

“Not only will customer service become a differentiator, it already IS a differentiator,” Maszal said, adding that abysmal service is already the catalyst behind significant churn for at least one major carrier. “Wireless customer service is similar to other industries — the sales force is incentivized for sales, not retention. Whenever you're incentivized to selling, customer service takes a back seat.”

Maszal said the customer experience also depends in large part on the customer's own expectations. “Call quality remains a universal problem across the industry, but customers have adapted to dropped calls, and they understand enough about wireless to know that's going to happen. But poor coverage in the home creates a whole different problem — those expectations are not set with the customer.”

That's certainly the case for Dana Dangles, a longtime U.S. Cellular customer who contacted Wireless Review to learn more about wireless number portability. She expressed serious dissatisfaction with her U.S. Cellular coverage, and upon learning that LNP was indeed an imminent reality, said she planned to switch carriers as soon as possible.

“In my neighborhood, service is never good,” said Dangles, who lives in the Chicago suburb of Wooddale. “What's the use of having service if I can't get calls in my house?” She said she's waited years to switch carriers, but was reluctant to give up her wireless phone number in the bargain. “[LNP] is a dream come true,” Dangles said.

Dangles' frustration with U.S. Cellular underscores a crucial if obvious point: You can't please all of the people all of the time, no matter how strong your commitment to customer service. But Rooney remains adamant that in the end, the customer experience will be the line of demarcation separating the winners from the losers.

“The customer is looking for the best service, not the best price,” Rooney said. “I hope our competition never wakes up to that fact.” --Jason Ankeny

Western Wireless

Western Wireless, better known by many of its customers as Cellular One, is no stranger to churn, but it is no better acquainted than its competition — about average, according to analysts. However, when it comes to doing battle with this chronic cellular condition, getting better acquainted with its customers may be the only cure.

On one hand, Western Wireless can take advantage of the same phenomenon that AT&T was able to ride for a number of years after its infamous break up in 1984. Five years after it was divested of its local phone service companies, most people who were asked in polls to name their local phone service provider still responded “AT&T.” The Cellular One brand enjoys that kind of recognition. It still rides the wave of being the first national wireless brand. On the other hand, Cellular One is confounded by that same recognition. For it is no longer a national brand. It is regional. It is rural. And it is franchised.

“The brand still has a high level of awareness and trust, even where it hasn't been used in a while,” said Eric Hertz, chief operating officer at Western Wireless. “Customers tell us that to them it means honesty, directness and good solid service.” Those are mostly rural customers. In the urban markets, good solid service sometimes gives way to good gadgets and enhanced services — like camera phones. “That's what happens when the power of big brands can set expectations,” said Iain Gillott, founder of iGillott Research.

To align the different faces it must present in disparate markets, Western Wireless launched a campaign this summer to reposition the Cellular One brand as a hometown provider. The repositioning campaign extended to other Cellular One licensees as well, because Western Wireless doesn't just sell the Cellular One brand — it owns it. The company bought out Southwestern Bell's interest in the Cellular One Group in July 2001.

Hertz said the Western Wireless momentum is headed in the right direction, with a two-year downward trend in its churn rate. But don't look for him to credit the competition.

“Most churn in the past year is somewhat related to the economy,” Hertz said. “There is not a huge amount going to the competition. That's why we feel we have a good chance of winning them back.”

To win customers back and to keep those who may be tempted to depart by the upcoming Sadie Hawkins Day — otherwise known as Wireless Number Portability Day — Western Wireless will be focusing on the fundamentals: the blocking and tackling of network quality, Hertz said.

Like its hometown Seattle Seahawks, Western Wireless knows that to win you have to throw downfield once in a while. So the company also is taking more dramatic steps to ensure that come Sadie Hawkins Day, or any other day, they build more customer relationships than they burn. The operator has advanced its CDMA rollout, transitioned its billing system to Amdocs and established a “save team” to capture people who are trying to deactivate.

How do they capture them? “We talk to them,” Hertz said. “We stay in touch with customers, and as we come up with new offers, we make sure they know about them.”

If they can't be saved, departing customers at least provide good data for keeping the next one. “They let us know if we need to improve our offers, clarify them, educate our distribution channels or fix network problems,” Hertz said.

The new billing system has helped Western Wireless retain customers by doing something so fundamental — so borderline cliché — that Hertz hesitates to even say it.

“It empowers our employees to make decisions,” he said anyway. “I know everyone says that, but what is an empowered employee if they don't have the right systems to work with? Customer service reps may be authorized to give credit, but if they can't do it right there on the call, then they are not truly empowered.”

Giving CSRs the ability to act on the spot, building out its network, taking advantage of its 850 MHz band, in rural areas where propagation rules, competitive pricing and proper blocking and tackling will help the regional operator face what Hertz calls “moments of truth.” In the absence of sophisticated predictive analysis tools or churn management solutions to identify specific causes for churn, Western Wireless puts its stock in being on the right side of every moment of truth its customers encounter every day.

