Changewave Research: Consumer Cell Phones and Service Provider Trends

ChangeWave Research: Consumer Cell Phones and Service Provider Trends

Consumer Cell Phone Service Provider Trends

iPhone Proves to be Huge Game Changer for Telecom Industry

Overview

ChangeWave’s latest consumer cell phone survey was completed July 20, 2007, nearly four weeks after the much ballyhooed release of the Alliance iPhone. A total of 3,003 members of the ChangeWave Alliance participated in the survey. Here is a look at key findings:

Part I: The Upheaval Among Cell Phone Manufacturers

Motorola Takes It on the Chin

Although iPhone sales are still in the early stages, the effect on cell phone manufacturers is already beginning to be seen.

Foremost, while Motorola (MOT) still leads in terms of current market share (31%), it has dropped a full 2-points since our previous survey in April, to its lowest level in more than a year.

Question Asked: For those of you who currently own a cell phone, which company manufactures it? (n=2,839)

Current
Survey
Jul ‘07 / Previous
Survey
Apr ‘07 / Previous
Survey
Jan ‘07 / Previous
Survey
Oct ‘06 / Previous
Survey
Jul ‘06
Motorola / 31% / 33% / 32% / 33% / 33%
Samsung / 15% / 13% / 13% / 13% / 13%
LG / 14% / 15% / 15% / 12% / 15%
Nokia / 14% / 14% / 16% / 17% / 16%
Research in Motion
(e.g., BlackBerry) / 6% / 5% / 4% / 3% / 3%
Palm (e.g., Treo) / 5% / 5% / 4% / 4% / 5%
Sanyo / 4% / 3% / 3% / 4% / 3%
Sony/Ericsson / 3% / 4% / 4% / 3% / 4%
Apple (e.g., iPhone) / 1% / NA / NA / NA / NA
Don't Know/NA/Other / 6% / 8% / 10% / 11% / 9%

At the same time, Samsung (15%; up 2-pts) and Research-in-Motion (6%; up 1-pt) have gained slightly since our previous survey.

Notably, although it’s been on the market less than a month, the Apple iPhone is already registering in our survey – garnering 1% of current market share.

But it’s when we asked respondents about their planned cell phone purchases that the coming marketplace transformation becomes fully apparent.

An astounding 16% of respondents who plan to purchase a cell phone in the next 6 months say they’ll be buying an iPhone, catapulting Apple ahead of all other manufacturers.

Question Asked: For those of you who plan on purchasing/upgrading to a new cell phone in the next 6 months, which company is the most likely manufacturer of the phone you'll eventually purchase? (n=755)

Current
Survey
Jul ‘07 / Previous
Survey
Apr ‘07 / Previous
Survey
Jan ‘07 / Previous
Survey
Oct ‘06 / Previous
Survey
Jul ‘06
Apple (e.g., iPhone) / 16% / 13% / 6% / NA / NA
Motorola / 14% / 17% / 24% / 33% / 34%
Research in Motion (e.g. BlackBerry) / 13% / 10% / 7% / 6% / 5%
Nokia / 10% / 9% / 11% / 11% / 12%
LG / 6% / 4% / 4% / 6% / 3%
Samsung / 6% / 7% / 8% / 7% / 9%
Palm (e.g., Treo) / 4% / 5% / 4% / 6% / 6%
Sony/Ericsson / 2% / 3% / 3% / 3% / 3%
Sanyo / 1% / 1% / 1% / 1% / 1%
Don't Know/Other/NA / 28% / 30% / 32% / 26% / 29%

Importantly, for the third survey in a row Motorola’s future share of planned purchases among consumers has registered a dramatic decline – falling from 33% in October 2006 to 14% currently. The chart below shows just how dramatic a collapse in future market share this represents for Motorola.

One upbeat note: The demand for RIM’s BlackBerry (13%; up 3-pts) does look significantly stronger over the next six months. Next week we’ll be releasing a Smart Phones report that will take a close-up look at RIM vs. the other manufacturers in the Smart Phone space.

Satisfaction Ratings

In terms of customer satisfaction, not too surprisingly new iPhone users report the highest satisfaction levels of all – with an extraordinary 77% saying they are Very Satisfied with the new Apple product. RIM also received a relatively high overall rating, with one-in-two RIM owners (50%) reporting they were Very Satisfied.

Question Asked: And how satisfied are you with your current cell phone? (n=2,839)

Apple iPhone / RIM / Sanyo / LG / Nokia / Samsung / Motorola / Palm / Sony/
Ericsson
Very Satisfied / 77% / 50% / 48% / 41% / 39% / 37% / 36% / 34% / 29%
Somewhat Satisfied / 15% / 42% / 41% / 48% / 51% / 51% / 49% / 47% / 53%
Somewhat Unsatisfied / 1% / 7% / 6% / 8% / 10% / 9% / 12% / 16% / 15%
Very Unsatisfied / 4% / 1% / 4% / 3% / 1% / 3% / 3% / 3% / 3%

On the downside, Palm (19% Unsatisfied) and Sony/Ericsson (18% Unsatisfied) received the lowest overall ratings among all of the major cell manufacturers. Moreover, just 34% of Palm owners and 29% of Sony/Ericsson owners said that they were Very Satisfied with their cell phones. We note that Motorola (15% Unsatisfied) also received a relatively low rating, with just 36% saying they were Very Satisfied with their MOT phone.

