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Technological Forecasting & Social Change 75 (2008) 854 – 874

Forecasting customer switching intention in mobile service:

An exploratory study of predictive factors in mobile
number portability
Dong-Hee Shin a,⁎, Won-Yong Kim b
a
College of Information Sciences and Technology, Penn State University, Tulpehocken road, P.O. Box 7009,
Luerssen Building, Reading, PA 19610-6009, USA
b
Ewha Womans University, Seoul, Korea 11-1 Daehyun-dong, Seodaemun-gu, Seoul, 120-750, Korea

Received 21 March 2007; received in revised form 6 May 2007; accepted 7 May 2007

Abstract

This study investigates switching barriers under the mobile number portability (MNP) in the U.S. mobile
market. The structural equation modeling analysis is used to evaluate the causal model, and confirmatory factor
analysis is performed to examine the reliability and validity of the measurement model. The logistic regression is
used to investigate the effect of demographics on switching decision. The findings indicate that customer
satisfactions, switching barriers, and demographics significantly affect subscribers' intent to switch. Among them,
switching barriers had the most significant influence, which raises a question of the effectiveness of MNP. The
MNP in the U.S. mobile market is intended to play an important role in lowering switching costs which can
increase the level competition among providers. The findings, however, imply that subscribers still perceive
switching barrier high, discouraging them from switching carriers.
© 2007 Elsevier Inc. All rights reserved.

Keywords: Mobile number portability; Switching barrier; Switching behavior; Structural equation modeling

⁎ Corresponding author. Tel.: +1 610 396 6135; fax: +1 610 396 6024.
E-mail addresses: dxs75@psu.edu (D.-H. Shin), wonykim@ewha.ac.kr (W.-Y. Kim).

0040-1625/$ - see front matter © 2007 Elsevier Inc. All rights reserved.
doi:10.1016/j.techfore.2007.05.001
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1. Introduction

Mobile number portability (MNP) requires mobile carriers to allow customers to keep their telephone
numbers when switching from one carrier to another. MNP was adopted in the U.S. in 2004 to address the
perceived switching costs of changing one's telephone number when one changes service providers. The
literature on switching cost shows that consumers will not switch their service providers if they are
required to change their mobile numbers because it is both inconvenient and financially burdensome. The
extent to which consumers invest in their telephone numbers, both personally and financially, outweighs
the benefits that may be realized by switching service providers. By removing a barrier to customer
switching in those markets where customers value their telephone numbers, number portability is
intended to foster competition among service providers.
Yet, as mobile carriers increase termination charges and introduce various switching barriers in
response to MNP, it has been questioned whether a switching barrier is effectively lowered with the
presence of MNP. An emergent question with MNP is whether subscribers are able to switch carriers
without significant switching barriers. Although a growing body of research has examined users'
intentions to adopt and use mobile services [1,2], very little research has been conducted on subscribers'
actual switching behaviors in the context of MNP. There is a growing need to predict how switching
barriers affect customer satisfaction and switching intentions. The theoretical framework built up around
customer satisfaction and intentions must incorporate switching barriers [3] to redefine them in the
context of MNP and answer such questions as “Who is switching and who is not?” and “How do
switching barriers interact with satisfaction and deter switching intentions in the MNP regulation?”
These questions are important because policymakers have asked whether MNP has produced positive
benefits. Ex-ante evaluations of MNP carried out in several countries have produced detailed estimates
of expected costs and direct benefits (e.g., strengthened competition and reduced prices). While
researchers have suggested that MNP should have a range of potentially important effects [49], such as
lower switching costs and barriers, few attempts have been made to quantify current switching intentions
to predict future switching. In this light, this study investigates the role of switching barriers in the
behavior of switching carriers and further explores the structural relationship among customer
satisfaction, demographics, and switching intentions under the MNP policy. Previous studies [4,5] found
a link between service quality and satisfaction, between satisfaction and customer loyalty, and between
customer loyalty and retention. Other studies [6,1] show that when a switching barrier exists, customers
tend not to switch even when customers are not satisfied with services. Given these empirically
demonstrated relationships, it is worthwhile to test switching intention under the MNP policy by
analyzing the effects of customer satisfaction and switching barriers on switching intention and the
structural relationship among these factors on U.S. mobile service customers. The objectives of this
study are (1) to identify variables that contribute to customers' switching in the mobile market; (2) to
conduct an empirical analysis of the relative effects of MNP on customers' switching in order to predict
the extent to which the switching intention is influenced by the level of perceived switching costs and
whether switching costs moderate the satisfaction–retention linkages, as suggested by previous research
[7]; and (3) to investigate the impact of demographics on switching intentions. The framework of this
study allows for more facile forecasting in a market with environmental volatility. More accurate
forecasting can enable both better technology policy analysis and more effective industry response.
Thus, the results of this study contribute to the body of work surrounding subscribers in mobile markets
and the regulation imposed to induce and increase competition.
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2. U.S. mobile number portability

Number portability dates back to 1995 when the Federal Communication Commission (FCC) enforced
this policy in local telephone service. The FCC later enforced local number portability between wireline
service providers, which has been occurring since 1998. MNP was first introduced in November 2003 in
100 metropolitan cities and expanded nationwide in May 2004. The main regulatory objectives of MNP
have been the benefits for consumers and the increased competition among carriers, which would lower
prices. The availability of MNP has been thought to bring substantial benefits to subscribers: lower price,
greater choice, higher quality, and a greater range of services. In particular, MNP would allow subscribers
to take full advantage of the choices that become available in a more competitive telecommunication
market. Subscribers will also be able to choose the provider that best meets their needs without incurring
switching costs by changing their phone numbers.
It was initially expected that 30 million subscribers would switch within the first year of MNP's
introduction. In the three years since MNP was expanded, however, only 10 million subscribers have
switched from one carrier to another according to data released by the FCC [8]. Furthermore, small
mobile carriers have not added subscribers significantly, whereas the top five big carriers have all
added subscribers with MNP [9]. It may be inferred that churn did not increase significantly with the
introduction of MNP because there was a positive impact (positive switching barrier) for consumers as
operators engaged in aggressive customer retention strategies, including better deals on upgrade
handsets, incentives for longer contracts, better customer service, and increased network spending. The
question, however, is raised whether switching barriers have been effectively lifted and thus have
subscribers benefited from MNP. While many researchers are questioning the intended effects of
competition, an emergent and the most fundamental question with MNP is whether subscribers are
able to switch carriers without significant switching barriers. Since the primary goal of MNP lies in
consumer benefit, a fundamental and priori question needs to address the consumers' actual
responses.

