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ChangeWave Research: Wireless Service Provider Trends

Wireless Service Provider Market Trends

iPhone 4S, Tiered Data Plans and 4G Reshaping the Landscape Going Forward

Paul Carton and Andy Golub

Overview: Several developments have combined to reshape the wireless service provider industry during 2011 including the introduction of tiered-pricing plans, 4G Speeds, the Verizon iPhone, and most recently the Apple iPhone 4S.

To better understand the impact of these changes and where the industry is headed going forward, ChangeWave recently conducted a survey of 4,130 consumers on wireless service provider trends – including future demand, dropped call rates, and customer satisfaction. ChangeWave is a division of The 451 Group.

The September 19-27 survey also looked at consumer reaction to proposed mega-mergers between AT&T and T-Mobile, and Google and Motorola Mobility.

Customer Satisfaction

Verizon Wireless continues to maintain its industry lead in customer satisfaction, with one-in-two of their subscribers (50%) saying they’re Very Satisfied with Verizon’s wireless service. Sprint/Nextel (31%) is a distant second, followed by T-Mobile (26%) and AT&T (19%).

Verizon has held a considerable lead over AT&T in customer satisfaction for the past two years, although AT&T has ticked up 2-pts since the previous survey in June.

Dropped Calls. Verizon also has the lowest dropped call rate in the industry, with customers reporting just 1.8% of calls dropped over the past 90 days. T-Mobile (2.5%) has moved into 2nd place this quarter ahead of Sprint (3.4%), with AT&T (4.9%) bringing up the rear.

Historical Perspective.As seen in the following chart, ChangeWave has been tracking the dropped call rates of the major U.S. wireless providers for the past few years. Here are the last three years of dropped call rates for Verizon vs. AT&T.

Customer Loyalty

To measure customer loyalty, we asked respondents how likely they are to switch to a different provider over the next 90 days. A total of 11% said they plan on making a change – up 1-pt since our previous survey.

At the provider level, Verizon continues to hold the lowest churn rate with only 5% of their customers saying they plan on switching, followed by Sprint (12%).

We note that both AT&T (16%) and T-Mobile (18%) are weaker in this measure compared to the previous survey, which may be partly due to uncertainty surrounding the proposed AT&T/T-Mobile merger.

When we asked T-Mobile subscribers what they plan on doing if the merger is approved, 19% said they would change providers and another 38% said they weren’t sure.

For those who currently use T-Mobile as your wireless service provider, if the AT&T/T-Mobile merger is approved, what - if anything - will you do as a result?

Current
Survey
Sep ‘11
I will continue subscribing and will become an AT&T customer if the merger is approved / 34%
I will change wireless service providers if the merger is approved / 19%
I will cancel my wireless service altogether if the merger is approved / 2%
Don’t Know / 38%
Other / NA / 7%

Another factor that’s affecting both AT&T and T-Mobile customer loyalty is Poor Reception and Coverage issues – as can be seen in the charts below:

What's the most important reason why you're likely to change wireless service providers?

AT&T T-Mobile

Other Industry Issues

iPhone 4S. Apple’s recent iPhone 4S announcement is having a direct impact on future wireless buying plans. We asked those who plan on buying a new iPhone 4S which provider they’ll use, and found AT&T (40%) leading, Verizon (34%) in second, and Sprint (9%) in third.

Which wireless service provider will you use for your iPhone 4S?

* Don’t Know/Other = 17%

It’s not surprising that AT&T has the advantage over Verizon among planned iPhone 4S buyers. AT&T has a huge installed base of customers with legacy iPhones who are ready to upgrade, while Verizon customers just bought the new iPhone 4 within the past 9 months and most of these Verizon iPhone owners are not yet ready to upgrade.

Note, however, that we are only looking here at respondents who plan to purchase the iPhone 4S model. It’s a far different story when we focus on those respondents who say they are likely to switch providers in the next 90 days regardless of which phone they plan on buying.

Verizon (42%; down 2-pts) has a big lead over AT&T (10%; up 2-pts) among likely switchers, followed by Sprint (9%; up 3-pts) and T-Mobile (5%; up 1-pt).

Data Plans. As the industry shifts toward tiered pricing data plans and away from unlimited plans, we’ve been taking a closer look at the importance of data plans in wireless purchases.

Note that 48% of smart phone owners say data plans are Very Important in their decision.

And not surprisingly, the Very Important percentage for Sprint subscribers (62%) is much higher, as they are the only major provider still offering unlimited data plans.

That said, among tiered data plan users we find real concerns about exceeding their allotment of data – with 10% saying they’re Very Concerned and 32% Somewhat Concerned.

4G Speed. Another key industry development is the emergence of 4G speeds. Better than a quarter of respondents (26%) say 4G capability is Very Important to their smart phone purchase decision and another 42% say it’s Somewhat Important.

We asked current 4G users how satisfied they were with various aspects of their 4G smart phones, and found Voice Quality of Calls (45% Very Satisfied) and 4G Download Speed (36%) at the top of the list. Down at the bottom we find Battery Life (12%) and 4G Coverage Areas (17%), both which show considerable room for improvement.

Google Acquisition. The Google acquisition of Motorola is generally viewed favorably by consumers, with 13% saying the deal makes them More Likely to buy a Motorola or Google smart phone in the future.

Only 3% said the deal makes them Less Likely to buy a Motorola/Google smart phone.

