Lowenstein's View: Things operators need to fix

Mark Lowenstein

The American Customer Satisfaction Index (ASCI), which measures customer satisfaction with leading companies across nearly 50 industries, shows that wireless operators consistently rank on the lower end in the telecom and media sectors, and that as an industry we are trending slightly down.

I find this ironic, because wireless networks continue to improve and the average monthly spend, per subscriber, is about the same as it was five years ago (although it has shifted from voice to data). Pricing is fairly competitive, with an increasing array of options for users. Customer service hold times are down, and first call resolution rates are up. Most people think their phones are good or great. So, why isn't customer satisfaction with wireless services higher?

I'll boil it down to two words: unpleasant surprises. A wireless operator can do everything right, but then blow it all with one bill "surprise" for the subscriber who dares to make a phone call or access their email when traveling outside the U.S. border, or happens to "go over" their voice or data usage allocation. Want to access wireless data when in Canada? That's $2.00 a megabyte, which means downloading one issue of your favorite magazine would cost $400. That's not a typo, folks, and we're not talking streaming video, either. Back on the home front, for the 70 percent of subscribers who still aren't on an unlimited voice plan, voice overage still comes in at circa $0.45 per minute. And in our tiered data plan structure, typical overage rates are in the $15 per GB range. No, it's not still the 1970s, and no, you're not on a plane or in the middle of the desert with a satellite phone.

Customers are smarter than they're given credit for. They understand the subsidy model in wireless, because it's analogous to "zero percent financing" options for things like buying furniture or TVs. They understand the ETF surcharge, because they know the retail price of a smartphone is ~$600. They even understand all the taxes and fees tacked onto a bill because it's predictable and transparent. Even in the cable industry, customers understand (but might not like) fee hikes, in part because the cable companies can say, "Well, ESPN hiked what we have to pay them per subscriber by 40 percent this year." Customers know the difference between something that's expensive and something that's a rip-off, sort of like accepting the $100 concert ticket but incensed at the $30 in Ticketmaster fees involved for the privilege of buying said ticket.

In a world where consumers can talk or video chat with anyone in the world from their PC for free or almost free, voice/data/text overages and international calling/roaming charges don't make sense. They get the operator into what I call "Ticketmaster" territory--the type of company that the customer has to deal with but nobody likes. Or, if they keep tacking on needless fees, like "upgrade fees" or "activation fees," they'll be compared to the airline industry.

Operators always have a comeback for this: "We offer international calling plans…foreign operators charge us high termination rates… you can buy a local SIM…you should upgrade your plan to a higher voice or data plan..." Yes, these are all valid options, and they make sense for frequent international travelers or those who clearly are not on the right plan. But there are really two things at work here: first, international roaming rates and overage rates are unnecessarily steep; and second, most customers who roam internationally or who go over their plan allocation, do so occasionally. Then they feel punished for it.

Great companies can charge a premium for their products, but they don't deliberately try to fleece their customers. Starbucks. Apple (until the $29 adapter for the iPhone 5). Bose. HBO. Mobile operators could come up with a more customer-centric approach. Here are some suggestions.

1. International Roaming.

·       Undertake a concerted effort to reduce rates. By, like, 50 percent. This happened in Europe, but it took regulators to step in.

·       Offer international "calling plans" for occasional travelers. Going to Europe for a week? Charge a reasonable "week pass" with significantly reduced rates, for both voice and data. Do it through an app that makes it easy to purchase and use.

·       If international operators won't play nice and reduce their rates, facilitate local SIM. Make it available domestically and able to be provisioned with an app, so the customer walks off the plane working. Don't lose this one to the OTT guys or to the maze of in-country SIM players.

2. Overage

We're already part of the way there on overage, with the majority of customers on unlimited texting plans, and more signing on to "unlimited" plans or share plans that include unlimited voice and text. But for the foreseeable future, the majority of U.S. wireless customers will have some component of their plan that is "metered." For example, even on Verizon's Share Everything or AT&T's Mobile Share plans, with all those users and connected devices sharing those gigabytes, it is relatively easy to do something or forget to do something that inadvertently results in overage. We're going to have bill shock incidents for data the same way we did for text or voice.

Operators already have good tools to inform customers about usage, and provide warning messages about large data downloads and data roaming charges. But they could do more:

·       Reduce overage rates. Voice overage should not be $0.45 per minute. In 2012. $15 for a GB of data is also steep.

·       Automatic right-sizing. Instead of steep overage charges, provide an automatic "upgrade" to the next plan for that month when a certain threshold is hit.

·       Buy a 'boost'. "Want to buy 100 more minutes or another couple of GB without changing your plan? Do it now." And for a reasonable charge.

·       Overage protection. This could work similarly to a bank's overdraft protection--you could pay, let's say, $10 a year for some form of overage protection, where you are automatically boosted to the next tier plan for that month.

·       Set a limit. Customers who might be worried about overage could set a top limit of their monthly spend. When reached, service stops working, except for emergency calls and perhaps calls to family members.

The myriad self-service tools and applications enable these capabilities to be self-configured. There would also be fewer calls to customer service for bill complaints, which, for example, helped MetroPCS for example keep their opex costs down.

More customer-friendly policies would also be looked upon more favorably by regulators, which will help in M&A, spectrum, and other discussions where there's a sharp eye on the industry's pricing practices.

Mark Lowenstein, a leading industry analyst, consultant, and commentator, is Managing Director of Mobile Ecosystem. Click here to subscribe to his free Lens on Wireless monthly newsletter, or follow him on Twitter at @marklowenstein.