January 20, 2005

Consumer Reports recently announced the latest findings from its annual mobile phone survey and there isn't one wireless company that didn't had its share of consumer complaints.

CR notes that all of the companies' customers experienced "chronic, major problems with service, billing and complaint handling."

However, out of a less-than-ideal pack, Verizon remains the top rated service, placing first in all 17 cities where CR conducted its research. T-Mobile was often a close second, but all companies have room to improve.

About 70% of CR survey respondents had a dropped call in the week before the survey, while almost 60% had experienced a bad connection.

Customer service also produced disappointing numbers, as just 40% of respondents said a provider's response to a billing inquiry was "very helpful," and just 30% found a service inquiry response to be "very helpful." It is therefore no wonder 35% of respondents said they were seriously considering switching services.

CR views the consolidation occurring in the industry with wariness. Jim Guest, President of Consumers Union (which publishes Consumer Reports), explains: "Consolidation is not a panacea to the service and customer satisfaction problems that continue to plague the industry.

In the case of Cingular and AT&T, both companies had problems with overloaded circuits. We don't see how a merger could improve that." The CR study was based on the experiences of more than 39,000 ConsumerReports.org subscribers in 17 cities.

As data collected for Q3 2004 by IDATE indicates, AT&T Wireless had a high level of monthly churn, 3.7%, compared to 2.8% for merger-partner Cingular and 1.5% for competitor Verizon.

A recent report by Forrester Research analyzing mobile providers, including a merged AT&T and Cingular, shows that the "new" Cingular will still have significant room to make up on churn, as its monthly average revenue per user (ARPU) and revenues are just a little above Verizon's.

The merger of Sprint and Nextel could be an interesting development in the market, as these companies have high ARPU and lower churn rates than many of their competitors, and would be the third largest mobile provider, post-merger.

Perhaps wireless providers can raise their rankings as the industry transitions into the next generation of mobile service. Another report by Forrester Research looks at the 2.5G/3G mobile data market, which it estimates will bring in revenues of $1.5 billion by the end of 2006, up from "nothing" a few years ago.

Ranking providers by three criteria — the quality of the service offered, how well the company is able to support the service with its infrastructure, including its financial strength, and its strategy for the future — Forrester finds that no provider has a decisive advantage.

While AT&T Wireless is the nominal leader in all three categories, second place Verizon and third place Sprint are close behind.

As Lisa Pierce, Vice President at Forrester, notes, "since the 2.5 and 3G market is relatively new in the US, we were not surprised that none of the providers were successful across all of the categories we evaluated.

As the market continues to evolve, there is significant opportunity for current leaders to stumble and challengers to move up."

Source: eMarketer

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