Local telecoms churn rises steadily in US

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By: Wise Marketer Staff |

Posted on July 23, 2003

The number of US households reporting they have switched local telephone service carriers in the past year has increased by over 60% in 2003, rising to 10% from 7% in 2002, according to a new study from J.D. Power and Associates.

The 2003 Residential Local Telephone Customer Satisfaction Study, based on a survey of 8,560 residential local telephone service users, suggests that the increased churn reflects the growing number of local telephone service providers entering the market, due to regulations allowing residential local phone access to be resold to competing communications providers.

The broader range of choice is undoubtedly good news for consumers who are attracted by competitive rates and opportunities to bundle several services offered by both the new entrants and the incumbent local telephone companies. The share of households reporting they have bundled at least local and long distance services from the same carrier has increased to 40% in 2003, up from 26% in 2002.

"As we saw in our 2003 study of long distance providers, bundling has presented customers with new opportunities to review their telecommunications choices and make changes that can save them money and simplify their billing," said Steve Kirkeby, senior director of telecommunication research for J.D. Power.

As competition between local service providers increases, consumers are also increasingly turning to their wireless phones for local calls. The study found that the percentage of households that completely drop traditional local telephone services in favour of wireless service has increased to 3% in 2003, up from 2% in 2002.

"Having purchased a fixed amount of minutes from their wireless carrier, some consumers have opted to use these minutes rather than incur additional costs to have a fixed telephone line," explained Kirkeby. "Local providers have to accommodate this exchange when building their service packages to position wireless and wireline services as part of an integrated offering."

Regional satisfaction
Customer satisfaction with local services is at its highest level since 1998, according to the study. Overall satisfaction was determined based on the following six factors (in order of importance):
·  Company image
·  Customer service
·  Performance and reliability
·  Billing
·  Cost of service
·  Offerings and promotions

In the Northeast region, SBC ranked highest among five carriers, with top scores from its customers in the performance and reliability, billing, and image factors.

In the Mid-Atlantic region, MCI ranked highest among four carriers, outperforming its competitors in performance and reliability, cost of service, billing, offerings and promotions, and image.

In the Southeast region, BellSouth ranked highest among five carriers, for all six factors.

In the North Central region, Talk America performed well in its first year in the study, ranking highest among ten carriers in the region, and receiving the highest overall index score in the study. The company's strongest factor was cost of service but it also received top scores in customer service, offerings and promotions, and billing.

In the Southwest region, SBC received another top ranking, being highest among five carriers, and having the best scores for all six factors.

Finally, in the West region, Cox Communications (also in its first year in the study) ranked highest among eight providers, with top performances in all six factors. This is the first time a company known primarily as a cable television provider has ranked highest in a J.D. Power telephone service study.

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