CELLULAR MARKET CHANGING FEWER NEW CUSTOMERS CREATES NEED FOR BETTER SERVICE.

Byline: Brent Hopkins Staff Writer

WESTLAKE VILLAGE - Cellular carriers need to guard their customers carefully as the new user market begins to dry up, according to J.D. Power & Associates' 2002 U.S. Wireless Industry Services Study.

While cell phones have become ubiquitous on Los Angeles streets, the study found only 54 percent of local households above $25,000 annual income utilize their service. But new users are less likely to sign up than in the mid-1990s, when carriers enjoyed annual subscription growth of 30 percent. Next year, the study found only 5.8 percent of nonusers will sign on.

``This industry grew so rapidly in the last few years, it was bound to start slowing down,'' said Kirk Parsons, J.D. Power's senior director of wireless service. ``It's still at a healthy rate, but it's half the growth it was a few years ago.''

That doesn't mean the business is drying up, however. Far from it. Geoff Tate, an assistant manager for Affordable Portables, has seen no dropoff in number of customers in the last year, signing up an average of six customers to Cingular contracts on weekdays, more on weekends.

``It's pretty rare that someone tells you they've never had a cell phone,'' he said from the chain's Warner Center location. ``Instead, they talk about all the horror stories with their old carriers.''

In an attempt to snare new users, AT&T has tried offering prepaid service, an entry-level option that has seen success in convincing first timers to sign up.

``A lot of first-time buyers are still on the fence, so in the next couple years, there will be different options for them,'' spokesman Ritch Blasi said. ``We've already launched prepaid programs, so you can go into 7-Eleven, buy a phone for $50 and have it all prepaid. If you're not using the phone a lot, it gives you an option to see all the benefits of a wireless phone, so that will fit the needs of those first-time buyers. It's up to the provider to get them from prepaid to post-paid.''

With new users increasingly difficult to come by, Parsons said a high turnover rate proves to be a major difficulty for carriers. At the same time networks lose their subscribers, they incur substantial costs to sign those who switch. After marketing costs and promotional deals to entice shoppers to sign up, the study found carriers spend up to $425 per user, cutting into the bottom line.

``A quarter of the customer base churns out every year; that's pretty high,'' Parsons said. ``These people either switch out to another carrier or cancel and don't come back. If there weren't so many barriers to switching, like having to get a new phone, transferring the address book, the cost of cancellation, you'd probably see more.''

AT&T Wireless, which won top marks in 15 of the markets surveyed, including praise for its customer satisfaction locally, combats turnover with its comprehensive Web site, www.attwireless.com.

``We've got a pretty good track record of having one of the lowest churn rates in the industry,'' Blasi said. ``We're trying to keep customers with us longer by giving them online customer care. You can go to the Web site, buy a phone, check out info, pay your bill electronically. It gives people a lot more capability to manage their bill, and we've seen a big decrease in customers leaving once they've started doing business online.''

Focusing on service, rather than price, is crucial to the industry's survival, Parsons said, before price wars drive the companies out of business.

``If you look at a case study of what not to do, the wireless industry is going down the same road the long distance industry did,'' he said. ``It's becoming cheaper, they're a lot more aggressive in upping each other in better deals, and how are you going to make money on that? There's lots of other ways to compete, like good service.''

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Photo:

(color) Geoff Tate, assistant manager for Cingular Wireless, looks at a phone on display at the company's Warner Center store.

Michael Owen Baker/Staff Photographer