As an industry, we are all too aware of the fundamental changes in our business. The days of high average revenue per minute of use, phenomenal subscriber growth numbers, low churn rates and duopoly markets are long gone.
Industry transformation has resulted in eroding economics: decreasing ARPU, slowing industry growth and increasing acquisition costs per new addition. Carriers are increasingly challenged to drive economic profit in a new wireless landscape, much like El Nino has dramatically changed the weather pattern.
We have moved from the network-centric days of the past to the customer-centric days of the future. And a critical first step in meeting the challenges is to understand your existing and potential customers and what attributes drive their satisfaction.
To this end, we commissioned a comprehensive national telecom consumer survey, called COMWATCH to provide a basis for measuring and understanding customer satisfaction in several telecommunication service market segments: wireless (includes cellular and PCS), paging, long distance, local, bundling (of local and long distance), online/internet, cable and satellite television. Of the over 6,200 total households surveyed in fall 1997 and spring 1998, approximately 32 percent subscribe to wireless service, with nearly 8 percent subscribing to more than one wireless phone. This exciting new resource represents a comprehensive new weather map to help carriers prepare for the hour the competition hurricane hits the coast.
Household penetration
As expected, the wireless penetration rates increase by household income with a low penetration rate of 15 percent in the annual income bracket of $25,000 to $49,999, and significantly higher rates reaching 51 percent in income ranges of $50,000 to $99,999 and 61 percent in incomes greater than $100,000. The penetration rates fall below 15 percent for incomes that are less than $25,000 per year. This suggests that carriers will have to find innovative, profitable ways to entice the lower tier income brackets, while still further penetrating the higher income consumers.
In spring 1998, of those households that indicated wireless use, 21 percent indicated that they have two wireless phones and 6 percent said they had three or more per household. This is up from 20 percent and 3 percent from the fall 1997 study respectively. Households with income greater than $100,000 were about four times more likely to have three or more wireless phones than the other income brackets. These trends signal an opportunity for carriers to gain a greater share of the cellular wallet per household, irrespective of household income bracket.
Certainly, carriers that provide multiple telecommunications services may be positioned to gain a greater share of the overall telecom wallet per household.
Those households with wireless services, including those with more than one wireless phone, were the most likely group to have pagers (40 percent for one cellular phone, 51 percent for greater than one cellular phone), cable TV (71 percent and 70 percent respectively), and online/internet access (38 percent and 51 percent respectively), suggesting a ripe opportunity for carriers to cross sell services.
Analog cellular phones still are the primary type of technology: a whopping 58 percent use an analog phone and only 9 percent and 7 percent use digital and PCS phones respectively. A large number of households, 25 percent, indicate that they did not know what type of phone they have. These figures confirm that consumers are less aware (and perhaps less concerned) about the technology carriers provide and more focused on the actual service offered. Clearly, as digital technology becomes pervasive, and carriers deliver services that take advantage of the inherent benefits of digital networks, the analog percentages will decrease.
What are the primary reasons consumers are using wireless service? Emergency, safety & security continue to be the main reason for using a cellular phone, although respondents citing this to be the case dropped to 42 percent, from 50 percent, in spring 1998. Using service for general convenience, personal, family and friends purposes increased significantly to 31 percent, from 24 percent, during the same period while use for business remained about equal at 18 percent. The increase in general convenience as the primary reason shows a growing acceptance of cellular phones as an everyday device. In spring 1998, 62 percent of the respondents cited using roaming less than 20 percent of the time; up slightly from 60 percent in fall 1997, indicating that roaming remains a non-issue for the majority of households.
The primary reasons for using a cellular phone differed, in terms of percentages, across geographic regions. In the Northeast and Mid-Atlantic regions, 52 percent of respondents purchased a cellular phone primarily for emergency and safety and security purposes, while the Pacific and West regions fared more equally between emergency, safety and security (36 percent) and general convenience, family and friends (32 percent).
The percentage of time the cellular phone was used for business purposes varied by region as well, with the highest percentage being in the Pacific (34 percent) and the lowest in the Mid-Atlantic region (16 percent).
A carrier’s perspective
From a carrier perspective, respondents identified 50 wireless providers in the 1998 survey with the top 10 providers being: Cellular One, AT&T, AirTouch, Bell Atlantic Mobile, GTE, 360
