In the years after passage of the 1996 Telecommunications Act, the entry of an estimated 400 new competitors into the landline phone business led to a land-rush atmosphere. Companies were so focused on signing up customers that when some disaffected ones defected no one paid much attention. Customer service suffered even though deregulation should have created the opposite effect. "Companies were growing so fast that they put it on the back burner," says independent telecom analyst Jeff Kagan in Atlanta.
In a sense, they were merely upholding a time-honored tradition, honed during a century when Ma Bell was the only game in town and memorialized by comedienne Lily Tomlin, who created a homely but haughty character named Ernestine. "We don't have to care," Ernestine would snap at callers through her headset. "We're the phone company."
At long last, that's changing, thanks to hypercompetition. The market is now filled with companies that sell local, long-distance, and cell-phone service plus high-speed Internet access. Cable-TV companies are moving to sell phone service through their lines. Wireless carriers still get away with marginal customer service, thanks to the strong demand for their products. But traditional phone companies don't have a choice: As their enemies close in, it's vital for them to hold on to every customer they attract.
"AN EVOLVING ART." That helps explain why a 2002 Federal Communications Commission report found "industrywide improvement in customer complaint levels for the second consecutive year." That's not surprising, says Bob Rosenberg, president of Insight Research, a telecom analysis firm in Boonton, N.J. He adds that after spending heavily on infrastructure in the early 1990s, the $250 billion industry began to focus more on customer service. In 1997, he figures, telecoms spent $2.3 billion on billing-related technology and call centers. In 2003, it spent $5 billion.
Indeed, customer service is one of the few points of differentiation between carriers, making it an "important battleground," says Kagan -- and one on which the prize is still very much up for grabs. Despite the improvements, "a lot of customers aren't happy with their landline service," says Lisa Pierce, vice-president of Forrester Research in Cambridge, Mass. For the phone industry, good customer service remains "an evolving art," she adds.
The key word is evolving. SBC Communications (SBC), Qwest Communications (Q), BellSouth (BLS), and Verizon Communications (VZ) all are playing up customer service as a key element of their strategies. "We're just at the beginning of customer awareness" of how many options there are for those willing to shop around, says Will Stofega, telecom analyst at IDC in Framingham, Mass. For traditional carriers, landline phone service revenues are especially important, Stofega says, since that's still the most profitable phone business.
LESS TO COMPLAIN ABOUT. At Verizon, better training for call-center workers, redesigned billing statements, and myriad process improvements have resulted in fewer complaints, says Joe DeMauro, region president for New York, excluding the New York City metro area. Total customer complaints in Verizon's entire 29-state region have fallen by about 18% since 2000, to about 104,000 in 2003, he says. The trend is continuing into 2004, he adds, even though digital subscriber lines (DSL), the phone company's high-speed Internet service, have been plagued by installation problems and outages.
"That was an issue for us most of last year," DeMauro says. "We think we've turned the corner." By training technicians better and making engineering fixes, he adds, Verizon cut complaints per 100,000 DSL lines by 6% from 2002 to 2003. So far this year, the level of complaints has fallen 17%. "The strategy we've adopted is to make sure customers are happy with us so we can retain them," DeMauro says.
This approach has also been adopted by Qwest, which in consumer surveys has consistently ranked at the bottom of the pile among the regional Bells. "We looked at ourselves and said, 'If we want to be successful in the long run, we have to define why people should do business with us and not elsewhere,'" says Mark Pitchford, vice-president for consumer markets at Qwest.
SPEEDY DELIVERY. In 2002, cable companies such as Comcast (CMCSA) and Cox Communications (COX) were starting to make serious inroads into Qwest's customer base. In Omaha, where Cox is Qwest's primary competitor, "we were losing 400 to 500 customers every week this time last year," Pitchford says. By this January, the loss was closer to 15 or 20 weekly, he adds, because of better customer service.
As part of its efforts, Qwest has improved the speed with which it does installation and repairs, has extended its call-center hours -- and has cut its relentless telemarketing by half. "These were the basic things we had to do just to be in the game," say Pitchford, who notes that as of mid-February, 74% of customers it surveyed rated Qwest's customer service as good or very good, vs. 58% at the end of 2002.
SBC says its customer-service metrics have improved year-over-year for the past three years. It has also focused on improving its DSL business, which has doubled the number of installations it does annually, even as the time it takes to do them has fallen from 10 days to 5 over the past 2 years. New or existing customers can now use SBC's Web site to order services, and the company is using global positioning systems to speed its service vans to their destinations.
TECH CONNECTIONS. Holding onto customers is particularly crucial for long-distance carriers, which are struggling to sell local-phone service even as local players and cable companies chew off bigger chunks of the long-distance market. Sprint (FON) is working "to improve customer service in wireline and wireless," says Jeff Balagna, vice-president for customer care at the Sprint's consumer solutions group. Balagna claims Sprint now has an 85% customer-satisfaction rate. And in early February, it announced a five-year deal with IBM (IBM) to further improve the carrier's customer service. Big Blue manage call centers for Sprint's long-distance and wireless customers.
AT&T (T) signed a similar deal with Accenture (ACN) -- worth about $2.6 billion -- in January, 2002. When asked to quantify improvements, AT&T representatives will say only that the number of small-business owners who use its improved customer-service Web site has risen 28%.
Bragging about customer service may seem a little hypocritical for an industry that for so long did such a mediocre job of it. But at last, phone carriers may have no choice but to make good on their promises -- and hope it's true that happy customers stay where they are. By Amy Tsao in New York