November 3, 2003 4:00 AM PST
It's your number--take it with you
- Related Stories
Nextel, Cingular agree on keeping numbersOctober 13, 2003
Merrill Lynch raises wireless forecastsSeptember 30, 2003
Sprint, Nextel make numbers portableSeptember 29, 2003
Cingular: Switching numbers not so simpleSeptember 23, 2003
Study: Cell phone use to doubleAugust 6, 2003
Verizon: No fee for number portabilityJune 24, 2003
New cellular company, new number--stillJuly 16, 2002
FCC to vote on phone-number crunchMarch 28, 2002
Graves said he would have left Verizon Wireless long ago, but the change would have required him to get a new number, affecting hundreds of personal and business contacts. There was also the matter of the 15 employees he manages at his privately owned investment banking firm, all of whom carry company cell phones.
"Switching carriers just wasn't worth it," said Graves, 38, during a recent lunch-time foray into a Manhattan cell phone store. "But now, I...can't wait."
Beginning Nov. 24, cell phone customers will be able to keep their old phone number when signing up with a new carrier.
"Local number portability" is expected to lead to unprecedented churn, new marketing campaigns by carriers and possibly a new round of consolidation.
Graves is one of the estimated 30 million U.S. wireless customers who may join an unprecedented migration to new service providers starting Nov. 24, when a Federal Communications Commission (FCC) mandate called "local number portability" takes effect. The rule creates stiff penalties for any cell phone service provider that doesn't let defecting customers take their old phone numbers with them. All of the nation's top six carriers have effectively stopped fighting the mandate, which they'd managed to delay three times, and have begun preparing for its eventual arrival.
Analysts and industry insiders expect a large impact from the mandate, which eliminates what Graves calls "the current annoyance tax" of having to change telephone numbers when switching carriers. The nation's wireless dialers typically say, in consumer surveys, that one of the top reasons for staying with their current carrier is the loss of their old number if they were to make a change.
The impact could be even greater among business professionals, the most lucrative and heavily courted customers. Among corporations, TMNG said nearly 25 percent of large businesses are prepared to switch providers.
If the predictions are correct, this unprecedented churn could be enough to trigger the long-predicted consolidation of the six major U.S. cell phone service providers.
"Local number portability is the perfect storm," said Randy DeLorenzo, vice president of telephone consulting service Telwares.
To prepare, the leading providers are already offering some of their best deals in years. T-Mobile USA has extended its weekend dialing times, when some calls are unlimited, to include Friday. And AT&T Wireless is offering free second phones to new subscribers in some areas.
The deal-making has worked for some, with Cingular Wireless recently announcing that it has already renewed the contracts of nearly three-quarters of its subscribers. There have also been internal preparations, as carriers craft the intricate deals needed to change telephone numbers and stock their calling centers for the millions of customer inquiries expected during the weeks after the mandate takes hold.
"We have spent the last 18 months preparing our people for this," said Nextel Communications Chairman Tim Donahue. "All the carriers understand this thing is coming. When the 24th hits, all of us will be prepared."
But analysts caution that carriers' tactics carry a hidden danger for the industry: shaved profits. "The use of aggressive subsidies cannot last," Deutsche Bank cell phone analyst Brian Modoff wrote in a note to investors. "It may make sense in the short term as operators try to lock their subscribers into new and sometimes favorable plans, in advance of mobile number portability, but someday it will end."
How are carriers preparing?
Although the ultimate impact of the rule change is still unclear, one thing is certain: The mandate has put customers in the driver's seat.
Cell phone carriers are spending an estimated $1 billion on new marketing and technology improvements in the hopes that amenities like a free second phone or rollover minutes will set them apart.
One of the first things most carriers did was to improve their own networks, hoping to eliminate dead zones. Dropped calls or the digital "burping" of a bad connection is a frustrating fact of life for many customers, but that's about to change. Sprint PCS, the nation's fourth largest carrier, is typical of these efforts. It spent $2.1 billion this year to add about 1,700 new base stations to its network.
Perhaps the most daunting task for all carriers involves preparing for an unprecedented number of customer service calls. Convergys, a cell phone industry consultant, expects about 100 million calls will be generated in just 12 weeks. That's about a year's worth of calls.
Verizon Wireless, a spokesman said, has built a service center solely to deal with customers who are switching from other carriers and who want to keep their old phone number. Other carriers haven't gone quite to that extent, only adding additional call center employees.
While consumers are enjoying a new round of courtship, the needle has swung even more so in favor of business consumers, according to Telwares' DeLorenzo.
Telwares makes most of its money negotiating cell phone service contracts for large corporations. In the past, companies faced a huge expense when changing carriers and tended to stay with their old provider. Now, companies are trying to take advantage of the hyper-competitive atmosphere by issuing "requests for proposals" (RFPs) for cell phone services.
"When we'd renegotiate in the past, maybe we'd get a 10 percent savings," he adds. "But if you put out an RFP, you can save 25 percent."
Perfect storm, part II, on the way
Once the dust clears on local number portability, carriers could face an even bigger issue: The FCC is expected to soon announce whether it will require landline phone companies to let their defecting customers keep their old phone numbers when switching to cell phone service providers.
Much of the potential impact is unknown, given that the FCC has only hinted that it will take up the matter next year. Scott Delacourt, chief of staff of the FCC's wireless telecommunications bureau, recently suggested that the agency will "further clarify" the issue before Nov. 24. Most analysts believe number portability for fixed lines could generate even more churn, especially among the growing number of U.S. residents that are choosing cell phones as their only phone.
Both landline and cell phone companies are expected to be hit hard among their most important customers--those under age 25.
This market segment represents a majority of the 10 percent of U.S. dialers who use only a cell phone, Delacourt said. Because of that, a landline telephone number isn't as crucial as it is for older customers.
"Wireless LNP will be chaotic," Delacourt said, "but wireline to wireless portability will likely have an even greater impact."