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Study: Wireless Number Portability Will Trigger Switching

Atlantic-ACM says the new rules will hurt customers with the poorest customer service.

The federal mandate requiring companies to let customers take their phone numbers with them when they change wireless carriers will cause a spike in the number of people switching service providers, and will hurt companies with the poorest customer service, a research firm said Friday.

The Federal Communications Commission's ruling on wireless local number portability is expected to result in as many as 20 million customers changing carriers in the first year of the mandate, which takes effect Nov. 24, Atlantic-ACM said.

The average churn rate of 25% to 35% for U.S. carriers is expected to increase by 25% to 50% in the first 12 months after the rule takes effect, the market researcher said. The findings were based on churn rates in foreign markets that have implemented similar rules.

The federal mandate is expected to cause a shift in market share toward companies with reputations for good customer service and value, Atlantic-ACM analyst Wona Park said.

A J.D. Power and Associates summer survey of 16,800 cell-phone customers found Verizon Wireless and Nextel Communications Inc. with the best rating for customer service. Out of the seven largest wireless carriers, Alltel Corp. and Sprint PCS were the only two with ratings below the industry average for service. Spring PCS had the worst rating.

The J.D. Power study also found that cellular phone customers were nearly four times more likely to switch carriers if the service provider rated below average in customer care.

"Look for wireless providers to focus more on establishing customer relationships to help stave off churn," Park said in a research note. "Some, like Sprint PCS, already are placing 'courtesy calls' to identify customer difficulties and strengthen their relationships."

In addition, Park expects carriers to offer incentive programs rewarding their sales force and dealers for customer retention, and to leverage usage statistics and predictive behavior models to target customers likely to jump.

The FCC mandate is also expected to affect customer-service centers. Convergys Corp., which provides customer billing, contact centers, and other services to businesses, expects an additional 100 million calls to its centers from people looking for information about the new rule and contract expiration.

A recent study by Convergys found that customers most likely to switch pay an average of $71 per month to their carriers, well above the $59 industry average, Park said.

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