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Wireless World: 'Roll-over' minute madness
by Gene Koprowski
Email: sciencemail (nospam) upi.com
01 Sep 2004
Customers use roll-over minutes to combat costs of wireless phones.
Published 8/27/2004 9:52 AM
A weekly series by UPI examining emerging wireless telecommunications technologies.
CHICAGO, Aug. 27 (UPI) -- Christi Dixon savors the roll-over minutes her mobile phone company recently started offering.
"All of my minutes transfer to the next month," Dixon, who works in marketing in St. Louis, told United Press International. "And on the months that I talk a lot, I avoid all the overage fees."
As recently as two years ago, mobile phone companies gouged consumers, selling them cool technologies, with seemingly cheap monthly plans. Consumers recoiled when they received their phone bills, and were charged huge fees, often two or three times the agreed-upon amount, for exceeding their allotted airtime minutes.
Research by PlanetFeedback.com, an online consumer-market research firm owned by IntelliSeek, has found that over 80 percent of the comments made by customers of wireless carriers in recent years have been complaints.
That is because most cellular subscribers simply did not know in advance how many minutes they would consume in a given month -- only college students and families with poor cash flow would budget properly in advance, experts said.
Now, phone companies, led by Cingular Wireless, are changing the telecom culture. To assuage furor over overages, carriers are letting consumers move unused minutes from one month to the next, or, alternatively, offering them unlimited calling for just about $40 per month.
A spokeswoman for Cingular told UPI the minutes may be rolled over, "month to month for up to one year."
These savvy technology companies are not having to build out their infrastructure, however, or add scores of new cell phone towers and repeaters to handle what one might expect would be dramatic increases in telephone traffic.
"That's because there is a certain limit to the amount that people will talk in a given month," Derek Kerton, a telecommunications analyst and the principal consultant at the Kerton Group in San Jose, Calif., told UPI. "Even if the phone companies offer 1,000 minutes for a low rate, across their customer base, on average, customers will use about 300 minutes of time per month. So they don't have to increase their network capacity."
Statistics confirm the analysis by Kerton, a leading telecom guru.
Research by TNS Telecoms, a telecom market information firm in Miami, provided to UPI indicates 78 percent of wireless minutes paid for by consumers go unused every month.
Other key findings of the survey:
-- About 1,400 monthly wireless minutes go unused by the average household.
-- The average wireless household uses 452 minutes -- but has access to 1,831 minutes.
-- Consumers who sign seemingly economical deals for $20 per month typically pay 52 percent more -- when their actual bill arrives.
-- Taxes, fees and other charges may increase one's bill even more -- with overages.
"It's not surprising that overall consumer spending on telecom services continues to grow," said Charles White, an analyst at TNS Telecoms. "What may be a surprise to consumers is that, on average, they only use 22 percent of the wireless minutes they have available."
Kerton does not think that is necessarily negative, however.
"It's not correct to say this is bad for consumers," he said. "The cap has been lifted on usage. In 2002, people were spending $40 for a 300 minute plan. Today, they're spending $40 for 1,000 minutes."
Today, consumers are benefiting from the increased competition for their loyalty -- and dollars -- among mobile phone carriers.
For many years, starting in the 1990s, and stretching until earlier this millennium, mobile phone companies engaged in price wars to snare consumers.
Then they realized they were not profiting through this kind of promotional strategy.
"They can't collude on pricing, but they all realized at the same time that if they offered larger and larger buckets of airtime, from 300 minutes to 400 minutes to 500 minutes to 1,000 minutes a month, consumers would still use only a small percentage of those minutes," Kerton said.
That evolved thinking about wireless capacity opened up the field for new players.
Start-up carriers, such as MetroPCS and Leap Wireless entered the fray recently, eyeing the overall telecom trends.
"They knew what their recurring revenue and usage would be," Kerton said. "But they did have some financial troubles, because they had to start from scratch and build a customer base."
Customers seem to like these upstarts, though.
"I use MetroPCS," Michael McCullough, a consumer, told UPI. "I don't have minutes. For $40 a month, I can make all the long distance and local calls I want."
Another mobile phone field that is rapidly expanding is the pre-paid mobile minutes niche.
A study by the Yankee Group, a Boston-based IT consultancy, said the pre-paid mobile phone industry is one of the fastest growing technology niches today, expected to expand from 18 million subscribers this year to about 25 million subscribers by 2007.
"More and more Americans are seeking greater control of their wireless expenses," said F.J. Pollak, president and chief executive officer of TracFone Wireless, the largest U.S. pre-paid wireless carrier, based in Miami.
Many consumers like the pre-paid packages, he said, because there are no credit checks, contracts, security deposits, or activation or reactivation charges.
Look for even more innovation in mobile phone technologies in the coming years, experts said.
"There is a religious war in the cellular industry over technologies," Kerton said. "There are two different standards -- CDMA and GSM. CDMA (Code Division Multiple Access) has more spectrum efficiency. But you can get two times as many voice minutes packed into a network with GSM (Global System Mobile)."
GSM is more popular in Europe and Asia, while CDMA has become more popular here. As the economy continues to globalize, however, consumers may want to have mobile phones that can be used on any continent, Kerton said.
"I think third generation mobile phones will be CDMA technology," he added.
Consumers may want even more promotions, however, with their new, advanced mobile technologies.
"Wouldn't it be great if your unused minutes could be applied to frequent flier miles," McCullough told UPI. "It would be an easy marketing campaign for both companies."
Gene Koprowski covers telecommunications for UPI Science News. E-mail sciencemail (at) upi.com
This work is in the public domain