September 5, 2002
Wireless LNP: Higher Customer Turnover, Savvier Carriers or Both?
About 46 percent of U.S. wireless customers will change carriers during the year after the U.S. Federal Communications Commission's (FCC's) number portability rule goes into effect, research firm In-Stat/MDR forecasts. Currently about 30 percent of U.S. wireless customers change carriers each year. The FCC's number portability requirement, scheduled for November 2003 implementation, would enable consumers to change wireless carriers without changing their cell phone numbers. In-Stat/MDR estimates that it will cost U.S. carriers an aggregate $900 million to $1 billion to modify their systems for number portability, and another $500 million a year to maintain them.
In Hong Kong, where WLNP has been in place for four years, carriers have become savvier at locking in customers through such penalties as SIM deactivation fees and termination charges. Anecdotal evidence suggests that operators in Hong Kong have also become smarter at using CRM software to profile and identify potential churners – using their accumulated data of evidence to date. By identifying potential churners, carriers can pre-empt them by offering spot discounts or loyalty benefits. ATS has recognized this strategy and has been working with wireless carriers in the U.S. on that kind of solution to help reduce churn – a strategy that will certainly become even more relevant.
Other evidence that operators can survive the WLNP process without excessive loss comes from Australia. In the first two months of WLNP there, late last year, just 90,000 phone users – less than 1% of the entire user base – ported their numbers. The four Australian cellular operators had apparently learned from the Hong Kong experience and moved to lock in their customer bases through their use of termination penalties and customer-focused programs.
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