NYT reports yet more deception in the hyper-sneaky cellular wars:

Ms. Sirianni is one of millions of customers whom wireless companies are trying quietly to entice into renewing their contracts in the next few weeks. New phones, additional minutes and cash credits are being handed out — all with an eye to locking in customers who may not know that come Nov. 24 a new federal regulation will allow them, for the first time, to keep their cellphone numbers when they change mobile services.

Because mobile phones have become as important as traditional phone lines for many consumers, the desire to keep the same cellular number has prevented many from switching providers even if they are less than satisfied with the service. That is about to change.

Kathleen Abernathy, a commissioner at the Federal Communications Commission, recently cited a study that said as many as 8.7 million cellphone users would switch immediately after number portability became available.

The movement may be a watershed moment for the industry. For the six major national mobile phone providers — AT&T Wireless; Verizon Wireless; Cingular Wireless, a joint venture of SBC Communications and BellSouth; T-Mobile, a subsidiary of Deutsche Telekom; Nextel Communications; and Sprint PCS — this could be the start of a shakeout that determines which companies will thrive and which may be absorbed by others.

Heavy competition in this industry has always meant strong marketing and customer retention campaigns. One of the mobile phone carriers’ biggest problems has been customer churn, with tens of thousands of customers shifting from one provider to another every month in search of better deals or service. The regulation allowing customers to take their phone numbers with them will accelerate churn, and that is why wireless companies are eager to sign customers to new one- or two-year deals before Nov. 24.

AT&T Wireless is now giving away $50 credits to some customers signing up for an extra year of service as well as airline miles to particularly valuable users. Cingular is handing out free phones and big discounts on color flip-phones to people who sign up for two more years of service. Sprint PCS has been offering similar giveaways.

While many customers are taking up these offers, most are not aware of impending number portability. Industry analysts, research organizations and the wireless carriers themselves say that public awareness of the new regulations is low.

Wireless carriers are hoping that they can take advantage of that absence of awareness to make an 11th-hour hard sell. “They are trying to sign people up for multiyear contracts,” said Patrick J. Comack, a telecommunications industry analyst with Guzman & Company, an investment banking firm. “They’ve significantly upped the incentives, and it’s going to get crazy going forward.”

By signing customers to longer contracts now, the companies will be able to keep more of them after portability takes effect — or at least force customers to pay termination fees if they do jump services before their contracts expire.

If the government is going to spend tons of money advertising, wouldn’t it make sense to spend it on something like this rather than rolling out the new $20 bill?

The cellular industry has long puzzled me. While it’s quite competitive, it’s one of the least transparent. Because they are selling a commodity–phone service is all pretty much the same–the companies differentiate themselves with confusing rate plans. They offer indecipherable buckets of minutes, use the same language in different ways (does “evening” begin at 5? 7? 9?) and include various traps in the system hoping that customers will fall into them and be forced to pay far more than they contracted for. One thing the majors all have in common, though, is long-term contracts. Which means, if a company’s local service is horrible and you constantly have to “roam” in your own area and pay higher charges, you’re nonetheless stuck with them for a year or two unless you want to pay hundreds of dollars for nothing.

I’m in the bizarre situation of having a Montgomery, Alabama cell number even though I’ve lived in Northern Virginia fourteen months. Why? Because my two-year contract with Cingular offers a “no roaming charge” package. Since I sometimes “roam” even in my own home and roaming charges are something like 50 cents a minute, that’s a good thing. Cingular was apparently not making a lot of money on the no roaming package, and so discontinued it within a couple of months. So, I either had to switch to whatever package was available at that moment or keep the plan I’d contracted for since, until the two years are up, I can’t realistically look for plans with other companies.

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James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.


  1. JKC says:

    The under-reported sidebar to this is the lack of technical standards in this country these days. Instead of one mobile phone transmission standard we have three: PCM, CDMA, and GSM. (Plus a few leftover analog holdouts.) None talks to the others, leaving us with redundant but incompatible systems. Everyone else in the world gets to buy mobile phones that work globally. Except in the US.

    Imagine if the four TV networks each used a different transmission standard. Would you buy a PAL TV for NBC? Or NTSC for Fox? Or SECAM for ABC? And what about cable?

  2. DonBoy says:

    That business strategy is what Scott Adams (of Dilbert) called a “confusocracy”. He was talking about the pre-cell-craze phone industry, but the key point is that collectively the phone companies make it impossible for you to figure out which deal is best.

  3. Elayne Riggs says:

    Thanks for this, James! Found out about this entry from Calpundit, and hope to be blogging about this from my end as well today.

  4. EK says:

    Definitely a confusopoly. The airlines do this too. It’s pretty much a standard business tactic in a highly competitive market with less than a dozen players or so.