Number portability could force US wireless operators to adjust their business philosophy significantly – moving away from ‘trapping the customer’ to making them the want to stay. But while switching should benefit many customers, the new handset purchases that it may require will offset its potential advantages for many others.
US mobile industry players are preparing for next year’s introduction of number portability.
The new FCC regulation that will allow US cell phone users to take their mobile number with them when they switch carriers is creating a great deal of anxiety for wireless operators. Although it does not come into effect until November 2003, it will inevitably force operators to spend more on customer retention and services.
In particular, they will have to replace closed contracts that severely penalize the customer for early termination or change in plan to agreements with motivational components designed to retain customers – such as compelling mobile data applications and increased customer service.
Datamonitor expects up to 40% of US mobile customers to switch to rival competitors in the first year after the rule takes effect. This is ten percentage points more switching than would otherwise be expected, obliging leading providers either to find a way of increasing retention, or to revise their long-term forecasts downward.
Number portability is crucial for small businesses, which need to maintain contact with clients and suppliers that have their old numbers on websites, business cards and letterhead. Many SMEs have resisted the temptation to change carriers simply because it was prohibitively expensive. The new rules will let them take advantage of better deals. However, they will have to ensure that the features that they really need – such as fax and data capabilities – are available from their new provider.
Many consumers also wonder whether their existing handsets will be compatible with the various networks that are currently available. The answer (as always): it depends. If you move between CDMA networks, you can keep your existing cell phone. However, if you move from CDMA technology to GSM you’ll need a new one.
While this is good news for handset manufacturers such as Nokia, Sony Ericsson and Motorola, it will make network switching more painful and costly for consumers.
Related research: Datamonitor, Industry Review: Telecoms – September 2002 (BFTC0771)
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