Commentary: Taking your number with you

By Charles S. Golvin, Senior Analyst

Wireless number portability will tax mobile carriers' models for evaluating customer value. As consumers gain the ability to move their numbers between any two networks, carriers must shift their focus from the network to the customer.

The wait is nearly over--as of Monday, U.S. wireless subscribers in the top 100 metropolitan service areas will be able to change service providers and retain their current mobile number. While the user experience of wireless local number portability (WLNP) is uncertain as carriers iron out the porting process, the effect of change is almost certain to be increased churn. Forrester has identified two groups of likely switchers:

• Those already intent on switching. These customers--9 percent of today's mobile subscribers--tell us that they are "very interested" or "extremely interested" in switching providers, even if they have to get a new phone number. Sprint PCS and smaller regional players have the largest share of these "carrier hoppers," who spend less and are more likely to be wireless neophytes.

• Those who will be enticed by WLNP to switch. Representing 15 percent of current users, these users report little interest in switching under today's regime but express the same strong interest as the previous group when given the option to retain their current number. These "WLNP switchers," who are much higher-value customers, are most likely to be on the Sprint or T-Mobile networks.

Two groups, two approaches
While both types of subscriber will seek to escape the clutches of their current provider in the near future, each will have a starkly different lifetime customer value:

• Carrier hoppers aren't worth fighting for. Those looking to switch today are more price-sensitive and are much more likely to opt for a highly subsidized handset. On nearly every metric, these customers report dissatisfaction levels double those of the average subscriber, indicating unrealistic expectations. As a result, these customers will likely opt for a shorter contract, remain dissatisfied, and switch again--and because they spend less and are costly to acquire, they will yield little to no profit to the operator.

• WLNP switchers are more likely to stick after switching. These savvy users, with more experience under their belts and a better understanding of service options, are more likely to select a carrier that will address their primary issues of plan value and service quality. With their higher monthly spending, proclivity to use data services, and willingness to spend more on a new handset, these customers are much more likely to be profitable for their new carrier.

		Related story Phone carriers brace for service-swapping rush America's cell phone subscribers now can keep their old telephone numbers when they switch carriers. Thirty million are expected to make a switch in the first three months.

• Stay away from low-cost, fun-oriented gadgets. Carrier hoppers are more likely to be entertainment-oriented and won't pay much for a new phone. AT&T Wireless should trim its subsidy on Nokia's 3300 with integrated keyboard, MP3 player and FM radio to attract buyers who will deliver messaging revenue.

• Hone the productivity and efficiency message. WLNP switchers are more likely to be high-income technology optimists and place more importance on core features like battery life and PIM (personal information manager) functionality. Since these subscribers are more likely to be career-motivated, AT&T Wireless can win them over by pitching the superior integration of its Motorola SPX500 smart phone with Microsoft Outlook.

New battlegrounds
While WLNP will fuel the already competitive wireless market, the Federal Communications Commission envisions a complete divorce between numbers and networks. Earlier this month, the commission endorsed wireline to wireless porting, but Forrester believes this path is overblown. Why? Because a customer new to wireless won't trust her primary number to a service with which she has no experience, so only existing wireless subscribers will consider this path. These customers will therefore have to ditch their current wireless number, something to which--per today's WLNP argument--consumers are highly attached. With the next debate looming around geographic porting--taking your number anywhere in the United States--how will these changes play out?

• Wireless pure plays will support wireline ports--slowly. Carriers like T-Mobile that have no fixed-line service will solve customers' number dilemma by simply forwarding calls bound for the wireline number to the customer's wireless phone. But these carriers have little urgency to make the necessary provisioning system changes to support this--today's cord-cutters spend less for wireless than those who retain their wireline service, so they are less attractive customers.

• Incumbents will speed deployment of integrated services. Carriers that own fixed and wireless networks must provide customers with a reason to subscribe to both services. Rather than continue to cut prices on local plus long-distance packages, SBC will expedite the rollout of packages that offer added functionality to its customers that also use Cingular Wireless. This plan will provide an integrated voicemail box, voice-activated dialing from a common address book, and call hunt among the subscriber's multiple numbers.

• Nonfacilities-based competitors will exploit a national footprint. Carriers like AT&T and Sprint, which wholesale local and/or wireless capacity, will be unique in having a national footprint for both fixed and mobile services. AT&T will mimic Vonage by aiming at customers who relocate, so that a customer who moves from Boston to San Francisco can keep her 617 number and get a 415 number, both of which ring on the same line.

© 2003, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.