“If you see an ad for a [pricing] plan and you ask, ‘What am I paying?,’ that's a moment of truth,” Hertz said. “If your call drops, that's a moment of truth. If you find an area that yesterday didn't have coverage and today it does because we put up a new tower, that's a moment of truth.”

However, the biggest moment of truth for many wireless operators will be the six months to a year following Nov. 24. “It is one of the most important changes in our industry in a long time,” Hertz said. “This is where we learn to be the best at what we do, when it is truly competitive.”

While not making any predictions for what will happen in the early goings of LNP, Hertz feels it will bode well for his company — at least in the long run. “Maybe not the first year, but I do believe there is a huge potential from the landline side of the business,” he said. “We should be able to encourage customers who don't need two landlines or even their primary line to port over.”

The good news for Western Wireless, said Gillott, is that the impact of LNP will be fairly minimal. The bad news is that the impact of LNP will be fairly minimal.

“People in rural markets know who has the best coverage and the best customer service, so I don't think it will have a big effect,” Gillott said.

And in many of Western Wireless' markets, the company may not have to provide number portability right away across its whole network. LNP is only required on Nov. 24 in the top 100 markets. Smaller markets have up to six months to implement LNP after a customer requests it. “But you know some smart-ass employee of a competitor will walk in and buy a phone in those markets and say they want to churn the next week, just to [make them mad],” Gillott said.

The uncertainty about what will happen when number portability goes live does have Western Wireless looking for help in the form of software. The operator has narrowed its choice to only a few vendors of predictive analysis and churn management tools but will likely hold its decision until after the launch of LNP. Given the technology's history of delays, that could prove to be a sound strategy.

Besides, “There are a lot of people coming to the table saying they have it, but what is it?” Hertz said. “There are lots of ways to do statistical analysis on a variety of factors then spit out some probability of churn for a particular customer, but the real question is, ‘What do you do with that data and how do you integrate it so that a CSR has a screen that tells them their customer has a high probability to churn?’”

That's the $20-billion-dollar question. --TIm McElligott

Alltel

Kevin Halpin is not an oncologist. The poster outside his office that reads “Watch for the warning signals” doesn't refer to lymphoma or melanoma, but to cancer of the subscriber base — a condition that Halpin has found to be largely treatable if detected early enough.

As Alltel's vice president of relationship marketing, Halpin's focus on churn has taught him that it's mostly self-inflicted. Customers don't usually leave because they were tempted by a competitor's offer: “In the vast majority of cases, they're pushed out the door by their existing carrier via something unsatisfactory,” he said.

It may be a comforting thought to Alltel. With the onset of wireless number portability, some analysts believe the major carriers will use low prices to fight over newly untethered subscribers. (“It will be price, price and price,” said Yankee Group analyst Roger Entner.) And with more economies of scale, bigger competitors such as Verizon Wireless and Cingular could afford to undercut Alltel's prices.

But Halpin is unafraid. He's convinced that as long as Alltel customers don't feel pushed around by their carrier, they won't be pulled away by price wars. This philosophy was drilled into Alltel's ranks in May when 1000 employees were assembled at the company's Little Rock, Ark., headquarters and taught a new mantra: “Get it right or make it right.” And it underpins the service-quality theme of the ad campaign Alltel launched later that month, in which a fictitious wireless carrier, with a fictitious boy band in its promotions, is chided for investing more in its marketing than in the quality of its network. (Alltel's presumably pricey former spokeswoman, pop star Faith Hill, is notably absent in these ads.)

But as Parker Hunter analyst Wayne Homren pointed out, “They have to beef it up with facts rather than just ads. If you think there are a lot of wireless ads on TV now, wait 'til Christmas.”

To that end, Alltel is putting $700 million into increasing the footprint of its digital network by 155,000 square miles this year, converting analog sites (such as those purchased from CenturyTel last year) to digital and ending 2003 with 68% more cell sites than it had in 2002.

Still, what Alltel's customers do come Christmas is anyone's guess. In its second-quarter earnings report, Alltel boasted its lowest post-paid wireless churn in more than three years — 2.03%. But a study conducted by J.D. Power & Associates the very same quarter ranked Alltel dead last among the seven major carriers in terms of network performance quality. The study measured customer gripes such as dropped calls, static and interference, and said these numbers correlated strongly with customers' reported intentions to churn.

So why did Alltel customers stay, even as they told J.D. Power they intend to switch? It's possible that a large chunk of disgruntled customers were under contract and unable to churn in the second quarter — carriers typically don't reveal how much of their base is under contract. But ultimately, it remains a mystery. (Homren suggested that Alltel's rural markets are less competitive, giving consumers fewer alternatives and making Alltel less susceptible to churn, a theory Halpin scoffed at.)

