Like a series of dominos, several of the largest regional carriers fell to consolidation pressures within the past year. The announcements came within a few months of one another: AT&T Inc. would buy Dobson Communications Corp., Verizon Wireless snapped up Rural Cellular Corp., and T-Mobile USA Inc. added SunCom Wireless Holdings Inc. to its portfolio.
And just like that, the gap between small and large carriers widened even further.
The smaller acquired operators, all roaming partners of the national carriers that acquired them, ranged in size from about 700,000 customers (Rural Cellular) to 2 million (Dobson). Some carriers with fewer than 1 million customers are among the 10 largest wireless carriers in the country. But the remaining small operators themselves note that consolidation has long been a hallmark of the wireless industry. They have fewer peers now — but also fewer competitors.
First to innovate
According to Bob Dawson, president and CEO of SouthernLINC Wireless, the real competition for small carriers right now is “probably the economy more than consolidation” as operators’ customers start feeling the pinch of economic troubles.
He added that SouthernLINC offers a variety of plans, including prepaid, to address customer needs and soon expects to introduce a budgeting feature that will alert customers when they run out of minutes in order to help them control their wireless bills.
Dawson also noted that small carriers often have been the first to introduce new plans that are later taken up and trumpeted by the larger carriers; his company has been offering an unlimited option to its customers for some time, and the national carriers are just now jumping on that bandwagon. Similarly, SunCom Wireless was actually the first to introduce a calling plan, dubbed Mobile-to-Anyone, which allowed users to select up to 10 numbers for unlimited calling. Alltel Corp. later made such plans more widely known with its myCircle offering, and T-Mobile USA gave the idea its own spin — and a special user interface — as its popular myFaves product.
Small carriers can roll out such plans relatively quickly in response to consumer demand, Dawson said. However, “what we lose out on as regional or a small carrier … is the hype and the buzz. Here come the nationals, months and months after we’ve done something, and who gets the buzz?”
Leap Wireless International Inc. has been selling its flat-rate unlimited plans for nine years and, according to spokesman Greg Lund, plans to launch a new, more aggressive advertising effort that will highlight the differences between the nationals’ new unlimited plans and those of the smaller carrier, which has about 3 million users.
“We still feel there’s a significant difference between our offering and theirs,” Lund said. “Having said that, we’re also mindful of the concentration of emphasis in the unlimited space, so we won’t sit idly by.”
Staying strong
As Leap has grown and expanded its footprint, Lund said, the company has kept its focus on being a low-cost wireless provider while at the same time taking advantage of the benefits of increased scale. Because the company focuses on its price advantage, he said, “We have to do business better than our competitors in order to really maintain our advantage.”
Michael J. Small, CEO of Centennial Wireless, has said that in order to survive and thrive, small operators must “adapt quickly and do the little things right.” For his company, those little things include details such as quickly integrating customer and employee feedback into training, and a software tool that allows tracking of store-level metrics that managers can use to improve their location’s performance.
Centennial has about 1.1 million customers in the U.S. and Puerto Rico, including nearly 700,000 users in the U.S. The company has steadily been increasing its U.S. customer base and wireless revenues, as well as its average revenue per user.
“We still see it as a growth industry, and we’re finding that our way of doing business is continuing to resonate with customers,” Small said. “We’ve basically made ourselves trusted advisors for our customers, put stores in places that the big carriers tend not to, in the small communities … and we train associates with endless hours of training at Centennial University.”
He said that the company’s detailed training allows it to offer a higher level of customer service to introduce customers to advanced wireless features, taking what he calls a “go slower” approach.
Although the company has cutting-edge technology deployed in tiny Puerto Rico, competing with the large, deep-pocketed national carriers on network speeds in the U.S. wasn’t practical. So Centennial has taken this “go slower” approach and promised customers that “we’ll explain how to use the technology better to you than the competition can,” Small said.
While the national carriers have the advantage of scale, Small said that his company takes a local market strategy that involves, for example, dividing its territory into 18 sub-regions for marketing and tailors its advertising for each one based on which other wireless carriers are its primary competitors in that specific area.
“No matter how big we get, we’re going to be tiny compared to [the national carriers],” Small said. “We’re not going to seek scale, but doing whatever is right for the local market. … We can actually make decisions at the store level. We don’t think our competition does that — they make decisions across all their stores.”
Local focus, roaming reach
Although national carriers often play up their expensive, advanced networks to customers, they may not have coverage in the areas that the smaller operators serve. And Dawson said that in his view, customers will soon tire of the hype surrounding wireless networks and instead place importance on the services that carriers can reliably deliver, as well as on being served by locally focused operators.
“We’re still relevant; we’re still robust, and out there taking care of people,” Dawson said. “I think the main difference between us and the large carriers is, when it comes to the customer, we’re local folks who see the local people. We take care of them, we show up and work with them as opposed to just sending them stuff.
“Customers want that local care,” Dawson said. He added, however, that consumers also want to be able to use their products wherever they please — meaning that data roaming agreements will become more and more important to small operators.
Iain Gillott, president of iGR Inc., said that small carriers will continue to exist as long as they’re economically viable. Ultimately, however, he said, “The reality is that it’s going to be very difficult to be a carrier with less then probably 20 million subs. … I think we’re going to end up with four carriers.”
One increasingly tough aspect of competition for the small carriers will be handsets, Gillott said. While nationals can use their size as leverage with handset makers for exclusivity — such as AT&T Mobility offering Apple Inc.’s iPhone and Verizon Wireless having a lock on LG Electronics Co. Ltd.’s Chocolate — the small carriers typically can’t wrangle such arrangements.
“It’s not that you can’t compete — you can compete,” Gillott said. But in light of the push toward open-access networks, he added, the large carriers will be using exclusive devices to attract customers, and “one of the major things that’s going to keep driving people into the store is some cool phone.”
And he doesn’t buy the small carrier argument that they provide better customer service than the nationals.
“That’s like saying that my local coffee shop has better service than my local Starbucks,” he said. “It depends on the manager of the Starbucks.” And while small carriers may be able to provide more
hand-holding, a large carrier “gives me tons more stuff. And people like stuff.”
Whatever the advantage — network coverage, price, store locations or customer care — small operators need to maximize its impact.
“If you have a competitive advantage and you sit on it, the competition will match it,” Small said. “The only way to win is to keep running, so they can’t catch you. … They keep getting better all the time in their strategy. The only way we can win is if we get better faster at our strategy.”
