If you live in the Midwest, or you're a Chicago White Sox fan, there's a good chance you're familiar with U.S. Cellular. As the sixth largest wireless carrier in the country after the "big four" (Verizon, Sprint, T-Mobile, and AT&T) and MetroPCS, U.S. Cellular serves 6.1 million customers in 26 states scattered around the center of the country, New England, the Pacific Northwest, and the Southeast.
For much of its life, Chicago-based U.S. Cellular appeared content with serving its home network area and offering its customers a relatively uninspiring lineup of handsets that you could also find with other CDMA carriers like Verizon Wireless. In the last couple of years, however, the carrier has awakened from its slumber. It secured roaming agreements with other operators to form a nationwide network, it activated 3G data services, and it began to introduce exclusive high-end smartphones like the HTC Desire and Samsung Mesmerize. And just two weeks ago, it introduced the Belief Project, which is a program that rewards long-term customers with a variety of benefits such as quicker phone upgrades and a cap on overage fees.
Last week at CTIA in San Francisco, I chatted briefly with Mary Dillon, U.S. Cellular's president and CEO. Formerly the global chief marketing officer and executive vice president for McDonald's Corporation, Dillon arrived at U.S. Cellular four months ago. She's not only the first female CEO at the company, but also the first woman to take the top spot at a major wireless carrier in the United States. John Coyle, the carrier's senior director of customer strategy, joined us to talk about the Belief Project, 4G, Android, and growing a nationwide network.
Q: Last week U.S. Cellular introduced the Belief Project. What's the story behind it and what do you hope to accomplish?
Dillon: We're very excited about the Belief Project because we expect that it will help grow our business. We expect we'll get new customers and, because of what the Belief Project is offering, keep returning customers at an even greater rate. It's all about rewarding customers and addressing that pinpoint in the industry. U.S. Cellular is the first to bring about this rule-changing way of business to the market.
Q: Some of the Belief Project's benefits, like letting customers buy a discounted phone without signing a contract and eliminating upgrade fees, are unusual for the bigger carriers. Will we see more of this?
Dillon: Listening to what is on customer's minds is good for business. Being new to the industry, I see there is a real opportunity to have a human relationship to customers instead of it being all about the contract. Our competitors may follow suit down the road, but I think that we can deliver this better than anyone else. While others might try to replicate pieces of it, we're bringing it to life now.
Also, we've just won a J.D. Power call quality award for the tenth consecutive time in [the North central region]. That, along with the Belief Project, gives us a way to differentiate. It's an ongoing way of doing business.
Q: What changes can we expect from the network?
Dillon: We have (4G) LTE trials gong on right now. That's our attention as the industry evolves over the next few years. We don't have a specific plan that we've announced yet, but right now we have a 3G nationwide network.
Q: What will LTE really do to the industry? People like to talk about faster speeds, but is there more than that?
Dillon: LTE is the tale to be told. Everyone is excited about LTE, but there's wide-open landscape as to how it will be used. It's up to the industry to imagine the sources of growth. Speed will be an enabler, but who knows what will come? We're trying to eliminate pain points with the way the network is evolving.
Q: How do you communicate the benefits of 4G?
Dillon: For people not in the industry, what they know about wireless technology comes from their experience with a carrier. As carriers go to whatever version of 4G they're using, they will talk about it to their customers. To a certain extent, customers may not know the difference for awhile. Their experience will drive them and it will take awhile before they're fully experiencing 4G. We're trying to innovative the network rather than letting the technology and terms get in the way of the experience.
Q: So do terms like LTE and 4G really matter when talking to customers?
Dillon: It matters and it doesn't matter. It matters because things are evolving. But in the day-to-day life of customers, they need speed and calls that won't drop. Delivering that really well is what we need to focus on.
Coyle: Earlier this year we had an interesting data point regarding awareness of 3G. For consumers who don't use data, but had 3G capable phones, they reached a point where the majority of them felt that they needed it. They didn't know what it was, but they wanted it.
