Wireless Carriers to Pay for Customers' Switching?

Posted by: Olga Kharif on April 22, 2008

Yesterday, small carrier Cellular South announced an unprecedented offer: It will cover customers’ early termination fees if they switch to Cellular South’s service.

As part of a limited time offer that began Sunday, Cellular South will give customers a credit of up to $200 to offset their former carriers’ early termination fees. I consider the move nothing short of revolutionary. Hefty termination fees are the main reason why Americans don’t switch service providers more often. One study showed that 47% of U.S. adults would consider switching service if they didn’t have to pay early termination fees. Some of these people, who live in Cellular South’s areas of coverage, may switch their service now.

If Cellular South sees a huge bump to its customer base as a result of the offer, other carriers may follow in its footsteps with similar offerings. And that could hit the wireless industry hard. Service providers already spend between $300 and $400 to acquire a new customer. This offer will likely push these already substantial costs up significantly. And, if wide-spread, this offer could rev up churn, reducing carriers’ profitability.

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Reader Comments

sourcerer

April 22, 2008 05:26 PM

Heck...I'd consider *moving* to whatever godforsaken part of the country Cellular South covers to switch and avoid termination fees. We're on a family plan with 4 phones and each is on a different 2 year contract...it's like entering the inner circle of hell...we can never get out.

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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