Text of WSJ "Chaos, Confusion and Perks Bedevil Wireless Customers"
April 17, 2002
Chaos, Confusion and Perks Bedevil Wireless Customers
By ANDREA PETERSEN and NICOLE HARRIS
Staff Reporters of THE WALL STREET JOURNAL
Joe Gielata thought he had hit the cellphone jackpot. The 24-year-old law
student in Chicago was paying his $60-a-month wireless phone bill
online recently when he spotted an ad offering to upgrade his Sprint PCS
plan. Mr. Gielata would get an extra 2,000 minutes in exchange for
renewing his contract. He signed up.
But he learned later that he had overlooked some small print on a
confirmation note. With his new plan, the night minutes start at 9 p.m.,
an hour later than his old plan. "It practically cut off calls to the parents,"
he says. "They go to sleep at 9:30."
Sprint PCS, a division of
Sprint Corp., refused to
restore his old plan, even
though Mr. Gielata had
called to change his mind
within the required time. A spokesman can't explain the glitch but
concedes that Mr. Gielata is out of luck.
These are infuriating days for many wireless customers, the casualties
of an industry in disarray. Wireless companies are struggling with
slowing subscriber growth, soaring expenses and intense competition.
Since the industry has already snared the easiest and most lucrative
customers -- road warriors and business people -- carriers are being
forced to court other groups such as parents, teenagers and even credit
risks. Meanwhile, customer loyalty is fading. The number of subscribers
who ditch their service each year has risen to 30% of the total number
who own a cellphone, currently 134 million people, from 25% five years
ago.
Hitting a Peak
After years of rapid expansion, the industry's growth peaked in 2000,
when 23.4 million new subscribers signed up for wireless service. That
number slid to 20.6 million in 2001 and is expected to fall to 17.1 million
in 2005, says John Bensche, an analyst at Lehman Brothers. Since the
spring of 2000, the shares of all three national publicly traded wireless
companies -- AT&T Wireless Services Inc., which was spun off from
AT&T Corp. last year, Nextel Communications Inc. and Sprint PCS --
have been on a fairly steady slide.
The upshot for consumers has been wildly mixed. Competition has cut
rates and boosted minutes of usage. Phones are smaller, smarter and
more fun. But the plethora of plans and their myriad restrictions and
charges can make it impossible to figure out the best offer or track
whether rates are being accurately applied.
And things will only get more confusing as the carriers roll out new data
services, such as photo-swapping and video. Forced to slash prices and
increase the number of minutes included in plans, the carriers are hoping
to recoup some of the money from extra charges and from new data
services.
Straining Networks
Wireless companies have been spending heavily to support their rapid
growth, but the surge in customers and traffic is straining their
networks. Seduced by plans with lots of minutes and advertising aimed
to convince users to go totally wireless, customers are chatting more
and demanding to use their phones everywhere.
The result: Fast busy signals and dead zones where you can't get a signal
are still facts of the wireless life. "The contracts are a problem, the
billing problems are horrendous and confusion is huge," says Carl
Hilliard, president of the Wireless Consumers Alliance, a nonprofit
consumer group based in Del Mar, Calif.
Many consumers aren't aware that the carriers don't treat all their
customers the same. In general if you spend more -- and sometimes if
you complain more -- you get better service, better deals and more
extras. Many carriers equip customer-service representatives with
profiles that show just how valuable you are, and which determine how
nice they can be to you.
The wireless companies save some of their sweetest deals for the
customers they are most in danger of losing: those that are coming to
the end of their contracts. Since the wooing of each new customer
costs the companies -- in advertising, promotions and discounts -- from
$350 to $475, it's important to keep the ones they have happy. In
December, AT&T Wireless launched an internal program it calls "Refuse
2 Lose." Under the program, if subscribers who call customer service
have fewer than six months left on their yearly contract, the operator
will offer a new plan, free minutes or other sweeteners in exchange for
renewing for another year.
"We'll be all over you like a duck on a June bug," says John Zeglis,
AT&T Wireless's chairman and chief executive. "We don't like the lower
revenue but we like losing a customer even less." The company has also
given one month of service free to some customers who renew for
another year.
