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The Keys to Keeping Cell Customers

"CALL MOM AT HOME." Such changes have already cut Nextel's customer-care costs by one-third, Douglas says. More important, the system helped reduce its churn from 1.6% to 1.4% a month -- by far the industry's lowest. It has also raised Nextel's ranking from below average in customer service to the No. 1 spot it now shares with Verizon Wireless in most regions of the country, according to J.D. Power.

Personalization can enhance the customer experience as well. No. 3 U.S. carrier AT&T Wireless (AWE ) uses speech-recognition software from privately held Tellme Networks in Mountain View, Calif., that identifies the caller's number, then dips into the carrier's database to check whether the person is an existing subscriber. (Within 12 months, the system will greet the subscriber by name, promises Tellme President Mike McCue.) The software then tries to speed up the inquiry by guessing why the customer is calling and offering help: For instance, after first signing up for the service, many people call for help with setting up their mailbox.

Tellme's software also includes an address-book feature that lets customers issue voice commands, such as "call mom at home." And by dialing *121, they can get stock quotes and news bites via voice, buy movies tickets, or get driving directions. Similar services provided by live humans cost $5 a call vs. 10 cents with Tellme, says McCue.

FAKE STEEPLES. Other service improvements require significant spending: The industry forked over $4.3 billion in the third quarter, up from $1.3 billion in the second, even though No. 4 Sprint PCS (PCS ) and T-Mobile, a subsidiary of Deutsche Telekom (DT ), are still losing money, while the other four among the top six carriers -- Verizon Wireless, Cingular, AT&T Wireless, and Nextel -- are all believed to be in the black. With newcomers like Virgin Mobile and Boost Mobile marketing prepaid plans to teens, stealing customers, and driving down prices, such investments are likely a must for staying in business.

Among other things, carriers are spending to improve call quality within buildings, such as at airports and malls. They're buying gear like that sold by privately held LComm in Ontario, Canada -- antennas attached to coaxial cable that can be placed throughout hospitals and warehouses to provide uninterruped calling coverage, says Michael Brunet, a partner at LComm. Depending on the layout, the system costs as much as 25% less than wiring the same area with Wi-Fi, a high-speed wireless networking technology that's less reliable, he says.

To enhance call quality in suburban and rural areas, service providers are buying cellular camouflage gear: fake traffic lights, cactuses, church steeples, and palm trees that are really cell antennas. Sales at privately held Larson Camouflage in Tuscon, Ariz., which sells artificial palm and pine trees to the top six U.S. carriers, have increased 50% this year vs. 2002, says Steve Meyer, Larson's business development manager.

OLD AND THICK. To pinpoint dead spots, many carriers are also deploying special software that recreates the customer's experience by placing hundreds of calls an hour and measuring sound quality, says Dunsby. And InCode is busy helping service providers figure out where their most valuable customers -- such as business users -- require access, so that the carriers can first improve coverage there, Dunsby says. On the short list are railroad stations and courthouses, many of which are 100 years old and have thick walls that wireless signals can't penetrate.

Of course, shareholders and investors will likely look unkindly on sustained increases in carriers' capital spending, say analysts at telecom consultancy RHK. And many cell companies argue that customers who switch service providers after Nov. 24 will be disappointed, since the call quality of most cell carriers is roughly equivalent, even though customers' perceptions differ.

What's clear, though, is that today cell service is still falls far short of perfection. And with the increasing customer focus on quality, no carrier can afford to aim lower than that.

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