Q: What do you think Android represents to the industry? In my experience, not everyone sees the opportunities the same way.
Coyle: For us it represents a couple things. It allows us to demonstrate that we have high-speed data offering on a nationwide footprint [their home area plus regions covered by carrier partner roaming]. Not all consumers are aware that it's a national footprint so that's been an opportunity for us. I think the other thing it represents is that platform. There's an incredible marketplace with an incredible number of applications.
Q: Do you see your customers as different from those with the big 4 carriers?
Dillon: Not really. I'd say we're more focused on individual customers than much bigger enterprise [customers]. Customers today want innovation and as our lineup of phones continues to grow in the smartphone arena, I expect that our customer mix will grow.
Q: Any plans to fully grow your home coverage area into something really nationwide?
Dillon: In many markets that we're in, we have the largest or second largest network. We may be sixth nationwide because of our footprint, but we have good penetration in those areas. Maybe in the future [we'll look to expand], but there's lots of potential subscriber growth in the markets that we're in right now.
We're more focused on finishing EV-DO rollouts and extending growing the technology to the next level. Extending to new geographies is always on the horizon of our possibilities, but there's so much opportunity for technology and brand awareness in the areas that we currently operate.
Q: Do you feel any pressure from consolidation? Is it inevitable?
Dillon: In this industry there's as much competition as there is collaboration. Right now we feel good about our level of coverage with other areas. Our customers can get a nationwide network when they travel.
Q: Have you noticed a growth in prepaid plans?
Dillon: The vast majority of our customers are postpaid. But we have offerings for prepaid customers as well and they're growing. In the industry, though, prepaid certainly is growing.
Q: What's the causing the growth?
Dillon: It's twofold. Certainly the recession has something to do with it. But for some customers, not having a contract is meaningful. Knowing that their bill is a set amount each month isn't a bad strategy. In our view, the Belief Project will attract customers who don't want a contract and want to upgrade faster. We want to drive our postpaid business, but there will always be a need for prepaid as well. Even if the economy gets better, that doesn't mean prepaid goes away, which is fine.
Q: During Motorola's CTIA press event, CEO Sanjay Jha said he that he welcomes tiered data plans and the industry appears to be moving in that direction. Do you think such data plans are the future?
Dillon: We're already starting to see that as part of the Belief Project since it allows customers to vary their data need. Our view is that there's a different data plan need for every customer. We'll watch how the industry evolves in relation to tiered plans.
Coyle: We're watching closely what's taking place, but now 5GB (the limit for the carrier's top data plans) is a great for the majority of customers.
Q: How has the industry reacted to the Belief Project?
Dillon: Customer reaction has been quite positive. It's early to gauge exactly, but we're pleased with the feedback so far. Outside of that, the FCC FCC Chief of Staff [Eddie Lazarus] pulled me aside this week to say that he thinks the Belief Project is great and that it's in line with what the agency wants to see for consumers.
Q: Would U.S. Cellular have any interest in a CDMA iPhone?
Dillon: Sure, that would be great.
Q: What about
Windows Phone 7?
Dillon: Absolutely. Our goal would be to have as broad a range of offerings as we can. That's important to customers. They should have access to all the operating systems.
Q: For a long time, U.S. Cellular didn't have many exclusive handsets in its lineup. Are you trying to change that?
Coyle: We've always desired it. One of the challenges we had was not having a nationwide network, but having that now in place has allowed us to get handsets that we wouldn't have been able to pick up before. We prefer an even playing field with new phones, but given the fact that there's not one, we welcome the opportunity to offer an exclusive.
Q: Do you think customers understand the role a wireless carrier serves?
Dillon: The average person takes for granted what it takes to get great wireless service. That's not a criticism, but it is an observation. It's in our interest to educate what goes into a great network, a great plan, and a great handset.
In the original version of this story I reported that FCC Chairman Julius Genachowski had commented on the Belief Project. Updated October 12, 11:55 a.m. PDT with the correction.