Analyst firm In-Stat/MDR says the high churn rates that were expected during the first few months of wireless local number portability (LNP) haven't materialized, but they're coming soon, especially among enterprise customers.
Like a sleeping giant, customer turnover rates are expected to rise over the course of 2004, according to the results of a survey conducted last month by In-Stat/MDR. The Scottsdale, Ariz.-based firm says that churn increases will be especially true in the business environment, which has been largely unaffected by LNP during the initial months of its existence.
Beginning in November of last year, new federal guidelines went into effect granting wireless phone users in the 100 largest metropolitan markets the option of switching carriers without losing their phone numbers.
"With the carriers having now -- for the most part -- resolved these technical problems and more people switching carriers as their contracts expire, churn will definitely be on the rise over the course of the year," said Becky Diercks, director of custom research and principal wireless analyst for In-Stat/MDR.
During the first few months after LNP was implemented, carriers experienced technical difficulties when switching users over to other providers. The increased mobility and freedom that LNP granted users was partially offset as word of mouth spread about the complications involved with making a switch.
Many businesses that may have wanted to execute an immediate switch decided to wait until the carriers addressed the technical problems, Diercks said.
"Everyone expected churn rates to increase dramatically and immediately as a result of LNP implementation," said Diercks. "However, this was not the case."
There were additional factors that delayed the enterprise LNP exodus until early 2004, including high contract cancellation penalties for those businesses wishing to switch carriers before their present contracts expired. According In-Stat/MDR's findings, most users were not so dissatisfied with their service that they would pay this penalty.
"The primary impetus is because of LNP, but what's happening now is that most people have held back because their contracts are still in place…now what we are seeing is more and more contracts expiring and no more fines," Diercks said.
The upcoming Cingular Wireless LLC merger with AT&T Wireless Services Inc. could also have an effect on churn rates, as their business customers may become concerned that the quality of service may decline as the two companies complete the merger process.
"Businesses may believe that [AT&T Wireless and Cingular] aren't focusing enough on the service itself," Diercks said.
"As glitches in the switching process are eliminated by the carriers, look to see businesses taking advantage," Diercks said.
"[Businesses] should really work with the other carriers that they are considering and work them off one another to get the best deal they can get -- not always the best price, but this could include other features that are usually not free," Diercks said. She added that such features could include special handset packages or options added to companies' current plans.