November 26, 2004 4:00 AM PST

U.S. yawns over number switching

Software salesman Kevin Johnson was no match for the Blackberry 7100 cell phone on display at a downtown San Francisco T-Mobile USA store. Ten minutes after first holding it in his hand, he bought it and was renewing his service contract for another year.

This wasn't how it was supposed to be, Johnson said. A year ago Wednesday, new rules kicked in, allowing wireless customers to keep their old numbers when switching service providers, and Johnson was among the first in line to take advantage by dumping his longtime carrier--T-Mobile USA.

But "T-Mobile dangled this sweet deal in front of me," the 37-year-old said. It was too sweet to pass up, and he walked out of the same T-Mobile store last year with two new phones and a one-year contract. Since then, he says, he's noticed improvements in coverage in his San Francisco neighborhood, and he's decided to sign up with the carrier yet again.

News.context

What's new:
Cell phone companies said that letting customers take their numbers when they change carriers would throw the industry into chaos, utter chaos.

Bottom line:
The industry was wrong. Number portability, one year later, turns out to be no big deal. Unless it helped you get a sweet deal from your provider.

More stories on cell number portability

Chalk one up to the resilient U.S. cell phone industry, which has largely managed to avoid the tumult of customer defections that was expected after the advent of so-called number portability a year ago.

The change--allowing consumers to take their phone numbers with them when they trading carriers--was supposed to set off a surge in customer turnover by eliminating a key hurdle in switching service providers, an inconvenience that kept many people in the fold regardless of their overall satisfaction. Although some analysts predicted that as many as 10 million cellular subscribers per month would jump carriers after number portability took effect, the total number of switchers has reached just 8 million in a year.

All of the five major carriers posted net subscriber increases in the past year. Verizon Wireless grew the fastest, adding 6 million new customers. Even laggard AT&T Wireless manages to eke out a slight gain.

Analysts said number portability may have exacerbated problems at AT&T Wireless, but many attribute its slower growth to execution problems, notably a glitch that forced prospective customers to wait weeks at a time to activate their new accounts. AT&T was later put for sale and purchased by Cingular Wireless for $41 billion.

"Wireless local number portability, which was fought for so long by U.S. carriers, is not much of a contributor to churn after all," said Claus Mortensen, an analyst with U.K.-based cell phone consultants Baskerville.

Catalyst for consumers
That's not to say the rule change has failed consumers.

Months before the Federal Communication Commission's cell phone number porting requirement went into effect, carriers went to work on the likes of Johnson by concocting hard to resist and unheard-of deals to lure a vast majority of their subscribers into long term contracts.

Then, operators turned attention to their cell phone networks and customer service, curing dead zones in key markets and upping the staffing at call centers.

In a sign that carriers are learning to live with number portability, Sprint and Verizon Wireless recently stopped charging customers a monthly fee of between $1 and $2 meant to subsidize the service.

"Some carriers were just really good at insulating their subscriber bases--they were protecting themselves," said research firm InStat/MDR analyst Clint Wheelock. "Plus, people may have also just overestimated the instant appeal of keeping a number when switching carriers."

The maneuvering during the past 18 or so months has created a noticeable shift in the balance of power between carrier and subscriber, whether it's a consumer scoping out a plan for his or her family, or a Fortune 500 business negotiating cell phone contracts for thousands of its employees.

Consumers and businesses now understand, more than ever, that "their business is mobile, just like their phones," said Michael Voellinger, wireless services director at Telwares, a Destin, Fla., telecom consultants to Fortune 500 companies.

"There are a lot more consumers, and businesses, that now know they can go and take advantage of better pricing," he adds.

Businesses could turn out to be a belated wild card in the industry's battle over number portability. In the past few weeks, Verizon Wireless has seen a noticeable increase in the number of companies shopping around for new cell phone services, triggered in part by the advent of wireless local number portability.

"We're stating to see an uptick in businesses wanting to port their number to Verizon Wireless," said spokesman Jeff Nelson.

5 comments

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Any industry does this
Every time US lawmakers want to make cars safer, or more fuel efficient, automakers claim it will force them to close plants and send jobs overseas. Meanwhile their lapdog, the UAW, goes and lobbies congress to make sure that "american workers are safe from unnecessary standards." Then the big three send jobs to mexico anyway. That may seem off topic, but predicting the destruction of your industry is standard practice when you feel the least bit threatened. Yet somehow analysts always seem to eat up every dramatic tale that these people hand off to them.
Posted by hakubi (3 comments )
Reply Link Flag
huh?
I recently bought a new phone with Tmobile. I had nextel before and the price of a nextel is not worth it so i switched. That was an experience. It took 5 days and about 2 hours on the phone with nextels porting office to get my number UNLOCKED! I need my number so I would do anything to keep it, even a little agrivation. If they say not many americans are switching just remember the contracts. 1 year 2 years, they will not pay to cancel thier phoones so they ride them out. It will be steady from now on Im sure.
Posted by baggyguy1218 (155 comments )
Reply Link Flag
Contacts?
This story hinted at, but did not focus on service contracts. This
is the reason people didn't flee their wireless carriers when their
numbers became portable. I would switch instantly if I could get
out of my contract and I'll do everything I can when I switch
services to limit the length of my next contract. I don't have to
sign a contract for my cable, my broadband, my landline, my
utilities, or any other monthly service I pay for. Cell phone
companies realize that as long as they ALL use contracts, they
avoid consumers actually shopping based on quality of service,
and instead lure them in with outrageous deals. In the end, I
think consumers are losing with contracts, and the cell phone
companies that are actually providing good customer service
and network coverage are unable to attract customers stuck in
outrageous contracts with less appealing companies.
Posted by (8 comments )
Reply Link Flag
Exactly
Since the beginning of this debate I have wondered why the effect of service contracts has been underplayed. It's the reason most consumers don't switch -- they don't want to pay the hefty penalty for defaulting on the one year or two year lock. And if you switch to a different plan within your current provider, you involuntarily extend your contract -- at least with Verizon. I would bet most people don't even know when their contract expires.
Posted by (1 comment )
Link Flag
LNP -- Mission Accomplished
The tone of this article seems to imply that LNP was of little use since fewer than expected have taken advantage of it. But in the accounts they detail as well as from my own experience, people have stuck around because the carriers have gone to great lengths to keep them. The sole purpose of LNP was to IMPROVE CONSUMER VALUE by leveling the competitive landscape. Whether that's done proactively by carriers to keep customers, or the customer gets better service by taking their number elsewhere -- the net effect is the same. The customers have won! (Perhaps I should say "are winning" ... there's still plenty of room for improvement.)
Posted by (1 comment )
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