3. Theoretical concepts of mobile telecommunication markets

Many previous studies have investigated the relationship between customer satisfaction and customer
loyalty [10,11], the relationship between customer satisfaction and call qualities [12–14], and the
relationship between switching demand and MNP [15]. However, the relationship between the factors and
actual customers' switching intentions has not been extensively discovered yet. The hypotheses in this
study are based on the relationships among the factors. The perception of switching barriers is key in the
hypotheses, which lead this study to explore customers' switching intentions.

3.1. Service quality

Service quality in the telecom industry is an important indicator to assess a firm's performance. Due to
inherent intangibility, inseparability, heterogeneity, and perishability of characters, service quality can be
defined as a consumer's overall impression of the relative efficiency of the organization and its services.
The dominant conceptualization and measurement of service quality has been the SERVQUAL
instrument developed by [16]. SERVQUAL identifies determinants of perceived quality and indicates the
arithmetic differences between customer expectations and perceptions across 22 measurement items.
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Using factor analysis, SERVQUAL further is condensed into tangible, reliability, assurance, and empathy
dimensions, which are generic across service contexts.
A survey conducted by [17] found that mobile subscribers who perceived that operators differed in
service levels were more likely to switch than those subscribers who did not see any difference among
networks. Nevertheless, the analysis did not go beyond the descriptive results to further postulate or
explore what differences exist between the network operators and how the perceived difference affected
switching intention. Thus, the following is hypothesized:

H1. Higher levels of service quality are associated with higher levels of customer satisfaction.

3.2. Customer satisfaction

Overall, satisfaction refers to the customers' rating of the brand, based on all encounters and
experiences [10]. Satisfaction can be viewed as a function of all previous transaction-specific
satisfaction [18]. Oliver [19] considered that customer satisfaction means customer reaction to the state
of fulfillment and customer judgment of the fulfilled state, and introduced the expectancy-
disconfirmation model for studies of customer satisfaction in the retail and service industries. The
main factor determining customer satisfaction is the customers' own perceptions of service quality [20].
Oliver [19] defines satisfaction as a pleasant past-purchasing experience from a product or service
given the anti-purchasing expectancy of the customer. In the context of mobile services, service quality
has been measured by call quality, pricing structure, mobile devices, value-added services, convenience
in procedures, and customer support [14].
H2. Higher levels of perceived price are associated with higher levels of customer satisfaction.
H3. Higher levels of customer satisfaction are associated with lower levels of switching intention.

3.3. Switching cost and perceived switching cost

Customer switching refers to migration of customers from one provider to another. Switching cost means
the cost incurred when switching, including time, money, and psychological cost [21], and is defined as
perceived risk, insofar as there are potential losses perceived by subscribers when switching carriers, such as
loss of a financial, performance-related, social, psychological, and safety-related nature [22]. Switching costs
exist whenever consumers face changeover costs in a market when switching from a purchased product to
one of its substitutes. According to Chang [23], initial costs are assumed to be the same across all carriers,
when the subscriber makes a purchase decision. These first period sales create the second period, or
aftermarket, switching costs. Switching cost can be explained in three categories [24]: learning costs occur if
knowledge between brands is not transferable; transaction costs occur when changing providers; and
contractual costs, or purely pecuniary costs, occur when a firm develops particular schemes, such as loyalty
benefits or withdrawal penalties, to encourage retention of existing subscribers. While the learning costs and
transaction costs represent the social cost of brand switching, the contractual cost occurs with a firm's
strategy, which punishes subscribers who switch by creating intentional barriers [24]. These different
switching costs are collectively perceived by subscribers, the so-called perceived switching cost.
Perceived switching cost is the degree to which an individual believes that switching service providers
would incur certain cost to him or her [25]. One way to investigate switching costs will be simply to ask
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consumers at what price differentials they would switch. The problem, however, is that consumers often
cannot estimate their non-financial switching costs correctly; therefore, their answers will reflect their
perceived switching costs, which may be different from actual switching costs. Perceived switching cost
rather than actual switching cost explains customer switching intention and affects the market outcome. In
addition, perceived switching costs constructed by carriers can be used strategically to retain customers,
even when customers are less than satisfied with the provider [15]. Because these costs may vary with
customer characteristics and the nature of the product, these costs can be used as attributes for market
segmentation and targeting. Fornell [26] distinguishes search, transaction, and learning and emotional
costs, as well as loyal customer discounts, customer habit, cognitive effort and financial, social, and
psychological risks for the consumer as switching costs. For services, customers may be less inclined to
switch when financial, search, and psychological costs are involved [27].

H4. Higher levels of switching cost are associated with higher levels of the switching barrier.

3.4. Switching barrier

Similar to switching cost, the notion of switching barriers has been spotlighted in recent marketing
research due to its importance in customer retention and profits to service providers [6]. Kim et al. [2]
identify the positive role of switching barriers in customer retention in the Korean mobile phone industry.
Patterson and Smith [28] also argue that switching barriers capture a substantial amount of the explained
variance in “propensity to stay with focal service provider” (p. 26). It is logically understood that the
switching barrier makes it difficult to switch service providers (H5).
Previous studies found that switching cost reduces customers' sensitivity to price and satisfaction level
and that they perceive functionally homogenous brands as differentiated heterogeneous brands [29,26].
That is, in the presence of switching cost, customers who might be expected to select from a number of
functionally identical brands display brand loyalty. In due course, ex-ante homogenous products may be
ex post differentiated by switching cost after they have been bought [24]. In addition, when customers are
sensitive to product attributes such as quality, uncertainty will decrease price sensitivity, and customers
will behave as if brand-loyal. For these reasons, switching cost is the factor that most directly influences
customers' sensitivity to price level and so influences customer loyalty [29]. Therefore, it is reasonable to
hypothesize that perceived switching barriers have a moderator effect on the relationship between
customer satisfaction and switching intention (H6).
H5. Higher levels of perceived switching barriers are associated with higher levels of switching behavior.
H6. Higher levels of perceived switching barriers moderate the relationship between customer
satisfaction and switching intention.

