In a research report based on a nationwide consumer survey on Local Number Portability, both of which were released by Standard & Poor's Equity Research Services, wireless substitution for traditional wireline telephone service in the home emerged as one more threat to the wireline telecom carriers, who are already challenged by competition from wholesale access providers and cable providers, and sizable labor and pension expenses.
Nearly 10% of current wireline customers responded that they would take their wireline number to a wireless carrier based on new rules allowing this, which is more than double the percentage of customers that have actually cut the wireline cord to date. The consumer survey was commissioned by Standard & Poor's, and conducted by InsightExpress, an online market research firm, during the last week of November 2003.
Based in part on the results of the nationwide consumer survey, Standard & Poor's telecommunications equity analyst Todd Rosenbluth is concerned that wireless substitution, which has been plaguing the wireline carriers for the past two years, will intensify in 2004. He expects access line losses to widen, as a greater percentage of consumers "cut the cord" and the carriers see more minutes of use flow to wireless networks.
The survey results also suggest that the prevailing assumption - that aggressive bundling of data services with traditional services would ensure consumer loyalty to one telecommunications provider - is questionable. "We believe that loyalty to one's carrier may be challenged, as consumers turn to price and convenience," says Todd Rosenbluth, Telecommunications Services Equity Analyst Standard & Poor's Equity Research Services. "In the survey results, we found no significant difference in intentions to stick with current wireline providers between those who receive traditional services only, like local and long-distance, and those that have additional services, like DSL." "We expect all carriers to develop aggressive bundling strategies, particularly wireline and wireless services under one plan, as they try to reduce customer churn, and we believe bundling should be catered toward sharing minutes between wireline and wireless services. We also found no evidence that the youth segment is more prone to cut the cord, although the prepaid market is just emerging," concludes Rosenbluth.
Rosenbluth also does not expect a sizable increase in customer churn from one wireless carrier to another as a result of local number portability. According to the survey, only 4% of current wireless customers will switch their number to a new carrier regardless of when their current contract expires. Also, approximately an additional 16% of those surveyed plan to switch when the current contract expires. This stated intention by the survey respondents is consistent with the normalized 25% annual turnover in wireless customers.
The majority of respondents believe that the most important factors in selecting a wireless carrier are price and quality of service, suggesting that aggressive minute packages and wireless capital spending should increase in 2004."
Posted to the site on 15th December 2003
Posted to: www.cellular-news.com/story/10302.php