The following chart ranks cell phone manufacturers by the percentage of their customers who report they are Very Satisfied.

More on Current vs. Planned Ownership Trends

As expected, ownership of cell phones with a camera (62%) is continuing to increase, while the market share for cell phones without a camera (32%) continues to shrink.

Question Asked: Do you currently own a cell phone?

Current
Survey
Jul ‘07 / Previous
Survey
Apr ‘07 / Previous
Survey
Jan ‘07 / Previous
Survey
Oct ‘06 / Previous
Survey
Jul ‘06
Yes - With a Camera / 62% / 58% / 54% / 49% / 45%
Yes - Without a Camera / 32% / 36% / 40% / 45% / 47%
No – But Plan to Purchase a Cell Phone in the Future / 1% / 1% / 1% / 1% / 2%
No - Do Not Own a Cell Phone and Have No Plans to Get One / 4% / 5% / 4% / 5% / 5%

Looking ahead at planned cell phone purchases for the next six months, the consumer market appears healthy – with 27% of respondents saying they plan to buy a new phone.

Question Asked: Do you plan on purchasing or upgrading to a new cell phone in the next 6 months? (n=2,877)

Current
Survey
Jul ‘07 / Previous
Survey
Apr ‘07 / Previous
Survey
Jan ‘07 / Previous
Survey
Oct ‘06 / Previous
Survey
Jul ‘06
Yes - New Cell Phone With a Camera / 21% / 19% / 18% / 18% / 16%
Yes - New Cell Phone Without a Camera / 6% / 7% / 8% / 11% / 12%
No, Will Not Be Upgrading/Buying a Cell Phone Within Next 6 Months / 53% / 55% / 52% / 49% / 52%
Just Recently Upgraded to a Newer Model Cell Phone / 11% / 12% / 13% / 13% / 13%
Don't Know/NA / 9% / 8% / 8% / 8% / 7%

Bottom Line: The Apple iPhone is a Game Changer. After all the hype and anticipation surrounding the iPhone, our survey results show that Apple’s newest device is delivering.

Building on the strong momentum we originally identified in our two previous surveys (January 2007 and April 2007), the integrated iPod, Phone and Internet device is changing the game within the telecom industry. No company is bearing the brunt of this transformation more than Motorola, which has experienced a precipitous decline since January.

The one company that is emerging unscathed is Research-in-Motion, which is showing increased momentum for its BlackBerry product line.

Part II: Cellular Service Providers

Shifting to the cellular service providers market, we are beginning to see the first signs of the impact Apple’s exclusive agreement with AT&T is having on the competition.

Question Asked: Who is your cellular service provider? (n=2,839)

Current
Survey
Jul ‘07 / Previous
Survey
Apr ‘07 / Previous
Survey
Jan ‘07 / Previous
Survey
Oct ‘06 / Previous
Survey
Jul ‘06
Verizon / 29% / 30% / 30% / 29% / 29%
AT&T (Cingular) / 28% / 27% / 26% / 27% / 26%
Sprint/Nextel / 12% / 12% / 13% / 13% / 14%
T-Mobile / 10% / 11% / 11% / 11% / 11%
Rogers/Fido / 3% / 3% / 3% / 4% / 3%
Alltel / 2% / 2% / 2% / 2% / 2%
Bell Mobility / 1% / 2% / 1% / 2% / 2%
Vodafone / 1% / 1% / 2% / 1% / 2%
Don't Know / 0% / 0% / 0% / 0% / 0%
Other / 8% / 8% / 9% / 8% / 8%
Not Applicable/NA / 4% / 4% / 3% / 4% / 4%

Current Market Share. For the first time in more than a year, Verizon’s current market share (29%) has registered a decline – down 1-point. T-Mobile (10%) has also declined by 1-point.

AT&T, on the other hand, has increased its market share by 1-pt. to an all time high of 28%.

Future Market Share. In a continuation of the dramatic transformation we’ve been seeing since the January announcement of the iPhone, AT&T has once again surged forward in terms of future market share – primarily at the expense of its chief rival Verizon.

