Posted on: Friday, May 14, 2004

Regulation on cell numbers caused shift in market share

By Scott Lanman
Bloomberg News Service

WASHINGTON — A Federal Communications Commission rule allowing mobile-telephone users to keep their numbers when switching carriers hasn't increased the rate of industrywide customer defections, the agency said.

The "overwhelming conclusion" is that the "churn" rate has stayed relatively flat since the rule took effect in the nation's 100 largest metropolitan areas Nov. 24, FCC wireless bureau chief John Muleta said. "What has actually happened is that it has shifted market share."

Churn is the average percentage of customers who disconnect service each month. It's a closely watched measure because a carrier may spend $300 to $400 to win a subscriber and it takes more than six months to break even.

FCC officials are discussing the rule's impact two weeks before it takes effect outside the top 100 markets, a move that commissioner Michael Copps said may reverse a decline in the rate of consumer complaints. AT&T Wireless Services Inc. lost customers and Verizon Wireless gained them in the first quarter partly because of the number rule, which most carriers opposed.

FCC Chairman Michael Powell said he transferred the cell numbers belonging to his wife, son and business phone. Powell didn't identify the carriers involved.

"I was shocked how well it worked," he said. "It was incredibly smooth and incredibly effective."

Carriers transferred approximately 2.6 million mobile-phone numbers through the end of April, said David Furth, the FCC wireless bureau's associate chief.

AT&T Wireless, based in Redmond, Wash., shed 367,000 customers in the first quarter, its first-ever loss, sending the churn rate to 3.7 percent, the highest among the six biggest U.S. mobile-phone operators. AT&T Wireless said the number-transfer rule was partly to blame for the loss.

Verizon Wireless, which gained 10 AT&T Wireless subscribers for every one that it lost to that rival as a result of the portability rule, had the lowest churn, 1.6 percent.

The Number Portability Administration Center Forecasting Group, an informal set of industry representatives, predicted last year that there would be more than 12 million phone-number transfers just for the final five weeks of 2003.

For the second phase of the FCC rule, Tampa, Fla.-based Syniverse Technologies Inc., the contractor processing most of the phone-number handoffs for wireless operators, is adding 70 smaller clients, primarily rural cellular carriers, spokeswoman Helen Harris said.

"There were certainly lessons learned from Phase 1, and in anticipation for Phase 2, the carriers have conducted more testing," Harris said.

Last month, the FCC said it had received 7,040 consumer complaints about wireless phone-number transfers since Nov. 24. AT&T Wireless was a subject of 3,104 of the complaints, the FCC said.