3.5. Subscriber lock-in

Firms keep developing various strategies to gain control over access to subscribers in an attempt to
achieve customer lock-in, which is usually referred to “loyalty” [30]. While subscriber lock-in is often
regarded as a concept similar to switching barrier, the distinction is clear: subscriber lock-in is a supply-
side variable describing providers' efforts to create switching barriers, whereas the perceived switching
barrier is a demand-side variable describing consumer perception.
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As an effort at subscriber capture, subscriber lock-in can take many forms, including contractual
commitments, bundling of services, product-specific learning costs, search costs, and loyalty programs.
However, each of these industry tactics represents various embodiments of switching costs and aftermarket
monopolization. The higher the cost of switching carriers within a particular market, the more the
subscriber is captured, or locked into, the original purchase decision (H7). In this situation, the provider
may be able to increase the service price without a significant loss of subscribers, providing the service
price increase does not exceed the cost of switching providers. This approach forces subscribers to balance
switching costs with the benefit of saving money in a competitor's aftermarket [31]. Switching costs thus
generates consumer lock-in, allowing firms to earn above-competitive, monopoly profits. In any market, a
provider competes for both existing and potential consumers. While markets with high switching costs
serve to retain existing subscribers, industry claims suggest that potential subscribers provide the
competitive discipline to resist overpriced products and services. This supports the reputation effects. If it
becomes known that providers will charge excess prices in the aftermarket, consumers may avoid such
costs by purchasing from a different provider during the first period. While the tactics employed by various
industries to seduce potential subscribers and retain existing subscribers will vary extensively across
markets, it has become an economic axiom that lower switching costs force competition for initial
subscribers and liberate second period subscribers from a particular aftermarket.
H7. Higher levels of customer lock-in are associated with higher levels of the switching barrier.

3.6. User demographics and switching intention

Studies of the adoption of new technologies have focused on an individual's socioeconomic

characteristics, the perceived attributes of innovations, technology clusters, situational factors, and the
characteristics of innovations that influence adoption [32,33]. Past adoption studies also show that early
adopters of new technologies tend to be young, well-educated, and richer than non-adopters; males are
more likely than females to be adopters of new technologies [34].
Although some research has highlighted the influence of demographics, the impact of demographics on
switching intention has received relatively little attention. Few studies to date have identified which, if
any, customer characteristics might be effective in predicting customer switching intention. This study
examines whether customers' switching intentions differ with respect to their demographics (age, gender,
and education). Carroll et al. [35] found that young mobile users use mobile services to satisfy their social
and leisure needs, reinforce group identity, and add value to their lifestyles. The researchers also found
that more educated people view mobile devices as lifestyle-related tools as well as task-oriented
technologies. This attitudinal shift might influence people's switching intentions as well. Thus, it is
reasonable to hypothesize that young and more educated subscribers tend to show higher intention to
switch than older subscribers (H8 and H10). In addition, applying the gender difference of mobile use to
switching intention, it can be hypothesized that male subscribers tend to switch more often than female.
Several studies have showed that female customers tend to experience higher levels of anxiety than males
in using technologies [36]. Gilbert et al. [37] found that females tend to show more techno-phobia and
anxiety toward mobile technologies. The anxiety is likely to discourage females from switching from one
carrier to another. The most recent study by Ranganathan et al. [38] confirms the previous findings of
demographics: males are more prone to switching carriers and age is negatively linked to switching (H8
and H9).
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H8. Age is negatively related to switching intention.

H9. Male subscribers tend to show more intention to switch than female subscribers.
H10. Education has a positive effect on switching intention.

4. Survey design and variables

Data for the present study were collected by a private market-research firm, which conducted a
standardized telephone survey among customers of mobile services in the U.S.
The telephone questionnaire was developed based on a previous study on MNP [5,14,15]. The survey
questionnaire asked about subscribers' behaviors and reasons for switching carriers such as satisfaction,
service, switching cost, lock-in, and prices. A pilot survey was administered to revise and complement the
survey questions. Five hundred and twelve valid survey responses were obtained by phone. The
respondents' ages ranged between 19 and 72, with a mean of 37.12 years (S = 12.99; n = 520). SPSS 10.0
was used for descriptive statistical analysis, factor analysis, and reliability analysis. The SEM tool was
used for the path analysis of H1 through H7. Logistic regression was used for H8, H9, and H10. A logit
model helps to understand the extent to which such factors influence a customer's choice of product. This
model evaluates the influence of independent variables on an event, either switch or not switch. In this
analysis of the independent variables (continuous and dichotomous) in this study, each of the categories is
assessed for its impact on the dependent variable (switching intention). Respondents were questioned as
to whether or not they would switch (switch 1 = yes, 0 = no).

4.1. Measurement

All variables in the hypotheses were assessed with multi-item scales (Appendix A). Customer
satisfaction was measured with a 3-item scale designed to capture the overall satisfaction [39]. The study
adopted an approach to the measurement of customer satisfaction that is common in the literature of
existing approaches to measurement of customer satisfaction. The measurement scales of switching cost
were adopted from Jones et al. [6]. Three questions were used to measure switching barriers and customer
lock-in, which were adopted from Chen and Hitt [40]. The measurements of switching barrier and
switching intention were both adopted from Kim et al. [10]. Perceived price was measured with a 3-item
scale. Similar items appear in Brynjolfsson and Smith [41]. Finally, service quality was assessed with a 3-
item scale that replicates the commitment scale developed by Cheong and Park [42]. Since LISREL 8.51
was used as an analytical tool, all of the constructs were subject to confirmatory factor analysis.