Question Asked: For those of you who are likely to change cellular service providers, which company are you most likely to switch to? (n=508)

Current
Survey
Jul ‘07 / Previous
Survey
Apr ‘07 / Previous
Survey
Jan ‘07 / Previous
Survey
Oct ‘06 / Previous
Survey
Jul ‘06
AT&T (Cingular) / 30% / 28% / 22% / 14% / 17%
Verizon / 19% / 22% / 25% / 28% / 26%
T-Mobile / 5% / 6% / 5% / 7% / 8%
Rogers/Fido / 3% / 3% / 2% / 3% / 1%
Sprint/Nextel / 3% / 4% / 3% / 5% / 5%
Vodafone / 2% / 2% / 1% / 1% / 0%
Alltel / 1% / 1% / 2% / 1% / 2%
Bell Mobility / 1% / 0% / 1% / 2% / 2%
Don't Know/NA/Other / 35% / 33% / 40% / 39% / 39%

AT&T (30%) has added to its growing lead over Verizon in terms of future buying, and is now the top choice among those likely to switch service providers.

The chart below paints a striking picture of this trend:

For the third consecutive survey, Verizon (19%) has continued to trend down among this critically important group.

Satisfaction Ratings

The one bright note for Verizon is that they continue to lead in terms of customer satisfaction – with 46% of its current customers saying they are Very Satisfied and another 46% Somewhat Satisfied with the Verizon service.

The ratings for AT&T are not nearly as high – with 31% saying they are Very Satisfied, and 54% Somewhat Satisfied. We note that Sprint/Nextel’s satisfaction rating is worst of all, with just 25% of its customers saying they are Very Satisfied and 51% Somewhat Satisfied.

Question Asked: How satisfied are you with your current cellular service provider? (n=2,839)

Total / Verizon / AT&T / Sprint/
Nextel / T-Mobile
Very Satisfied / 34% / 46% / 31% / 25% / 33%
Somewhat Satisfied / 51% / 46% / 54% / 51% / 48%
Somewhat Unsatisfied / 11% / 6% / 11% / 15% / 14%
Very Unsatisfied / 3% / 2% / 3% / 8% / 5%

Bottom Line – Service Providers: Once again, the impact of the iPhone is very clear: Cell phone users are heading towards AT&T and future purchasers are abandoning Verizon in droves. The outlook going forward also appears bleaker for Sprint/Nextel and T-Mobile.

One cautionary sign, however, is the relatively low satisfaction level for AT&T – an issue that we will continue to watch closely as new iPhone users migrate to the AT&T network.
Part III: Verizon's Fiber-Optic Service (FiOS) vs. AT&T's U-verse

These last few questions focused on Verizon's Fiber-Optic Service (FiOS) and AT&T's U-verse.

Question Asked: Verizon's FiOS Internet service – now available in select areas – provides broadband speeds of up to 5 Mbps (Megabits-per-second) for $40 per month and 15 Mbps for $50 per month. How likely are you to sign-up for Verizon's FiOS Internet service if it becomes available in your area? (n=3,003)

Current
Survey
Jul ‘07 / Previous
Survey
Apr ‘07 / Previous
Survey
Jan ‘07 / Previous
Survey
Oct ‘06 / Previous
Survey
Jul ‘06
Very Likely / 12% / 11% / 14% / 20% / 19%
Somewhat Likely / 22% / 22% / 28% / 29% / 30%
Unlikely / 49% / 53% / 44% / 36% / 37%
I Already Have FiOS Internet / 4% / 3% / 3% / 3% / 2%
Don't Know / 10% / 3% / 3% / 11% / 9%

Question Asked: Verizon is also building a Fiber-Optic Television service (FiOS TV) as a competitive alternative to cable and satellite television services. Current availability remains limited, but Verizon plans to expand to several suburban areas in the near future.

FiOS TV provides a broad collection of all-digital programming (including HD, video-on-demand, and digital video recording) and can be purchased as a stand-alone service or in conjunction with FiOS Internet and voice services. Pricing ranges from $13 per month for Basic to around $40 per month for Expanded Basic, with additional packages available. How likely are you to sign-up for Verizon's FiOS TV service if it becomes available in your area? (n=3,003)

Current
Survey
Jul ‘07 / Previous
Survey
Apr ‘07 / Previous
Survey
Jan ‘07 / Previous
Survey
Oct ‘06 / Previous
Survey
Jul ‘06
Very Likely / 11% / 11% / 14% / 16% / 14%
Somewhat Likely / 29% / 30% / 34% / 34% / 37%
Unlikely / 42% / 43% / 38% / 35% / 35%
I Already Have FiOS TV / 2% / 1% / 1% / 1% / 0%
Don't Know / 12% / 12% / 11% / 13% / 11%

A total of 34% of respondents say they are likely to sign up for Verizon’s FiOS internet service if it becomes available in their area – including 12% who say they are Very Likely to sign up..

Another 40% say they are likely to sign up for FiOS TV – with 11% saying they are Very Likely to sign up.

Question Asked: AT&T is building Fiber-To-The-Premises (FTTP) networks across 13 US states in order to deliver its U-verse Internet and Television service to customers. The Basic package provides residential Internet with speeds of up to 1.5 Mbps and more than 100 TV channels for around $60 per month. Additional packages include broadband speeds of up to 6 Mbps and over 400 TV channels.