Accurate cellular subscriber churn rates continue to be elusive for most people to obtain except those really “in the know” at cellular service companies, which makes it difficult for analysts and consultants to confirm carrier reports that their churn rates are decreasing.
BellSouth Cellular Corp. is proud of its churn rate, which it says is running at less than 2 percent per month this year.
U S West Cellular says it has in the past and continues to experience monthly churn rates below the national average, which it estimates at between 2 percent and 3 percent.
Ameritech contends that while cellular carriers overall average an annual 22-23 percent churn rate, Ameritech Cellular Services has rates at almost half of that. The company wouldn’t provide a monthly figure.
All three carriers say their churn rates are decreasing. None will give any hard numbers. So analyzing trends in churn-the decrease in subscribers on a system-can only be done through suppositions.
Herschel Shosteck, president of Herschel Shosteck Associates Ltd., reported the percentage of new subscribers on a system who don’t buy a phone, as compared with total new subscribers, is decreasing-from 17.5 percent in 1991, to 13.9 percent in 1992, to 11.7 percent in 1993. This theoretically could mean that churn is decreasing.
But Shosteck theorizes that, instead, the decreasing percentage is probably because the number of phones being sold is increasing so rapidly as the market grows that the number of “brand new” cellular users is overwhelming the ratio-making the number of other types of new subscribers to a system appear to decrease.
He said that based on subscribers interviewed for a recent survey, there actually seems to be no drop in churn between competing systems, which is the kind of churn cellular carriers worry most about. In surveys between 1991 and 1993 with new subscribers that already own phones, Shosteck found the number of users coming onto a system from that system’s competitor consistently ranged between 67.6 percent and 70.2 percent.
“That’s very interesting because you would think that the carriers would recognize the causes of churn…and put a lot of effort into curing that,” said Shosteck. “But whatever is happening, you still have a pretty consistent churn rate between systems.”
Other reasons for coming onto new systems, aside from brand new subscribership, included coming from another market (12.9 percent to 15.9 percent) and reactivation (14 percent to 16.9 percent), according to Shosteck.
Shosteck said he hasn’t yet started asking subscribers why they switched carriers, but he has a hypothesis: black holes causing dropped calls.
“We know that total perceived quality has gotten better because we measure that, and we’ve seen that since 1987 the average system has better perceived quality,” he said. “And carriers, as they add capacity, they’re going to fill in the black holes whether they intend to or not. So that’s why the overall quality of service has improved since 1987.”
In a survey this year from another consulting firm, Link Resources Corp., “better price from competitor” showed up on top (40.9 percent) of the results of a survey asking people why they switched cellular carriers. “Coverage area” ranked second (19.3 percent).
The survey questioned 500 subscribers-an unequal representation covering all seven regional Bell operating company regions-with 88 reporting they had switched carriers. The survey showed the Ameritech region-not just Ameritech individually-with the most subscribers switching to the competitor (23.2 percent), and the BellSouth region with the least (11 percent). However, results of the survey may not be truly representative of actual churn rates because of the small sample size.
“The study doesn’t confirm any of the other studies we’ve done at Ameritech,” said Ameritech Cellular Services President John E. Rooney, who contended Ameritech has one of the lowest churn rates in the country.
Ameritech has spent $700 million on its cellular networks in the past two to three years to achieve the finest network performance in the markets it serves, Rooney said. The company focuses on customer service and on offering competitive pricing and service packaging.
Iain Gillott, a consultant with Link, recognized that churn is a sensitive subject, but said there is more churn out there than carriers are ready to admit.
“It’s very nice to say that the problem is going down,” said Gillott. “But how are you going to compete with the new players with new spectrum” and digital service?
It will be interesting to watch over the next few years how the entrance of Nextel Communications Inc.’s enhanced specialized mobile radio service and personal communications services into the market-adding more customer choice-will affect churn rates. This is something cellular carriers are actively preparing for, but for obvious reasons won’t release any specifics.
“As we move forward with increased competition, whether it’s from PCS or specialized mobile radio, whatever the case might be, with increased competition, customer loyalty and retention is going to be more important than ever before,” said a U S West Cellular spokeswoman. “So for companies to be successful in the future, it’s going to be important for companies to offer products and services that are very specific to satisfy customer needs.”
One of those services that could help bring the churn rate down to zero will be offering debit, credit and subscriber identity module (SIM) cards to subscribers, said Shosteck. Cellular carriers likely will adopt this marketing idea from PCS providers, who will use this tactic as a way to differentiate themselves from cellular carriers.
“So there’s no churn problem involved because they always have the debit card (or other type of card),” he explained. “So you don’t have a subscriber that you lose. What you do is you have people to whom you distribute debit cards.”
Dianne Hammer is a freelance telecommunications writer based in Denver, Colo.