4.2. Pretest and pilot survey

To enhance the validity of the proposed model's measurement item, a pretest and a pilot survey were
conducted before the main survey. To assure content validity in the MNP context, faculty members of a
marketing department reviewed a set of questionnaire items that were based on relevant previous research.
The content validity of the questionnaire items was verified through personal interviews with experts in
the mobile industry. A pilot survey was conducted using the initial questionnaire items. Forty-nine
customers with experience in mobile switching participated in the pilot survey through the web survey.
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Table 1
Convergent validity and internal consistency reliability
Items Factor loadings Cronbach's alpha
Customer satisfaction CS1 0.873 0.8894
CS2 0.832
CS3 0.833
Switching cost SW1 0.859 0.8941
SW2 0.829
SW3 0.831
Subscriber lock-in LO1 0.738 0.8389
LO2 0.768
LO3 0.809
Perceived price PP1 0.711 0.9467
PP2 0.941
PP3 0.914
Switching barrier SB1 0.719 0.7339
SB2 0.801
SB3 0.721
Subscriber lock-in SL1 0.703 0.743
SL2 0.811
SL3 0.792

4.3. Reliability and validity

Cronbach's alpha is used to test the internal reliability of each of the composite constructs. Internal
consistency measures estimate how consistently individuals respond to the items within a scale. All
independent variables show acceptable values (above 0.7) in Cronbach's alpha coefficients, which
indicate the reliable measures of their respective constructs [43]. The reliability analysis of each factor is
produced in Table 1.

4.4. Confirmatory analysis: LISREL measurement model

In the data from the studies, confirmatory factor analysis (CFA) and coefficient alpha were used to
assess the reliability and unidimensionality of the scales in order to determine whether it was appropriate
to operationalize each of the constructs as an index. Drawing from service literature and qualitative
interviews, switching cost is conceptualized to encompass three dimensions. Based on scale refining,
eight of the initial 21 switching cost items were found to have acceptable psychometric properties. A
measurement model was specified constraining the eight items to load on three factors as theorized
(x 2 = 729.5, df = 242, p = 0.000, CFI = 0.96, GFI = 0.93, AGFI = 0.813, RMSEA = 0.05). All items were
found to load strongly on the intended latent dimension. Scale reliabilities were above 0.75 for all scales,
Using factor reduction, 13 service quality items are condensed to three dimensions.

5. SEM and structural paths

To test the structural relationships, the hypothesized causal paths were estimated with SEM of LISREL.
The results with SEM show that six hypotheses were supported and one hypothesis was rejected at
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Table 2
The results of hypothesis tests
Hypotheses Estimates t-value S.E. Result
H1 0.281⁎⁎ 2.701 0.001 Accept
H2 −0.175 − 2.261 0.021 Reject
H3 −0.109⁎ − 0.248 0.681 Accept
H4 0.489⁎⁎ 4.238 0.000 Accept
H5 −0.197⁎ − 2.121 0.292 Accept
H6 −0.192⁎ − 4.301 0.103 Accept
H7 −0.193⁎ 3.193 0.001 Accept
⁎p b 0.05; ⁎⁎p b 0.001.

p = 0.05 (Table 2). The model explains 68% of the variance in customer switching, 41% of the variance in
customer satisfaction, and 53% of the variance in switching barriers. There is a high level of explanatory
power.
The findings indicate that both customer satisfaction and switching barriers exhibited strong impacts on
customers' attitudes toward and behaviors in switching mobile carriers. The test of hypothesis 1 showed
that service quality is significantly related to customer satisfaction, implying an indirect effect on
switching intention. Interestingly, however, the test of hypothesis 1 reveals that perceived price is not a
significant factor affecting customer satisfaction, which implies the insignificant effect of price on
switching intention. According to the test of hypothesis 3, customer satisfaction has a direct influence on
switching intention, suggesting that satisfied customers will more than likely not switch carriers. Together
with hypotheses 1, 2, and 3, it can be said that if customers think that they are getting a high value from the
service they receive in relation to price, they are more likely to be satisfied and more likely to stay with the
current carrier. It can be said that the perceived price paid by subscribers is diluted by increased service
quality and customer satisfaction. These linkages confirm previous studies' findings that service quality
and price directly influence customer satisfaction.
The results of hypotheses 4, 5, and 7 suggest that the switching barrier is influenced by customer lock-
in and the increased switching cost, which negatively influence customer switching intention. The path
coefficient of the switching barrier and switching intention show that the switching barrier is a key factor
in subscribers' switching intention.
Hypothesis 6 reflected the moderating effect of the perceived switching barrier of customer satisfaction
and switching intention. The result of hypothesis 6 suggests that the switching barrier has a moderator
effect on customer satisfaction and switching intention. It suggests that customers having high switching
costs tend not to switch even if they are not satisfied with the services delivered. This further implies the
moderator role of switching barrier on the relationships between call quality and customer satisfaction,
and between price and customer satisfaction. It can be inferred that the perceived switching barrier
reduces subscribers' sensitivity to the level of subscriber satisfaction.

6. Logistic regression and demographics

For the test of 8, H9, and H10, logistic regression is used to denote whether demographics affect
customers' switching intention. Logistic regression is used as a tool to determine which of the factors
identified in the switching intention were significant with regard to predicting switching intention. Using
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Table 3
The results of logistic regression
B S.E. Wald X2 Odds ratio
H8: Age −0.012⁎⁎ 0.001 482.06 1.910
H9: Gender 0.171 0.031 39.690 1.297
H10: Education 0.189⁎⁎ 0.029 49.913 2.330
Model X2 6790.22⁎⁎⁎
H-L test X2 60.19⁎⁎⁎
⁎p b 0.1, ⁎⁎p b 0.05, ⁎⁎⁎p b 0.01.

binary data, the logistic regression method gives estimates of model coefficients that can be used to
quantify the probability of subsidence. The independent variables in this study are age, gender, and
education. Dichotomous dependent variables are used in this study whether the customers switch carriers
or stay with the current carrier. Although there are other appropriate methods (discriminant analysis,
binomial regression, etc.), logistic regression analysis is an appropriate type of analysis since the
dependent variable has only two values (yes = 1, no = 0), and the variable regards future behaviors.
Table 3 presents the results of the logistic regression analyses. The overall model significance can be
evaluated by the model X2 value, which is significant (p b 0.001). The H-L Goodness of Fit Test also
indicates a significant fit (X 2 = 60.22, p b 0.001). Further, the odds ratio helps understand the relative
importance of the independent variables. These results provide considerable support for H8 and H10,
which show that age and education have a direct impact on switching intention: younger subscribers and
more educated subscribers are more prone to switching carriers because they appear to be better aware of
switching provisions. However, it was found that gender may not affect subscribers' decision on
switching, which is a contrast with the finding of Ranganathan et al. [38]. These demographic findings
call for further investigation, such as other socio-economic factors that may affect the perceived ease of
switching and the perceived importance of price in the subscribers' choice of mobile carrier.

