With personal communications services carriers reporting average monthly churn levels about twice as high as cellular carriers, bad debt increasingly is being blamed for PCS churn problems.
Some PCS carriers are reporting average monthly churn levels of around 4 percent, while cellular carriers are averaging less than 2 percent each month. Many PCS carriers attribute increases in churn to disconnecting non-paying customers.
Aerial Communications Inc. last week reported its churn rate was 6.3 percent during the second quarter, driven significantly by company-initiated disconnects.
PCS carriers trying to penetrate increasingly crowded markets have focused on growing their subscriber bases quickly, say analysts. That has led to a growing problem with bad debt and fraud because carriers and distributors are scrutinizing customers less vigorously.
“Subscriber fraud is easier with the PCS guys because of their use of mass merchandisers,” said Perry Walter, a telecom analyst at Robinson-Humphrey Co.
“There’s a lot of voluntary churn,” said Peter Nighswander, director of cellular and PCS at the Strategis Group, Boston. “Involuntary churn is on the rise, though.”
However, David Kerr, director of wireless programs at Strategy Analytics, said termination churn related to bad debt is a “blip on the radar screen [compared with] the big looming problem, which is the dramatic increase of carrier-to-carrier churn that we anticipate over the next couple of years.”
While PCS carriers have placed the focus of their churn problems on bad debt, analysts say other factors are driving churn as well.
Subscribers have signed up for deeply discounted service plans that include large buckets of minutes. When those plans expire and customers begin receiving higher bills, many churn out of the system, say analysts.
“A lot of times these subscribers are offered a good deal and later find out it’s not something they need,” said Nighswander.
Another reason PCS churn is higher is that it is attracting a different type of subscriber, said Nighswander.
“They’re attracting new subscriber bases-often younger subscribers-that aren’t accustomed to paying that monthly bill,” he said. “They rack up these charges and then realize they don’t want to pay, so they drop out of the system.”
“They’re delving into the next layer of subscribers, which constitutes a more fickle audience,” said Robinson-Humphrey’s Walter.
Call quality and coverage also are reasons customers are dissatisfied.
The new adopters “have been conditioned that wireless is CD-like compared with an 8-track cassette tape,” said Richard Siber, director of the worldwide wireless consulting practice at Andersen Consulting. “In most instances it is very good, but clearly digital service has its idiosyncrasies. If they are expecting landline [quality], they’re going to be disappointed.”
The most important factor in deciding to churn for consumers is price, say analysts. According to Siber, 50 percent of consumers cited price as the reason they were dissatisfied with their wireless service. Twenty percent pointed to call quality, with the remaining 30 percent split equally among dissatisfaction with inaccurate billing, customer service and network coverage.
Corporate customers are less concerned about price, as only 20 percent said price was a reason for dissatisfication. Instead, 30 percent said customer service was the most important reason for disatisfaction. Twenty-five percent of corporate customers named call quality as a problem, followed by network coverage with 15 percent and inaccurate billing with 10 percent.
Matt Bixler, product manager for customer intelligence products at Lightbridge Inc., said he also hears price cited as the most common reason for dissatisfaction among consumers. However, it is often unclear whether customers are unhappy about the actual price of service, or whether they believe they are paying too much for the quality of service they are receiving, he said.
One way carriers are trying to combat churn is through proactive relationships with their customers, said Bixler. The ability to identify which customers are unhappy with the price or quality of their service-and then take steps to make that customer happy-is something carriers increasingly are interested in, he said.
Bixler also said carriers want the ability to place a value on customers-either a monetary value or score-to help them determine which customers deserve the most energy.
“Carriers really have to pay attention to marketing expenditures. Maybe they’re not spending enough money, or maybe they are misdirecting the money they are spending,” said Nighswander of the Strategis Group.
Part of Lightbridge’s approach to helping carriers combat churn includes diagnosing where carriers are experiencing their biggest churn problems in near real-time. Then Lightbridge’s system profiles customers to help carriers know what problems their customers are experiencing and the best ways to fix those problems.
“Churn isn’t always a bad thing, though,” said Nighswander. “If you’re not a high-margin subscriber, and you pay your monthly access fees, but only use the phone once, than it might be costing me more to keep you on than to get you off my network.”