Many of the carriers have installed sophisticated computer software that
helps them predict which of their subscribers are the most likely to leave
and need to be treated with kid gloves. The software considers data such as how many calls you make and
receive, what percentage are long-distance, the duration of the calls, the kind of phone you have and how
many times and for what reasons you've contacted customer service. The software then creates statistical
models and gives each subscriber a score that indicates the likelihood of that person's dropping the service.
Amdocs Ltd., a St. Louis-based software provider, works with five of the top six national carriers and its
software gives each subscriber a percentage-based score. A score of 85 for example, would indicate an
85% likelihood of dropping the service. The carriers then use this information, coupled with the information
on how much you spend, to target promotions.
When Sprint PCS subscribers call to cancel their service,
they are bounced directly to the company's "retention"
department where specially trained operators can offer
incentives to entice them to stay. If you switch carriers, you
have to change your number, a fact that has kept a lot of
people loyal. That is slated to change this November when
the Federal Communications Commission is set to require
that wireless carriers provide "number portability," as local
phone companies are required to do. But Verizon Wireless, a
joint venture between Verizon Communications Inc. and
Britain's Vodafone Group PLC, and other carriers have
petitioned the FCC to either drop the requirement or push
back the deadline.
Playing the System
Some people have learned to play the system, by threatening
to leave in the expectation of getting perks to stay. John
Baptista, a 24-year-old part-time student from Bakersfield,
Calif., read about the strategy on Internet message boards
and then called Sprint PCS. He says the carrier more than
doubled his anytime minutes, threw in an additional 450
minutes of nights and weekends, and cut the amount he had
to pay if he went over his minutes allowance to 25 cents a
minute from 39 cents. Mr. Baptista signed a 12-month
contract.
His $70 monthly phone bill probably helped his cause.
Carriers usually are more generous to those with higher
monthly bills and good payment records. "If we have to give
you a $25 credit to keep you, it isn't worth it for a
$25-a-month customer, but it is for a $100-a-month
customer," says Sprint PCS President Charles Levine.
The losers are people such as Eric Williamson, a Sprint PCS customer for about two years. He says he
rarely exceeds the minutes allowed under his $39.99 monthly plan. The 26-year-old Mableton, Ga., student,
who says he has had to return two "faulty" phones, stood in an Atlanta-area Sprint retail store Monday
trying to get repairs for a third. Mr. Williamson says he has threatened to switch, but Sprint PCS
representatives didn't offer him any perks to stay. "All they did was remind me about the $150 termination
fee and said they'd be sorry to lose me as a customer," he says.
For select customers (including former President George H.W. Bush and the Secret Service), Sprint PCS
has an "executive services" group that handles VIP requests for everything from personal tutorials on how
to get voicemail to work to personally delivered phones.
At VoiceStream Wireless, a unit of Deutsche Telekom AG, the higher your bill, the less time you'll spend on
hold. A computer system routes customer-service calls based on, among other things, how much the caller
pays each month. In general, those with cheap plans are routed to the least-experienced representatives.
Those on pricier plans may be offered special rates or new phones.
Treats for 'Low Users'
Even thrifty subscribers sometimes get a break. Rural carrier Alltel Corp., for example, offers subscribers it
calls "low users" (those who use their phone for only 10 or 15 minutes a month) incentives such as free
long distance or caller ID. "We want to encourage them to give out their phone number and use their phone
more," says Philip Junker, Alltel's executive vice president of marketing.
The market is tantalizing for consumers because wireless service has never before been so widely available
-- or so cheap. The average monthly bill has dropped about 8% to $61 at the end of last year from $66 at
the end of 2000, according to J.D. Power & Associates. And customers are getting more minutes for those
prices. Late last year, VoiceStream Wireless added free long distance to some of its national plans. Last
month, Cingular Wireless, a joint venture between SBC Communications Inc. and BellSouth Corp., added a
bunch of minutes to its national plans. The $29.99 plan now includes an extra 150 anytime minutes. Those
who spend $199.99 get an extra 1,000 anytime minutes.