7. Forecasting scenarios: switchers versus continuers

In order to conduct dynamic analysis on the subscribers' behavior, this study performed additional
statistical analyses on the collected samples by dividing them into several groups. Based on the responses
from the survey, a 2 × 2 matrix was made (Fig. 1). Two customer groups were divided into four groups
(Fig. 1). The first group (n = 141) is a customer group representing switching. The second group (n = 121)
is those who would remain without further switching. The third group (n = 116) is from the continuer
(unswitching) group that intends to switch in the future. The fourth group (n = 124) represents a customer
group that remains consistently with the current provider and will not switch.

Fig. 1. Customer type regarding switching intention.

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Table 4
ANOVA on switching
Variable Switcher group Continuer group t-value p-value
Mean S.D. Mean S.D.
Usage time/week 4.390 0.113 1.813 0.172 4.221 0.020⁎⁎
Call frequency/week 68.11 0.231 25.12 0.180 4.391 0.027⁎
Services in use 6.610 0.119 2.323 0.231 2.196 0.015⁎⁎
Switching cost 1.331 0.440 5.241 0.451 −3.275 0.002⁎⁎⁎
Subscriber lock-in 3.321 0.320 4.141 0.272 2.2543 0.001⁎⁎
Price 4.822 0.205 2.132 0.243 3.283 0.003⁎⁎⁎
Opportunity cost 1.811 0.218 4.810 0.408 2.8123 0.071⁎
Call quality 6.531 0.274 3.812 0.341 −3.1481 0.0012 ⁎⁎
Subscriber service 4.233 0.234 1.123 0.121 2.1129 0.002 ⁎⁎
Value-added service 4.938 0.441 2.169 0.404 − .84780 0.130
⁎p b 0.1, ⁎⁎p b 0.05, ⁎⁎⁎p b 0.01.

For the comparison of the switched group (Groups 1 and 2) versus the continuer group (Groups 3 and
4), ANOVA is used. Then, for the investigation of future intention (Group 1 and 3), logistic regression is
used. For the groups without future switching intention (Group 2 and 4), multiple regression is used to
investigate the factors blocking their switching intention.

7.1. Switching group versus continuer group

The two most determining factors for the switching group to change carriers shown in Table 6 are price
and the switching cost. Of those who switched, 44% responded they left for a better price on monthly
service, and 12% switched because of a promotion of sale. Twenty-two percent switched because of
coverage or service quality, the two factors that had been considered major reasons that would lead to
widespread switching. Service factors show a generally higher influence than switching barriers. Unlike
the commonly accepted notion, switching barriers were not a significant factor. MNP was not by itself a
reason for subscribers to switch carriers, but it did lessen the hassles of switching.
Among switching barriers, subscriber lock-in is the most significant factor discouraging subscribers
from switching. Analyses show that subscribers who switched generally are satisfied with their new
service and carriers. In general, the switched subscribers are well informed about MNP. Approximately
82% of subscribers were very or somewhat satisfied with their porting experience. In addition,
approximately 81% of subscribers indicated that length of porting met or exceeded expectations.
On the other hand, most continuing subscribers felt the switching barriers higher than the switching
group. Even after the MNP enforcement, switching barriers have influenced subscribers' decisions. In
addition, subscriber lock-in is the second important factor making subscribers stay with current carriers.
Continuing subscribers have been locked in with long-term contracts, fees, and memberships. These
continuing subscribers received a promotional discount when they selected the current carrier as a
condition of a 2-year contract. Furthermore, the continuing subscribers worried about hidden costs that
included early termination fees (if subscribers switch carriers during the contract, subscribers should pay an
early termination fee). Fourteen percent of respondents said that they stopped pursuing switching after they
became aware of the early termination fee. The continuing groups explained another hidden cost of fees to
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keep the current number after switching carriers. With MNP, the FCC allowed carriers to charge a fee to
recover number porting costs. Carriers charge this fee to subscribers or new carriers. In addition, the
continuing group worried about a requirement to purchase a new handset compatible with the new carrier's
network. These subscriber lock-in factors have heavily discouraged subscribers from changing carriers.
Interestingly, continuing subscribers rarely see mobile service as important. They have had little real
experience with various value-added services. They tend not to differentiate or discriminate different
service quality other than voice. They are not highly satisfied with current services nor think the service
will be improved with other carriers. Interestingly, 2% of continuing subscribers are completely unaware
of the existence of MNP. Subscribers' awareness of MNP was not high enough that they lacked a detailed
understanding of the process, timing, and cost of porting. Most continuing subscribers had the simplistic
notion that MNP would be free, immediate, and hassle-less. Approximately 3% of continuing subscribers
responded that they would wait for a while until switching costs are lowered (Table 4).

7.2. People with future intention (Group 1 and 3)

For Group 1 and Group 3, logistic regression is used. Logistic regression, in general, supports the
ANOVA analyses (Table 6). Subscribers from the continuer group are most likely to switch when
switching barriers become low. In particular, subscriber lock-in is shown to be the biggest deterrent that
keeps subscribers from switching. Subscribers in the continuer group perceive switching barriers to be
higher than the switching group does, as shown in the subscriber lock-in. In addition, the continuer group
in general is less intrigued or prompted by lower prices. These subscribers are interested in lower price
(monthly fees), but they think the lower price would be offset by a high switching cost and a move-in cost.
In fact, it is consistent from a series of analyses that the continuer group is less concerned with levels of
service quality and is less responsive to price change.
As for services, subscribers from the continuer group are least likely affected by the service factor. In
general, the subscribers in the continuer group are causal users who tend not to care about their numbers.
They just need to make a call when they need to. This observation is consistent with the following variable

