TMNG Global Article on WNP for Telecommunications Online Magazine

Wireless Number Portability: Smoother Sailing Than Expected?

Past perspective for future focus

By Hisham Kassab and Paul Petersky - TMNG Global

May 26, 2005

There is no shortage of analysis and forecasting before a storm, and the period leading up to the November 2003 debut of wireless number portability (WNP) was no exception.  By the end of 2004, the regulation that allows wireless subscribers to take their phone numbers with them when switching providers had enabled more than 9.6 million subscribers -5 percent -to switch carriers without changing their wireless phone number. 

While WNP effectively reduces barriers to switching, it is also apparent that WNP was not, as widely predicted, a seismic event that dramatically reshaped short-term market shares. Did the WNP storm fail to develop as predicted?  Or did carriers heed forecasters’ warnings and prepare appropriately by training first responders, building sea walls and shoring up communications?

Research firm TMNG’s pre-and post-WNP research reveals two main reasons why WNP was not the transformational event that many anticipated:

• Carriers successfully developed and marketed product and pricing enhancements to lock in or inoculate their bases against competitive offers; and
• Confusion about the cost and process of switching, particularly among consumer subscribers, and negative publicity surrounding early operational problems during porting, helped suppress and delay initial demand for porting.

Preport Preparations

By 2003, carriers were making operational investments on three fronts.  First, they already had invested billions of dollars in operations, including network, provisioning, billing and customer care: areas that customers rated among the most important.  Second, since carriers believed WNP would cause a spike in the number of incoming and outgoing subscribers, they had to shore up their operations even further to give themselves every competitive advantage: keeping subscribers happy meant losing fewer of them.

Lastly, additional investments were needed (eventually totaling more than $1 billion) to develop intra- and inter-carrier infrastructures specifically designed to fulfill porting requests.  Several carriers created call centers dedicated to handling WNP issues.  A TMNG study in May 2004 revealed that employees at 94 percent of retail wireless stores received an average of three hours of training in preparation for WNP.  Additionally 46 percent of retailers received an upgrade to their in-store order management systems. Carriers also used internal analysis, proprietary research and industry experts to help guide them through this uncharted territory.  For example, a  TMNG toolkit offered service providers research on user behavior among consumers and businesses; a proprietary modeling tool to forecast the impact of WNP on ARPU, subscriber adds, churn, provisioning, porting, billing and subscriber care; an operational readiness assessment of key systems and processes requiring modification to support WNP; and marketing strategy and subscriber loyalty campaigns appropriate for each service provider’s situation and goals.

One top U.S.-based wireless carrier successfully reduced the time to port by 15 hours, significantly increasing cash flow and mitigating customer dissatisfaction by reducing the incidence of porting failure. In most cases, carriers’ investments in operations paid off; however, some suffered post-WNP operational issues that proved costly in terms of revenue and brand.

Investing in Features and Marketing

As in operations, service providers had already been investing billions in branding, acquisition and retention initiatives to differentiate themselves and enhance customer loyalty.  According to Ad Age magazine’s report on leading national advertisers, year-over-year advertising spending by wireless carriers increased by more than 30% in 2002, and by over 50% in 2003.

In 2003 the innovative programs, services and features carriers promoted to push subscriber hot buttons, included:

• Wasted minutes—Cingular’s rollover pricing plan.
• Discounts on frequently called numbers—AT&T’s free customer-to-customer calling.
• Push-to-talk—Verizon’s  challenge one of Nextel’s core strengths

Also notable was the continued aggressive use of multi-year contracts with early termination fees, directly aimed at raising subscribers’ cost of switching carriers.  According to TMNG’s May ’03 WNP Study, the number of subscribers under contract and the length of those contracts may play significant roles in post-WNP churn, since “as soon as my contract expires” was the number one reason for when they would port.

Other significant initiatives included upgraded wireless data and combo voice/data devices such as the Blackberry, Treo and other smartphones.  While these initiatives may not have been designed specifically for WNP, they helped inoculate existing customers against competing offers or against customer dissatisfaction with other aspects of their current carrier.

Consumer Response

Fueled by mainstream media reports of porting problems, the period immediately following WNP was marked by subscriber confusion and trepidation, resulting in consumer hesitation.

According to TMNG’s September, 2003 study, subscriber awareness of WNP was high—over 42%--leading into the initial November 2003 phase. Pricing plans and QoS were the primary drivers to change carriers.  When choosing, subscribers identified with the perceived strengths and marketing campaigns of the different carriers.  Clearly carriers’ respective investments in differentiation, packaging and retention programs paid off.

The process, however, was often problematic and issues were widely reported by news media.  TMNG’s post-WNP study provided a customer perspective to help carriers understand gaps in the process and how to address them:

• Retail stores were the clear choice for sales, due to consumers’ desire for face-to-face explanations;
• 22 percent of subscribers porting their wireless numbers experienced one or more problems with their port;
• 88 percent of those with a porting problem felt it was important enough to contact their new carriers;
• 50 percent of those required five or more contacts to achieve resolution and reported only 10 percent satisfaction with their carriers’ handling of the problems.

Consumers’ awareness of WNP, while relatively high, was also high level—they lacked a detailed understanding of the process, timing and costs of porting.  Therefore, carriers had to set expectations, which often conflicted with consumers’ simplistic notion that porting would be free, immediate and painless. 

According to TMNG’s post-WNP study, most of the complaints concerned perceived delays in porting numbers between carriers.  Other significant surprises or hidden switching costs included early termination fees (14 percent of respondents—a much higher percentage than expected- said they paid an early termination fee) and the requirement to purchase a new handset compatible with new carrier’s network.

By March 2004, a subsequent TMNG study revealed a decline in porting problems from both the carrier and subscriber perspectives:

• Wireless retail managers saw a 30 percent decline in the number of problems with porting numbers since the previous November.
• The incidence of porting problems decreased over time from approximately 31 percent in December ’03 to 19 percent in March ’04;
• By March ‘04, 82 percent of subscribers were very or somewhat satisfied with their porting experience, compared to 73percent in December 2003;
• With time, carriers across the board, appeared to set the proper customer expectations as to porting time. In March ’04,  approximately 81 percent of subscribers indicated that length of porting met or exceeded expectations, compared to 64 percent in December ‘03.

Overall, subscribers’ hesitation due to confusion and fear of lost service dampened and postponed the expected initial wave of porting.  This delay gave carriers time to lock subscribers into long-term contracts, in many cases, by offering upgraded or subsidized handsets.  Additional carrier preparation on the front lines, including customer service training and special consumer offers, helped convince consumers intent on leaving to give their carriers another chance.

WNP in Perspective

The bottom line with WNP is that the once anticipated seismic shift didn’t occur due to carriers’ heightened preparation in marketing, sales and, to a degree, operations, as well as subscribers’ confusion and trepidation about porting.

WNP is not, in and of itself, a reason for subscribers to switch but does lessen pain of switching; in fact, porting has become part and parcel of carriers’ typical churn numbers.  The attributes carriers need to win the porting battle mirror those necessary to acquire and retain customers: quality, which is a function of coverage, features and connection; and cost, which is comprised of the per-minute rate, plan flexibility and volume discounts.  Simply put, carriers that execute best will be the ones that benefit most from WNP.

For the most part, carriers undertook the prudent path of assessing WNP’s long-term impact on key business areas by using market research, analyzing existing data and consulting with industry experts.  Using this information, service providers made appropriate investments, particularly in marketing, where differentiation, long-term contracts and retention programs helped drive consumer behavior.  They also spent on operations to ensure that the customer experience during the porting process was as smooth as possible.