Last update: November 19, 2003 at 3:24 PM

Cutting the phone cord: Who and how fast?

Steve Alexander,  Star Tribune

November 12, 2003 CELL12

First published on Nov. 12, 2003.

Now that consumers can keep their phone numbers if they leave either their wired or wireless service providers, the question is how many people will actually do it.

Starting Nov. 24, the Federal Communications Commission (FCC) has given the green light to two forms of "number portability" in the 100 largest metro markets:

• Traditional phone users can cut the cord and switch to a wireless phone without giving up their home phone number.

• Disgruntled wireless customers can switch cell phone companies and take their numbers along.

Analysts say millions of people are likely to do both -- but maybe not right away.

It may take months for many customers to change wireless companies and perhaps years for many traditional phone customers to make the leap to wireless, they say.

Many consumers with wired phones may never switch because they like features that today are unique to wired phones, such as the ability to have many phone extensions sharing a single number or the ability for 911 calls to be traced to a specific location.

Businesses, which have much invested in wire lines and can buy wire-based services in bulk, will have little incentive to switch to wireless, said Cheryl O'Brien, president of consulting firm Technology Management Corp. in Shorewood.

In the long run, wired-to-wireless number portability seems likely to help the wireless industry because its potential customer base has been greatly expanded.

"It does help wireless companies get new customers," said Allan Keiter, president of

MyRatePlan.com, an Atlanta firm that helps consumers compare wireless phone plans in their own cities. "In the short run, it will still be painful for wireless companies because adding new customers costs them more than they initially earn. That's because they are paying a subsidy for the phone and paying a retailer to activate a customer."

The ability to lure new customers from traditional phones to wireless ones could help cell phone companies survive while they fight it out among themselves over wireless number portability. New cell customers could help alleviate high customer turnover, or churn, that averages 30 percent annually in the cell phone business. Analysts say churn will only get worse as existing wireless customers hop from one cell service to another in search of a better deal.

Companies such as Qwest don't benefit from the FCC's rule because number portability in reverse -- wireless to traditional phone -- wasn't required by the FCC.

In what some analysts interpreted as a hint that it might challenge the FCC's new portability rule in court, Qwest calls the rule unfair.

"This is a one-way street that will leave millions of customers stranded without the ability to convert wireless numbers to wire-line," Qwest said. "Millions of customers prefer the security and quality of a wire-line telephone."

Qwest's negative reaction "is an indication that there is a certain amount of pent-up demand for the transition from wired telephones to wireless ones," said Cory Jackson, an analyst at U.S. Bancorp Piper Jaffray.

"The transfer to wireless will be appealing to some because it is a cheaper alternative considering that long-distance is included," Jackson said. "Those who are considering switching from wired to wireless phones won't even be concerned about things like 911 service or multiple telephone extensions."

But not all traditional phone companies are equally hurt. Verizon, which is both a wired phone company on the East Coast as well as a wireless company in many parts of the nation, might not actually lose its East Coast wired phone customers so much as move them from its wired side to its wireless side.

The picture for Qwest is not as bright. The company owns its traditional wired phone service but re-markets Sprint wireless service under the Qwest Wireless name. As a result, shifting a customer from Qwest wired phone service to Qwest wireless is likely to make that customer less profitable for the company, Jackson said.