Table 5
Logistic regression analysis on independent variable of switching
Factors Independent Switching Continuer group to intend
variables (Group 1) (Group 3)
B S.E. p-value B S.E. p-value
Switching barriers Switching cost 0.0593 2.432 0.833 0.401⁎⁎ 9.238 0.001
Subscriber lock-in 0.294⁎⁎ 1.541 0.092 0.471⁎⁎ 1.421 0.005
Opportunity cost 0.014 0.344 1.042 0.842⁎⁎ 0.511 0.0273
Services Call quality 4.681⁎ 0.723 1.441 0.431 3.313 0.621
Customer service 4.001 1.143 0.312 1.019 1.923 0.805
Value-added service 4.773⁎⁎⁎ 0.942 0.354 1.070 0.0152 0.332
Price 5.193⁎⁎ 0.253 0.012 2.124⁎ 0.012 0.038
Constant −3.820 − 3.844 1.263 0.000⁎⁎⁎ − 5.107 1.444
Log likelihood 173.02 56.422
Chi-square 149.54 69.742
⁎p b 0.1, ⁎⁎p b 0.05, ⁎⁎⁎p b 0.01.
 866
D.-H. Shin, W.-Y. Kim / Technological Forecasting & Social Change 75 (2008) 854–874
Table 6
Multiple regression of factors affecting switching barriers
Switching Switching Subscriber Opportunity Call Subscriber Price Subscription Additional B β Sr2
cost lock-in cost quality service structure fee service fee
Switching 1
Switching cost 0.149⁎⁎⁎ 1 1.00⁎⁎ 0.144 0.027
Subscriber lock-in 0.036⁎ 0.555 1 0.54⁎ 0.119 0.029
Opportunity cost 0.052 0.192 0.126 1 0.13 0.065 0.039
Call quality 0.012⁎⁎⁎ 0.045 0.311 0.051 1 1.12⁎⁎ 0.143 0.012
Subscriber service 0.016 0.032 0.234 0.455 0.213 1 0.01 0.115 0.023
Price structure 0.043 0.140 0.032 0.223 0.593 0.724 1 0.02 0.079 0.052
Subscription fee 0.008⁎⁎ 0.023 0.311 0.036 0.191 0.842 0.399 1 0.64⁎⁎ 0.043 0.021
Additional service fee 0.007⁎⁎ 0.023 0.020 0.049 0.022 0.097 0.183 0.133 1 2.33⁎⁎⁎ 0.012 0.045
Intercept = 2.545 R = 0.214⁎⁎ R2 = 0.046

ANOVA summary table

Sum of Squares df Mean square F Significance
Regression 406.442 10 235.840 4.741⁎⁎ 0.002
Residual 8411.313 289 27.542
Total 7314.803 291
⁎p b 0.1, ⁎⁎p b 0.05, ⁎⁎⁎p b 0.01.
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that the continuer group tends to see the value-added service as the least affecting factor. Call quality is the
most vital factor for the continuer group to switch in the future, but this is not a significant factor.
On the other hand, subscribers with switching experience are likely to switch again if they find lower
prices. These subscribers are also are tempted to switch carriers with better value-added services. They
tend to see mobile service as an additional means of communication and look for richer functionality and
greater versatility.
While price is found to be the important factor, switching barriers are the least important factor for these
subscribers. As they have experience in switching and thus they know how to better deal with switching
barriers, the switching group now sees services as a more important consideration than the switching
barriers. The switching group tends to more easily change current carriers if service quality falls short of
these subscribers' expectations. Also, subscribers in the switching group are willing to switch again if
they find lower prices through promotions or special sales offers (Table 5).

7.3. Subscribers without future switching intention

For the group without future switching intention (Groups 2 and 4), multiple regression is used to
investigate the switching barriers discouraging subscribers' switching intention. Among the identified
switching barriers, move-in cost and loss cost have a direct effect, which implies that MNP does not have
a direct effect on the subscribers' switching decisions; rather, MNP affected customer benefit indirectly by
lowering prices, by increasing customer services, and through carriers' strategies such as promotions.
Service is also a significant factor, but not as significant as switching cost. This suggests that
subscribers are likely to remain with their current carriers even when they experience only a low level of
service satisfaction. It is inferred that service qualities are almost identical among carriers because almost
every mobile carrier is striving to provide the best customer service possible in order to reduce customer
churn. Service qualities from different carriers become similar enough for customers not to differentiate
service itself when choosing carriers. In addition, although mobile carriers are aggressively introducing
value-added services (i.e., location-based services, streaming media, game-on-demand, VPN access, and
m-commerce), they do not matter to customers as far as switching decisions are concerned (Table 6).

8. Discussion

The switching barrier is a major factor directly affecting subscribers' decisions about switching.
Among the identified switching barriers, move-in cost and loss cost have a direct effect, which implies
that MNP does not have a significant effect on subscribers' switching decisions; rather, MNP affects
customer benefit indirectly by lowering prices, by increasing customer services, and by increasing
promotions through carriers' strategies. Through MNP, carriers have increased subscriber lock-in by
making subscribers sign long-term contracts, by increasing termination charges, and by imposing the
burden of hidden costs. This raises important implications for the effectiveness of MNP. Despite the
regulators' aspirations, there seems to be little effect of MNP at the individual subscriber level. The
regulators' assumption was that MNP would enhance competition due to reduced switching costs.
However, because subscribers still feel the high level of switching barriers after the introduction of MNP,
there has been little effect on the competition in the mobile market. Although there are no data available to
compare pre-MNP and post-MNP, the validated relationships of the factors in SEM imply that switching
barriers are not a unidimensional concept, but there are different types of switching barriers—with unique
868 D.-H. Shin, W.-Y. Kim / Technological Forecasting & Social Change 75 (2008) 854–874

Fig. 2. Structural path results.

