Once upon a time, a wireless phone was going to be more than just a communications device. It was going to be a game console, a video screen, a jukebox, a roadmap, a necessary fashion accessory, as well as a technical butler. Internet use, too, was considered as essential as another food group: Take a class online instead of spending time in a dusty classroom, the cheerleaders sang, or download a movie at your leisure instead of schlepping to Blockbuster. Internet access would be available from every kiosk in every public place. Even refrigerators would be broadband-connected, making a trip to the supermarket obsolete.
We've learned the hard way that promised services don't always come to fruition, and even if they do see the light of day it's in a slightly more yawn-inducing form than originally advertised. Now, as the once high-on-technology Wall Street digests its Prozac, reality should once again be in vogue in the communications sector. After many bad marketing gimmicks and plain old poor service, it's time for wireless, Internet, cable, and telephone companies to consider getting back to basics.
The wild growth rates enjoyed two years back are slowing down. Wireless subscribers jumped from 118.3 million in June 2001 to 134.6 million one year later. But almost seven months later, the number of subscriptions inched up a paltry 2.8 million. And for all the talk of the more lucrative broadband Internet connections, dialup remains the favored means of access74 million to 33 million. Cable companies, too, are feeling the heat. The competition from satellite providers is threatening their monopolies and unquenchable appetite for growth. This year, just throwing new services at the problem won't save providers.
"This is part of the whole carrier strategy, to throw it all up there and see what sticks," says Ken Hyers, senior analyst at market research firm Cahner's In-Stat Group. "They have to focus on the customer rather than the technology this year."
It's obvious from the cascade of sour earnings reports that providers must start focusing on the customer. But putting the crown back on the customer's head is going to take some unlearning of bad habits. If they can't get their hands on the crib notes, here are the top 10 lessons service providers need to learnpreferably before their next earnings reports come out.
1. Getting the customer isn't the hard part. Keeping that customer happy is. Acquiring customers at any cost doesn't always pay off for the service provider. Consider the case of Cingular Wireless. The Atlanta-based, second-largest wireless company announced a loss of 121,000 customers in its fourth quarter. Sales were relatively flat, up a stingy 1% compared to 2001's fourth quarter. After the bad news came out, Cingular Wireless, owned by SBC Communications and BellSouth, blamed the customer exodus in part on the lame customers it had inherited from bankrupt WorldCom. WorldCom's wireless service, which was mainly resold from other providers' networks, was notorious for angering customers with its shoddy billing and nonexistent customer service.
It's obvious from the cascade of sour earnings reports that providers must start focusing on the customer. But putting the crown back on the customer's head is going to take some unlearning of bad habits.
Cingular could have used WorldCom's meltdown to its own advantage. Analysts said Cingular would have to concentrate on new services this year that would entice the customer. When asked what kinds of new services they'd be rolling out this year, the company said: "Cingular expects 2003 to be the year when true third-generation technology becomes a reality. With the ongoing deployment of GSM/GPRS and EDGE throughout Cingular's nationwide network, we anticipate growing demand for a full range of advanced, high-speed voice and data applications, as well as the devices that enable their use." Finishing the network, designing, marketing and selling the advanced services and retrofitting the devices to support those services: That's quite a lot of ground to cover in eight months. Which brings me to the next rule...
2. Keep it simple. "My phone is vibrating instead of ringing. Now I have to take it back to the store." I've heard that complaint from three different, otherwise intelligent wireless-phone users. Forwarding a voice-mail message? Forget it. Customers, even the smart ones, don't read the manuals that come with the phones. They don't know how to click their way through the menus. They think the phones are broken when they're just stuck in the wrong format. Sure, there are the usual suspects who can know and adroitly navigate each one of their cell phone's scores of features. But there's got to be a business somewhere for a wireless phone company in making the phones easier to customize. Think what AOL did for email and instant messaging. Simplifying will save providers wear and tear on their help lines and keep customers from churning.
3. Know who's the boss. Two years after the mega-deal he is credited as masterminding was complete, America Online founder Steve Case resigned as chairman. Shareholders watched as AOL's stock tanked after the ISP merged with Time Warner. Case may have gotten the blame, but some reports had him crying all the way to the bank to deposit his $160 million in compensation and stock sales. The two companies had different visions of their collective future. Lesson learned? Providers need to know their betrothed, and have a good idea of how their children will be raised, before they walk down the aisle.
