4G Boosts Spending, Cuts Churn

Does 4G Long Term Evolution reduce mobile churn and increase customer spending? At least one study suggests that is the case.

To be sure, customer retention is a complicated issue, since customer unhappiness can be caused by price, perceived value, dropped calls, slow mobile Internet access, billing issues, poor customer service, device availability or perceptions of network coverage.

Also, churn rates for prepaid customers are much higher than for postpaid accounts. But there is some evidence that the converse also is true.

Faster networks, more reliable networks, networks with greater coverage, better customer service, attractive prices and device availability tend to do better.

A study conducted in 2013 by J.D. Power found that U.S. customers with 4G-enabled smartphones are more loyal to their wireless carrier than owners of devices that use other technologies.

The study also found that the amount of monthly wireless spending is considerably higher among customers who experience fewer problems with slower connection speeds.

That study measured overall network performance in 10 areas, including dropped calls; calls not connected; audio issues; failed/late voicemails; lost calls; text transmission failures; late text message notifications; Web connection errors; slow downloads and email connection errors.

Smartphone customers who experience just one problem per 100 attempts (PP100) and 10 problems per 100 attempts with slow mobile web speeds spend an average of  $11 more per month than those who experience between 11 PP100 and 20 PP100 ($140 vs. $129, respectively).

Customers experiencing more consistent network speeds are more likely to be brand advocates, as 31 percent of smartphone customers who experience between 1 PP100 and 10 PP100 "definitely will" recommend their carrier, compared with 24 percent among customers who experience between 11 PP100 and 20 PP100.

Overall, satisfaction is significantly higher among smartphone customers using 4G networks than among those using previous-generation networks (7.3 vs. 7, respectively, on a 10-point scale).

This satisfaction gap is due to the level of problems experienced with network quality, J.D. Power suggests.

On average, 4G LTE smartphone customers experience significantly fewer issues with data than do 3G customers (16 PP100 vs. 19 PP100, respectively).

This in turn translates to higher brand loyalty. Some 12 percent of smartphone customers using 4G LTE service indicate they are likely to switch their carrier within the next year, compared with 15 percent among those using 3G.

ISPs in the fixed network segment probably have growing opportunities to lift customer spending and take market share, as well. Gigabit networks, where available, are likely to lead to significant customer churn, especially where value-price relationships are disruptive, as with Google Fiber and other offers of a gigabit, symmetrical, offered for about $70 a month.

In most markets, $70 will buy perhaps 50 Mbps from many suppliers.

Some consumer surveys show video entertainment provider satisfaction scores might be diverging, with cable companies lagging significantly, and some telcos and satellite providers gaining.

The point is that network performance now might allow some service providers to take significant market share from lagging competitors.