So with less than 85 shopping days left 'til Christmas, Halpin will stay focused on early detection to fight churn. For example, he'll study usage statistics to identify so-called “glove box” users and target them with direct marketing that suggests sticky new uses for their cell phones (e.g., cheap long-distance or family calling plans). Alltel has also retrained its customer service staff to spot those “warning signals,” like customers calling in to ask when their contract expires (hint, hint). Instead of just answering the question, Alltel reps are now directed to follow up by asking if the customer is dissatisfied with his or her service and, if so, offer a remedy.

“I don't know why we as an industry didn't ask those questions in the past,” said Halpin. “I think it was because we had a line wrapped around the stores with all the next [customers] coming in the door.”

Like the rest of the industry, Alltel's focus now will be on those customers lining up to exit. --Ed Gubbins

Churn Plus Portability Equals Y2K-03

An industrywide churn rate as high as 35% already provides an unstable foundation upon which wireless businesses are built. So when the unpredictable component of portability is introduced at the very start of the 30-day window that accounts for a major portion of the industry's yearly revenue, what's an operator to do?

Should they spend the money on solutions that promise a seamless port both in and out — solutions that will certainly score points with the FCC and fellow operators, but if done properly have the smell and feel of handing their customers a free trial of someone else's service? Or should they invest in predictive analysis capabilities that help them identify whom they are about to lose and provide a course of action to stop them on the spot? Do such things exist?

One thing is certain: Operators will be spending either way. According to iGillott Research, the figure that has operators losing sleep over number portability is not the $1 billion dollars the industry will pay for infrastructure or the $500 million per year to maintain it. It is the $20 billion hit it could take over the next four years in the cost of retaining its customer base, assuming a throw-a-dart-at-the-chart 10% uptick in churn. “Every time someone churns, it costs an average of $350 to replace them,” said Iain Gillott, founder of iGillott Research. “So if a subscriber for Carrier A ports to Carrier B and one ports the other way, they both keep the same number of subscribers, but their cost just went up $350.”

In an industry with revenues of roughly $100 billion, a 10% increase in churn puts a 20% hit on margins. However, despite projections that say as many as 45% of wireless subscribers will churn within six months of portability, Gillott says a measurable impact won't be felt until next year.

“Number portability can come in November, but if your contract isn't up until June, you probably won't do anything before then, if at all.”

That gives operators time to assess a customer's likelihood to churn. One would think that this window of opportunity would provide just that — an opportunity to put a solution in place to keep customers from taking advantage of the padded walls of portability.

There is one school of thought that says operators wouldn't need churn software if they were executing on their operational missives. Then there is this: “If carriers were perfect and had no price competition, there wouldn't be as much need for churn prediction, but I don't know of any industry with that kind of perfection,” said Richard Wolniewicz, vice president of engineering at CSG Systems' analytics group.

CSG is one of many software vendors with predictive analytics solutions for battling churn. Most other major billers, such as Amdocs and Convergys, also have such solutions. They exploit their inherent ties to billing records and customer care. “Billing data is the core to many companies' data warehouses and the lifeblood of many organizations in terms of data,” Wolniewicz said.

Standalone providers such as PeopleSoft, Siebel Systems, Oracle, Business Objects, AMS and Teradata have their own analytic and predictive solutions. They take customer data from just about everywhere and crunch, dissect and disseminate it in the form of prediction and prescription for who will churn and how to stop them.

Unfortunately, for now, the software is good at telling operators who is likely to churn, but not why, Gillott said.

CSG's ProfitNow solution has two modules. The profitability module uses data to characterize the odds of and make recommendations on which new services customers are most likely to adopt. The churn module predicts which customers are likely to churn. “We try to get the CSR to make that one offer that will most likely keep that customer,” Wolniewicz said.

Other providers have their own variations on the same theme. So far, the operators we spoke to for this article are unconvinced which is the best. Decisions are being put off until after November.

This leaves the bulk of remaining budgets for getting wireless number portability done right. Roberta Cohen, wireless group vice president at Telcordia Technologies — a company which claims an 85% market share in LNP solutions in part through its partnership with Telecommunications Services Inc. — came up with the Y2K analogy.

“There are a lot of activities that need to be undertaken,” she said. “There is one due date, one commencement date and no opportunity to phase in capabilities.”

Everything has to be ready, and it has to work. That is, unless operators, like their counterparts on the wireline side (which in many cases happen to be the same companies) who allegedly tried to subvert the process by making the local service request transaction as cumbersome as possible, think that a difficult process will protect them.

“The wireless carriers we are working with are tending not to do that,” Cohen said. “Most are taking the high road.”

In the end, churn management and portability solutions will find common ground and together turn LNP into a true Y2K phenomenon — one of the most anticipated non-events in history.

“Most wireless subscribers have contracts,” Cohen said. “Part of the portability process is creating methods that will make a determination as to whether or not to enforce that contract before letting a customer go. Carriers are reaching different conclusions. All systems that deal with customer records have to be touched to make that determination.”

And the two become one.