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More Consumers Likely to Switch Completely from Existing Wireline to Wireless Phone Services
New research study from PriMetrica and Ernst & Young confirms significant interest in “wireless substitution” or “displacement”
22 May 2003
SAN DIEGO, CA and Exeter, UK — A just released consumer research study reports that nearly one-half of all U.S. households would switch from their primary wireline service to a “family share” type wireless service plan that provided for unlimited local calling from the home and 600 anytime minutes, including long distance, for $50 per month. The hypothetical wireless plan assumed quality coverage throughout the home, and it was also assumed that the consumer had a means of accessing the Internet comparable to their current form of access.
The findings of the study, conducted by PriMetrica and Ernst & Young, suggest that the threat that wireless service poses to wireline telephone companies will be significant when such technological hurdles as providing high-quality in-home coverage and wireless Internet access have been met.
Wireless service plans similar to the type explored in the survey are currently available and are evidence that this displacement or wireless substitution trend already exists, as some wireline telephone companies have noted in recent Public Utility Commission filings and releases. One major telephone company noted that 18.7% of a wireless operator’s customers in a state previously had wireline service, but no longer do. Another major telephone company, which provides both wireless and wireline services, recently acknowledged that there are more wireless customers in one of its largest metro areas than wireline customers
Dr. Kevin Duffy-Deno, Director of Analytical Services at PriMetrica and primary author of the study noted, “There are some significant implications that can be drawn from these results for both wireline and wireless operators. Wireline telephone companies face a real competitive threat to their primary fixed line business and need to develop strategies to counter the threat. Mobile wireless providers need to be careful as well - because capacity constraints will become problematic should they add customers too quickly. And few wireless providers are in a position to make significant CAPEX investments in the short term to accommodate a tidal wave of new customers.”
As part of this study, PriMetrica surveyed a nationally representative sample of 700 U.S. households during the first quarter of 2003. The survey inquired about households’ attitudes toward their wireline service provider, their experience with wireless service and their willingness to drop their wireline service for a “family share” wireless service plan.
While a number of research studies have been conducted on wireline-wireless substitution, this study is unique because it:
Focuses on total displacement of primary household wireline service. In other words, under what conditions would consumers be willing to completely abandon their wireline service in favor of wireless?
Focuses on households’ willingness-to-pay for two wireless service plans designed to be replacements for a household’s wireline service. The study shows how the willingness to churn differs across the price points and plans and provides price elasticities for these different plans.
The study also explores the drivers of wireless substitution, the factors that motivate households to consider switching.
Full results from the study are immediately available.
About PriMetrica:
PriMetrica (www.primetrica.com) is a leading provider of customized solutions to the telecommunications, technology, financial, and utilities industries, with over 450 clients in 30 countries. Since 1982, the company’s focus has been on accelerating profitability for businesses being impacted by the convergence of communications, media, and information technology.
The company’s main offices are in San Diego, CA; Exeter, UK; and Tokyo, Japan.
About Ernst & Young:
Ernst & Young, a global leader in professional services, is committed to restoring the public's trust in professional services firms and in the quality of financial reporting. Its 106,000 people in more than 140 countries around the globe pursue the highest levels of integrity, quality, and professionalism to provide clients with solutions based on financial, transactional, and risk-management knowledge in Ernst & Young's core services of audit, tax, and corporate finance. Ernst & Young practices also provide legal services in those parts of the world where permitted. The firm's Communications Advisory Services practice specializes in assisting communications service providers in meeting the challenges of today's competitive environment. Further information about Ernst & Young and its approach to a variety of business issues can be found at www.ey.com/perspectives. Ernst & Young refers to all the members of the global Ernst & Young organization.
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