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Enraged customers will create opportunities in the wireless space

Business Week recently described the sad state of the art of wireless phone services in the United States.  Wireless companies, it seems, generate more customer complaints than any other industry.  Even more than airlines.  Wireless companies, in fact, according to the Better Business Bureau, generate the most complaints out of all 3,900 industries it tracks!  Customers are so enraged at some wireless companies’ practices—signing them up for two year contracts for minor changes in service, charging them for supposedly ‘free’ downloads like ring tones, and of course (my favorite) providing poor coverage in general – that regulation has started to look pretty good to lawmakers.  But which lawmakers?  Ah, there’s an interesting dilemma.  States are starting to get into the act, threatening the industry with the kind of nightmarish regulation that industries such as insurance are dealing with right now – state by state requirements with slight differences among them.  A so-called ‘wireless bill of rights’ looks like a nice juicy political win for the state lawmakers.

The carriers, of course, don’t like this idea at all, and are investing in federal regulation of cell phone services.  I guess better one regulator than many, is their thinking.  Meanwhile, they are investing loads of cash in fighting the state regulatory initiatives in places like Minnesota. 

So how is this likely to proceed?  One lesson, I think, comes from the experiences of manufacturers such as the US auto industry – during the period when they were relatively protected from foreign competition, quality was terrible, pricing high, and innovation basically incremental.  It wasn’t until a real competitive threat appeared in the 1970’s that automakers started to upgrade their service and performance, by which time they had alienated so many customers that many won’t even consider buying a US-made car.  Similarly, the wireless carriers have used their oligopoly positions to offer pretty poor service including many ‘enrager’ features for the average customer.  This is bound to create an enormous opportunity at some point for players who can offer a better experience.  Why is the iPhone so popular?  It addresses some of the device based enragers, although it still can’t overcome the limitations of the AT&T network that it runs on.  But, that is highly likely to change.  And customers sure will be motivated to flock to an alternative, should one present itself. 

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