4. Cook up some sticky buns. If management upheaval was its Kryptonite, email and instant messaging services were AOL's super powers. In a climate of competitive pricing and enticing promotions, customers held tight to their familiar email addresses that ended in @aol.com, which helped the ISP retain its 35-million customer base. Instant messaging buddy lists, too, proved the glue that stuck customers. Wireless providers might find out how loyal their own customers will be when local number portability (LNP) comes about at the end of this year. LNP will enable a cell-phone user to take his phone number with him, facilitating his leap to another provider. If a provider can only offer price, not sticky and unique services, that customer is as good as gone.
5. Just because it's gold and sparkly doesn't mean it's more than a phone. The Vertus phone, manufactured by Nokia, was all the talk in the press last year. The platinum phone encrusted with precious gems was also a bust at the sales counter this year. As of February, in the New York market, the pricey portable had only been purchased by two people. Sure, the luxury phone with its eye-popping $19,450 price tag, has a limited market. But it's doubtful wireless companies would have ever guessed just how limited that market was. Mere mortals don't want to shell out more than they have to for a device because they know advances in technology could make it obsolete quickly. Look, too, at cable operators paying huge sums of money to develop cable telephony. At the end of the day, a customer doesn't care that his phone call is handled by a more complex, packet-based network, or that his call comes from a jewel-caked device. Customers care that their phone calls go throughPeriod.
6. The games people don't play. Gaming on the Internet and on wireless phones was going to be a surefire premium service for operators. But who is willing to pay an extra buck to play each game? If the teen market can come up with the money, they're not likely to squint at the monochromatic small screen when their Playstations are waiting in the den, so the device will have to be a better version than today's cell phone. "You expected [wireless gaming] would have hit a few years ago," says Cahner's Hyers. "Except among a small segment, it hasn't taken off." Some analysts, like Dana Tardelli of Aberdeen Group, are more bullish on gaming, pegging it at a plus-$9 billion industry. Still, the wrinkle Tardelli adds, is that even if gaming scores with users it won't necessarily translate to bigger profits for providers. Third-party game designers and distributors will get a big cut of the action, leaving providers eating the crumbs.
7. Good service gets votes. New York's Congressman Anthony Weiner knows how to get headlines. In late January, he called for the passage of the Cell Phone Service Disclosure Act. It's the same old theme on a different technology. A few years back, it was the fast busy signal that was driving political action on the Internet service front. Now it's cell phone dead spots. Service providers need to make sure their networks and call centers can keep up with the traffic.
8. Location, location, location. Customers care about their surroundings. Location-sensitive portals and content will sell services on the Internet and television content. For wireless providers, location isn't just a service, it's a mandate. Providers must comply with emergency 911 (e-911) technology that enables rescue dispatchers to determine the location of a caller, as is the case with a call made from a landline phone.
Once this location technology is in placeprobably by the end of 2003the providers will more than recoup their costs on premium services, like being able to find the nearest Chinese restaurant or vacant hotel room, using the technology. Analysts predict there will be a marketing war as providers prepare their networks for e-911. Providers using CDMA will have an advantage over their TDMA-using competitors. Look for the CDMA providers to be early e-911 adopters and market the safety message to their best advantage.
9. If it works, copy it. Like AOL, wireless operator Nextel has a successful and enviable service. In Nextel's case, its walkie-talkie- like transmissions that enable communication primarily between a set group of people is catching favor, especially among lucrative business customers. Wireless providers are emulating Nextel with the 'push to talk' service, a model that many analysts predict will hit big this year. Market experts also advise providers to look overseas for examples of services that have been tried and tested. For instance, the availability of prepaid calling cards for long-distance and local voice services, and for Internet and wireless usage, have been a money- maker in Europe. It makes sense in the U.S. market as well.
10. Too much cream of the crop is bad for your arteries. Courting only the most affluent customers was a luxury providers could indulge in when growth-rate percentages were still in the high teens, year after year. But now that everyone who wants it has Internet access and wireless phone service, and since cable operators are playing tug-of-war with satellite providers over their customers, and local providers are crashing into the long-distance markets, carriers need to embrace other market segments. The credit-challenged have a place, perhaps with prepaid cards. And who knew that it would take the teen market to make instant messaging such a pop culture icon?
Innovate. Customers can only buy the services they see offered, but maybe providers aren't offering what these customers would buy. Home networking makes sense for today's average American family, with its 2.2 kids, two computers, and one printer. But providers need to include practical installation solutions and reasonable pricing plans to make it desired by more than only the tech diehards. Methods for broadband access to the Internet can also stand some advancement. Pricing plans, too, need innovation. The wireless industry refuses to allow calling party pays (CPP) to happen because it's an immediate threat to profits, but it's a pricing plan that customers want.
And in the end, whether providers like it or not, giving customers what they want is the new reality.
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