Summary of Key Findings

The ChangeWave Research Network is a group of 25,000 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Table of Contents

Summary of Key Findings 7

Customer Satisfaction 9

Customer Loyalty 12

Other Industry Issues 15

AT&T iPhone 4 Owners vs. Verizon iPhone 4 Owners 21

Corporate Market: Wireless Service Provider Trends 23

ChangeWave Research Methodology 24

About ChangeWave Research 24

About The 451 Group 24

The Findings

Introduction: Several developments have combined to reshape the wireless service provider industry during 2011 including the introduction of tiered-pricing plans, 4G Speeds, the Verizon iPhone, and most recently the Apple iPhone 4S.

The September 19-27 survey also looked at consumer reaction to proposed mega-mergers between AT&T and T-Mobile, and Google and Motorola Mobility.

Customer Satisfaction

How satisfied are you with your current wireless service provider?

Total / Verizon / AT&T / T-Mobile / Sprint/
Nextel / Rogers/
Fido
Very Satisfied / 33% / 50% / 19% / 26% / 31% / 15%
Somewhat Satisfied / 50% / 43% / 54% / 57% / 55% / 63%
Somewhat Unsatisfied / 12% / 4% / 20% / 13% / 9% / 19%
Very Unsatisfied / 4% / 2% / 7% / 4% / 4% / 3%

Verizon has held a considerable lead over AT&T in customer satisfaction for the past two years, although AT&T has ticked up 2-pts since the previous survey in June.

Here’s a look at satisfaction ratings for Sprint and T-Mobile over the same time period.

Historical Perspective.As seen in the following chart, ChangeWave has been tracking the dropped call rates of the major U.S. wireless providers for the past few years. Here are the last three years of dropped call rates for Verizon vs. AT&T.

And here’s a look at Sprint and T-Mobile:

Over the past 90 days, how frequently have you experienced a "dropped call" on your cell phone?

Current
Survey
Sep ‘11 / Previous
Survey
Jun ‘11 / Previous
Survey
Mar ‘11 / Previous
Survey
Dec ‘10 / Previous
Survey
Sep ‘10 / Previous
Survey
Jun ‘10
Total / 3.0% / 2.8% / 2.6% / 2.7% / 3.1% / 2.7%
Verizon / 1.8% / 1.9% / 1.4% / 1.7% / 1.8% / 2.0%
Sprint/Nextel / 3.4% / 2.3% / 2.7% / 2.7% / 2.4% / 2.5%
T-Mobile / 2.5% / 2.6% / 2.3% / 2.2% / 2.8% / 3.5%
AT&T / 4.9% / 4.9% / 4.6% / 4.7% / 6.0% / 5.8%

Customer Loyalty

How likely is it that you will change wireless service providers within the next 90 days?

Current
Survey
Sep ‘11 / Previous Survey
Jun ‘11 / Previous Survey
Mar ‘11 / Previous Survey
Dec ‘10 / Previous
Survey
Sep ‘10 / Previous
Survey
Jun ‘10
Very Likely / 3% / 3% / 2% / 3% / 2% / 3%
Somewhat Likely / 8% / 7% / 7% / 7% / 6% / 5%
Unlikely / 85% / 87% / 87% / 86% / 88% / 88%
Don't Know / 3% / 3% / 2% / 2% / 3% / 3%
Not Applicable / 1% / 1% / 1% / 1% / 2% / 2%

At the provider level, Verizon continues to hold the lowest churn rate with only 5% of their customers saying they plan on switching, followed by Sprint (12%).

We note that both AT&T (16%) and T-Mobile (18%) are weaker in this measure compared to the previous survey, which may be partly due to uncertainty surrounding the proposed AT&T/T-Mobile merger.

Current Survey (Sep 2011) - Breakdown of Respondents by Provider

Total / Verizon / Sprint/
Nextel / AT&T / T-Mobile / Rogers/
Fido
Very/Somewhat Likely / 11% / 5% / 12% / 16% / 18% / 8%
Unlikely / 85% / 92% / 84% / 78% / 79% / 88%

When we asked T-Mobile subscribers what they plan on doing if the merger is approved, 19% said they would change providers and another 38% said they weren’t sure.

For those who currently use T-Mobile as your wireless service provider, if the AT&T/T-Mobile merger is approved, what - if anything - will you do as a result?

Additionally, we asked all respondents how they felt about the potential merger – and found two-in-five (41%) saying the merger should be approved while 32% disagreed.

AT&T recently announced plans to acquire T-Mobile's wireless division. However, in August the U.S. Department of Justice moved to block the merger citing anti-trust concerns. Which of the following statements best describes how you feel about this potential merger?

Current
Survey
Sep ‘11
AT&T should be allowed to acquire T-Mobile because they will still have Verizon and Sprint/Nextel as major U.S. competitors / 41%
AT&T should NOT be allowed to acquire T-Mobile because fewer competitors will lead to higher prices for consumers / 32%
Don’t Know / 26%
Other / 1%

Another factor that’s affecting both AT&T and T-Mobile customer loyalty is Poor Reception and Coverage issues – as can be seen in the charts below:

What's the most important reason why you're likely to change wireless service providers?

AT&T T-Mobile

Poor Reception/ Coverage (41%) is also an issue for Sprint, while among the relatively small percentage of Verizon switchers Cost (56%) remains the top reason for switching.

Sprint Verizon

Other Industry Issues

Which wireless service provider will you use for your iPhone 4S?