effects on customer satisfaction, service quality, and perceived price in the MNP context. Such examples
include increased service quality and customer satisfaction, which can be called positive switching
barriers, along with negative switching barriers such as customer lock-in [6]. It can be inferred that mobile
carriers have improved service quality since MNP went into effect to minimize subscriber churn rates. It
can be also expected that customers stay with their current carriers because of such positive relationships,
which is called customer loyalty. The finding that service quality is not as significant a factor as switching
cost suggests that subscribers are likely to remain with their current carriers even when they experience
only a low level of service satisfaction. This implication can be explained in two ways: (1) service
qualities become almost identical among carriers (to the extent that customers do not switch just because
of service qualities) because almost every mobile carrier is striving to provide the best customer service
possible in order to reduce customer churn; and (2) therefore the issues of service quality and subscribers'
satisfaction are offset by the increased switching barrier. Subscribers may see the increased switching cost
and barrier as some form of commitment by the current carrier.
Indeed, it can be argued that the switching barriers that have been strategically set by carriers affect not
only the subscribers' switching decision directly, but also other independent variables indirectly. The
influence of customer satisfaction on their switching intention can be lowered in the presence of a
perceived switching barrier. The switching intention is likely to be reduced if customers feel a high level of
perceived switching barriers, and customers with high switching barriers become insensitive to prices and
service quality, which then leads to neutralized customer satisfaction. While this argument is partially
consistent with the findings by Ayndin and Ozer [29], who report that switching cost has a moderator effect
on the antecedent of customer satisfaction and customer loyalty, it also shows the opposite direction of
causality from the previous findings, which show that customer satisfaction reduces sensitivity to price by
lessening price elasticity [44] and minimizes customer switching from fluctuations in service quality [26].
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From the finding that the perceived price was found to be less significant than call quality and customer
service, it can be inferred that customers can bear a certain degree of price difference as long as they
perceive high-quality service rendered by their current carriers. While the low level of price effect can be
explained as customers becoming less sensitive to the price level as compared to service quality, it can
also be seen that mobile service costs become more and more flat or neutralized as mobile carriers try to
counter-offer to beat competitors' prices. In the long run, however, the use of pricing tactics to deter
subscribers' switching may not be effective because competitors can easily offer new pricing schemes to
beat the temporary advantages in price level or price structure [14].
Of the demographic variables, age has a stronger association with switching compared to education.
The odds ratio for age indicates that when holding all the other variables constant, younger subscribers are
1.911 times more likely to switch mobile carriers than older subscribers. The findings also indicate that
education level is positively linked to switching: subscribers with higher levels of education are relatively
more prone to switching mobile carriers. However, it is found that gender may not affect subscribers'
decisions on switching. These demographic findings call for further investigation, such as how other
socio-economic factors may affect the perceived ease of switching and the perceived benefits of switching
(Fig. 2).

9. Contributions and implication: generalizability to other communications services

Investigating customer switching and loyalty behavior in services has gained considerable attention in
recent years [25,32,37], although it must be pointed out that the mechanisms of customer switching are
not completely understood [21]. An important limitation of the abovementioned studies is that they
investigated switching or retention and reported only the single effects of a mobile carrier's efforts on
customer behavior. These studies mostly ignored the overall context of mobile services, such as policy,
regulations, and customers' behavior. One of the main characteristics of the mobile telecommunications
sector is that the mobile services offered are complicated in terms of regulations and market situation to
the extent of technological advancement.
In this unpredictable new technology environment, it is important to better understand customers'
behavior and intention. By incorporating the influence of government telecom policy and firms' strategy,
this study provides an integrated framework to analyze the antecedents and consequences of switching
intention in MNP. Meanwhile, with the rapid growth of the mobile phone market worldwide, consumers'
switching costs should be understood so providers in the market can create comprehensive marketing
strategies. This study produces referential findings from research into the mobile market in terms of
antecedents and consequences of switching costs in the U.S. This study thus enhances researchers and
managers' understanding of switching costs. At the same time, this study contributes to the scholarly
literature in a number of ways: (1) this research investigates the important work of identifying factors that
affect customers' switching under the MNP policy; (2) it examines the actual switching intention of
subscribers'' mobile numbers, not just their self-reported switching intentions; (3) it goes beyond
satisfaction and intentions to explore heretofore unexamined attitudinal, behavioral, and demographic
characteristics of customers as possible predictors of switching intention; and (4) it focuses on customers
of mobile services, which are a growing industry, and one seemingly plagued by churn.
The presented empirical study, however, has some limitations, which limit its generalizability findings
as well as open up suggestions for future research. The approach in this study produced country-specific
results. As the study was limited to a single country, the research cannot exclude the impact of country-
870 D.-H. Shin, W.-Y. Kim / Technological Forecasting & Social Change 75 (2008) 854–874

specific factors, such as legislation, maturity of the market, and regulators' roles. This could be solved
with a multi-country study, which would help to control for the abovementioned effects; however, this
might prove hard as legislation was not being introduced simultaneously and, given the rapid
development of the industry, might hinder the validity of results. In addition, the results of this study are
generated from a single industry; additional studies in other industries may strengthen the generalizability
of the proposed constructs and framework. In the case of multiple sectors, longitudinal studies
investigating the role of customer switching intentions may overcome the constraints of multiple cross-
sectional studies.

10. Conclusion

There is a lack of empirical research into the extent of customer switching or demand-side switching
determinants in mobile markets, particularly in the MNP context. Many studies in marketing and retailing
have focused on customer loyalty as a supply side component, and essentially assume that switching cost
plays a role in protecting firms' existing customer base and gaining a competitive advantage [24]. This
view is somewhat pro-industry, focusing on how to build switching barriers and how to increase customer
lock-in at the expense of subscribers' interests. The present study has approached MNP from a customer
perspective, focusing on how and why customers switch carriers and how MNP enables or facilitates
customers to switch without the significant burden of switching cost. The results of this study show that
customer satisfaction and switching barriers are each found to have a direct effect on subscribers'
intentions to switch. The findings also show the moderating effects of perceived switching barriers on the
relationships between customer satisfaction and switching intentions. It was found that due to the
moderating role of switching barriers, switching intention, in the context of MNP, is not a unified
construct but rather one with at least two distinct dimensions: positive and negative switching barriers.
According to Julander and Söderlund [50], a positive switching barrier is that customers stay with their
current providers because of a perception that the provider is superior in services and products. A negative
switching barrier is that customers stay with their current providers because it is too expensive to leave the
provider and there is a monopoly on the market or the provider is powerful.
The results of this study confirm the existence of these two kinds of switching barriers in MNP: that
customers stay with current providers because the subscribers are tolerant of small price differences or
because they are happy with their current service.
The results also provide empirical support for linkages between satisfaction/switching and their sub-
components. Particularly, the degrees of perceived service quality are found to be a more significant factor
than the perceived price affecting a customer's satisfaction, which influences the extent of intention to
switch. Therefore, highly satisfied customers tend to show a high likelihood of staying and higher
tolerance to price increases by providers or price decreases by competitors.
The results imply that MNP has not significantly contributed to the regulators' goal of removing
switching barriers that have been prevalent in the subscribers' perceptions. Instead, MNP has indirectly
enhanced switching barriers through increased subscriber lock-in strategies and tactics [45]. From the
finding that subscribers seem to still feel high barriers in switching carriers, it can be inferred that
subscribers' decisions about switching are not much influenced by the MNP requirement. This raises a
question about the validity of MNP and whether it is being enforced and implemented in an effective way
as it was intended and planned. At the same time, it can be inferred that carriers continue to improve
customer satisfaction by restructuring price and by increasing service quality in order to reduce customer
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churn in response to MNP. That may be the reason that subscribers are insensitive to or even not aware of
the price structure and switching condition as carriers keep changing the provisions related to switching
and pricing.
The arguments of this study are partially consistent with the previous studies by Aoki and Small [46]
and Reinke [47], who argue that positive gains from portability are actually offset by the carriers' inertia
not to lose subscribers by increasing hidden costs and subscriber lock-in. Although MNP is designed to
benefit consumers, it becomes possible that the corresponding increase in the marginal cost of production
reduces consumer surplus and makes entrants and consumers worse off. As argued [46], it is also very
likely for consumers to receive fewer benefits following a reduction in the cost of switching between
carriers. There is a discrepancy between the regulatory assumption held by the FCC and actual industrial/
market phenomena. MNP is not always and everywhere socially beneficial; therefore, future studies may
further research this discrepancy. Based on the findings here, this study makes a suggestion to regulators:
in order to develop socially desirable, legally justifiable, industrially feasible, and economically viable
policy, it is advisable for regulators not just to enforce MNP: they should rather seek to reduce the
perceived switching barriers held by subscribers and raise customers'' awareness of MNP to have
subscribers fully take advantage of MNP. This argument is in line with the previous research [48,49] that
investigated the effects of consumer ignorance of relevant pricing and suggested that MNP may
deteriorate customers' price information. By understanding customers' switching intentions, regulators
can ensure MNP's effective implementation, which will also make it more convenient for end users to
switch operators if their services do not meet customer expectations.