Niche companies, such as Leap Wireless International Inc. and MetroPCS, a closely held newcomer, are
now offering unlimited local calling for as little as $32.95 a month.
But some of the good deals aren't as good as they sound. Verizon Wireless has been heavily advertising its
new America's Choice plans. The $35-a-month plan, for example, includes 300 monthly anytime minutes
and 3,000 minutes for use on nights and weekends. "Now you can use all of your minutes across America,"
the Verizon Wireless Web site beckons. Except, that is, in big chunks of California, Texas, Oregon and
several other states where Verizon Wireless doesn't own the network the calls run on and has to pay
another carrier to handle those calls. In those spots, subscribers have to pay a 65-cent roaming charge per
minute.
"The way we compensated the customer who may have used the off-network feature is we provided them
more minutes on our network," says a Verizon Wireless spokesman. "The majority of customers who
choose a national plan do not roam off of our network."
Under Verizon Wireless's old national plan, users could use their minutes for any call, but the carrier found
that 7% of its traffic was running off its network, costing the company a big chunk of money. So Verizon
Wireless abandoned that plan.
Defining a Minute
Alltel launched plans similar to Verizon's -- and dubbed the program National Freedom -- on Jan. 31.
Subscribers who call off the network in those plans are slapped with a 59-cents-a-minute roaming charge
and -- if the call is long-distance -- an additional 40-cents-a-minute charge. "From an economics
perspective, it is very favorable to us," says Alltel's Mr. Junker, though he declines to provide details.
Many consumers are bewildered to learn just how many ways the industry defines "minute." There are peak
minutes that can be used during the daytime; anytime minutes; nights and weekends minutes; and minutes
that are only good when calling from cellphone to cellphone.
Kerstin Beal Turner, a public-relations executive in Atlanta, says she frequently goes over her allotted
minutes in her VoiceStream cellphone plan. Her $40-a-month plan includes 600 anytime minutes and
unlimited weekend minutes, but most months she finds herself using an extra 30 to 35 minutes. With each
additional minute costing her 40 cents, that adds nearly $15 to her monthly bill. "I have the best plan that
they have right now, but it still stinks," Mrs. Turner says.
The caveats and charges are enough to make Chase Beasley throw up his hands. Mr. Beasley, a 39-year-old
vice president at an Atlanta-based technology company, spends about $140 a month on his AT&T Wireless
plan. His calling plan gives him 1,000 weekend minutes, 500 anytime minutes as well as unlimited
"mobile-to-mobile" minutes for calls placed to other cellphones on a shared plan, such as his wife's number.
Some of the calls are billed as local calls, regional calls, or "roaming" calls for when he makes calls outside
of his calling area. "Sometimes I just look at the bill and laugh," he says. "To check to see if it's valid would
take all day."
Last spring, in response to consumer complaints about billing and advertising, 22 state attorneys general
requested advertising, billing and marketing information from wireless carriers including Verizon Wireless,
Sprint PCS and Cingular Wireless. One attorney general says the wireless companies have been
"cooperative" in handing over the data, adding that no charges have been filed against the companies to date.
If the proliferating plans and inequitable treatment are confusing consumers now, things are only going to
get worse. The carriers are starting to unleash a slew of new services that run on high-speed networks.
Many customers will also find that they have to buy new phones -- their old ones won't work on the
speedier networks.
The new data services include e-mail with rich graphics, photo services, games and high-speed wireless
Internet access. The carriers hope that the more people get hooked on these services, the less likely they
will be to change providers. But get ready for more confusion about prices. Some carriers are talking about
pricing per service: for example, one price for each photo sent. Others are talking about pricing per minute
or per kilobit. Verizon is letting consumers choose either per-minute or per-bit pricing.
According to Verizon Wireless vice president Jim Straight, such issues are already causing consternation:
"People call customer service saying, 'What's a bit?' "
Write to Andrea Petersen at andrea.petersen@wsj.com and Nicole Harris at nicole.harris@wsj.com
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