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How to survive the coming cell-phone wars
Your number is now yours to keep, a change that's expected to send millions in search of a better deal. But portability has costs, hidden and otherwise.
By Liz Pulliam Weston
You know that scene in "Gone with the Wind" where Scarlett
O'Hara is encircled by admirers fighting for her attention? Cell-phone users
are about to feel a lot like that.
Analysts expect a huge new wave of competition as cell-phone companies battle
for customers untethered by the new "portability" mandates. The rules are scheduled
to take effect Nov. 24 for the 100 largest U.S. markets. (To see where these
markets are, click on the link at left under Related Sites.) The rules bring
two important benefits for cell-phone users:
- Consumers can keep their phone numbers when they change cell carriers.
- Land-line numbers can be converted into cell-phone numbers.
Portability should take effect for the rest of the country by May 26. (All this assumes the cell-phone companies don't derail implementation. They've delayed the change for at least seven years, and there's a chance they could persuade Congress to step in and put off the deadline yet again.) And some 30 million cell-phone customers may switch carriers in the first year, predicts The Management Network Group, an Overland Park, Kan., company that tracks cell-phone trends.
Everybody will want your business
Portability is expected to cause customer turnover to spike, because a desire to keep the same phone number is often all that chains a cell-phone user to a carrier. Analysts predict that great deals -- more minutes, cooler phones, lower monthly fees, maybe even better service -- are on the horizon as cell companies try to keep the users they have while stealing as many as possible from each other.
"Portability, in my opinion, is going to be humongous" in its effect on the industry, said Patrick McGugan, vice president of operations for TeleBright, which allows consumers and businesses to compare cell-phone plans. "I expect there to be an onslaught (of competitive offers) in the first several days and weeks."
But don't let all the attention go to your head. If you rush to make a deal prematurely, you could, just like Scarlett, quickly come to regret your choice. Among the reasons:
- Technical glitches. There may be some problems in the first few weeks as carriers grapple with the logistics of "porting" numbers. "I would let the first wave go past," McGugan said. "The first 30 days, 60 days -- whatever glitches there will be are going to happen then."
- Overly long commitments. Carriers currently are pushing two-year contracts, and pushing them hard. The sort of perks that used to be available for one-year signups -- bonus minutes, free phones -- are being withheld unless you commit for 24 months. That pressure probably will intensify in the weeks after Nov. 24, because the carriers want a cushion of locked-in customers to help them survive the coming battles. But you don't want to bite, because:
- The best deals are down the road. Nobody can predict when the industry's feeding frenzy will reach its peak, but most analysts predict it will be after Jan. 1. If your contract expires soon, you might want to go on a month-to-month basis if your current carrier allows that, just so that you can keep your options open.
"We generally expect the deals will get better" in the weeks and months ahead, said Janee Briesemeister, Consumers Union senior policy analyst. "If you can wait, you probably should."
To help give you some idea of the magnitude of this change on the industry, consider that the average "churn" rate -- at which customers defect to another carrier -- is currently somewhere between 2.5% and 3.5% a year, according to The Management Network Group. The company expects that turnover rate to zoom to 20% after Nov. 24.
The defections are expected to be even greater on the business level. Some 25% of the nation's largest companies are expected to switch carriers in the coming months.
The bad news for consumers is that those big corporate buyers are going to get the sweetest deals, as they always have. The big guys have lawyers, professional negotiators and huge volumes on their side, Briesemeister notes, while you just have your native cunning. But this situation is nothing new.
"The consumer always bears the burden of corporate discounts," McGugan said.
What the cell-phone companies won't tell you
There are also some limits to portability and some things you should keep in mind. Such as:
- Portability is confined by region. You will be able to transfer your number to another carrier within the same metropolitan area, but you won't be able to take your number from your old home in San Francisco to your new one in Chicago.
- You'll probably need a new cell phone. While the number can come with you, your cell phone is not likely to be compatible with your new carrier's system.
- Early termination fees still apply. This is a big one, since termination fees average $150 to $200. Unless you really can't live with your current carrier, it's usually smart to wait until your contract is up before switching.
- Your current carrier can't hold you hostage. Once you request that your number be ported to a new carrier, your current carrier must comply, even if you still have an unpaid balance or owe a termination fee. (You're still obligated to pay what you owe, of course, but the carrier can't require you to pay before "porting" you.)
- You may face new fees. Your old carrier is allowed to charge you a "reasonable" fee for switching, although your new carrier may pick up the tab. (Be sure to ask.) Also, your new carrier may try to impose a much steeper termination fee to keep you from switching again. McGugan said he wouldn't be surprised if some carriers tried to double or triple their current fees. "I could see some (carriers) saying, let's make it $600," McGugan said.
If the past is any guide, the high-charging carriers eventually will abandon the fee hikes as savvy cell-phone users stampede to their competitors. But you want to make sure you're not one of those unfortunates who get stuck in the meantime.
As always, the best deals will require vigilance and reading the fine print. Don't count on oral representations from the carrier's salespeople, Briesemeister warned. The only contract that counts is the one you sign, so read it carefully.
How to make the best of the situation
Here are some other suggestions for making the most of the coming cell wars:
Shop, shop, shop. Consumer Reports has a terrific comparison shopping tool for subscribers on its Web site. Other Internet comparison sites include TeleBright (which powers the Consumer Reports service) or SaveOnPhone.com. Once you've seen what's out there, call your current carrier to see what they offer. Many companies will try hard to keep you from switching, Morningstar analyst Michael Hodel predicted, because acquiring a new customer costs between $350 and $450.
Watch those fees. As noted above, termination fees could soar as carriers attempt to lock in customers. Also, you'll want to ask about all the other fees the carrier imposes, since these can vary widely.
Ask about the details. Carriers differ about many aspects of their plans, including when off-peak hours start and stop, whether minutes can be rolled over to the next month, when long distance and roaming charges apply and whether incoming calls are free.
Don't cancel until your new service is in place. Switching from one cell provider to another should take just a couple of hours, while porting a number from a land line to a cell may take a few days. Keep your old service until your new service is activated.
Use the grace period. Many carriers give you two weeks to try out your phone and service, Briesemeister said, so make sure you use it. Employ your cell phone everywhere you're likely to need it to make sure there aren't any significant dead zones (like in your office or at home). If the service or the plan isn't all you thought it would be, take the phone back and shop some more.
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