11. Limitations and future studies

Although hypotheses were tested and confirmed, this study must be considered exploratory regarding
the role of switching barriers for switching intentions as well as attitudinal motivations. Empirically, it is
rather difficult to forecast the potential magnitude of the MNP effects because of three reasons: Firstly,
MNP has only recently been introduced in most countries so the time span is rather short for an empirical
analysis. At the time of this study, MNP was not an option in most countries; thus rigorous methods were
limited such as comparative, longitudinal, or dynamic analysis. Secondly, very little data are publicly
available on consumers' actual switching intention. Thirdly, the mobile telecommunications sector is so
dynamic with growing demand, changing technologies, and changing market structures that it is difficult
to empirically isolate the effects of MNP. Therefore, this study is vulnerable to the criticism of static
analysis that this study analyzed customers' switching intention under certain conditions. Therefore, the
results of this study have a limited applicability when carriers are changing new conditions by altering the
terms of service. The SEM for switching costs in this study suggests that other antecedents exist in the
study context. This preliminary study forms the basis for further analysis. Future studies may investigate a
longitudinal assessment of consumer satisfaction to see the dynamic aspect of the cognitive process.
Future research into the effect of MNP will benefit from the existence of time-series cross-section data
from jurisdictions where MNP has been implemented.
As the goal of this study was to test the effect of switching cost and customer satisfaction on switching
decisions, this study deliberately over-simplifies the relationships of the possible variables. This poses
weaknesses for this study that it could have investigated more complicated relationships, such as the
moderator effect of perceived switching cost on customer satisfaction and customer loyalty. Luckily, since this
study reveals the one moderator effect of switching barriers on the relationship between customer satisfaction
872 D.-H. Shin, W.-Y. Kim / Technological Forecasting & Social Change 75 (2008) 854–874

and switching intention, future studies may further investigate various moderate effects using the moderated
regression analysis tool. Since this study sheds light on positive switching barriers, further studies should put
much more care into trying to define and operationalize positive and negative switching barriers [6].
In addition, this study does not take into account customer loyalty because it is over-researched in the
marketing and retailing literature. Future study may incorporate customer satisfaction into the switching
intention to investigate a more comprehensive model. The last limitation could be that this study chose
only limited aspects of demographics and analyzed only the direct effects on switching intention. As Kim
et al. [10] suggest, future studies can include customers' demographic characteristics and their behavioral
and psychological characteristics. These can be structurally analyzed for the direct effects of
demographics on customer satisfaction as well as customer loyalty. Further, demographic factors can
be tested for moderating effects as well as adjusting effects on the overall causal relationships involved in
switching.

Appendix A. Items used to measure

Scale Scale items Alpha

Customer satisfaction – I am satisfied with the current service 0.94
– The current service meets all the requirements that I see reasonable
– The service satisfies my need
Switching intentions – I intend to switch carrier 0.69
– Next time I shall need services of other carrier
– I would not continue to have service from my current carrier
Switching barriers – It is difficult for me to use other carrier 0.80
– It would be complicated for me to change carrier
– It takes a lot of time to get information about other Carrier
Customer lock-in – I feel locked to this carrier 0.73
– There are hassle procedures to switch service
– In order to switch service, I have to breach contractual agreements
Switching cost – In general, it would be a hassle changing carriers 0.84
– It would take a lot of effort changing carriers
– It would take a lot of time changing carriers
Service quality – I think that my current carrier provides satisfying services 0.81
– I think that the services I can get from my current carrier are valuable
– My mobile service provides a quality of content and services that I need
Perceived price – I think the price for the mobile service is reasonable 0.86
– I think the monthly charge for the mobile use is reasonable
– I think the additional service charge and other incurring cost for the mobile use is reasonable

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Dong-Hee Shin is an Assistant Professor in the College of Information Sciences and Technology at Penn State University. Dr. Shin is based at the
Berks Campus of the Penn State University, where he teaches courses in telecom, user interfaces, and information systems. He has been
researching on telecommunications management and policy and his publications have appeared in several international journals such as
Information Research and Government Information Quarterly.

Won-Yong Kim is a Professor at Ewha Womans University, the Division of Digital Media. Dr. Kim received his Ph.D. and M.A. from the
University of Texas, Austin. He can be reached at wonykim@ewha.ac.kr. His postal address is Ewha Womans University, Seoul, Republic of
Korea 11-1 Daehyun-dong, Seodaemun-gu, Seoul, 120-750, Republic of Korea.