How Consumer Cellular made a billion dollars cornering the senior mobile-phone market.
Shortly after noon on a warm October day in Birmingham, Alabama, Ms. Carmichael, a grandmother of five, renewed her journey into the magnificent but confusing world of modern communication technology. She had owned many flip phones over the years, but her latest one was now six years old. She felt limited. “I want to come into the next century,” she said. “I want to be able to text.”
Ms. Carmichael had an AT&T plan, but she had seen television commercials for Consumer Cellular. The spots featured active, silver-hair retirees who didn’t need an expensive unlimited plan. According to iSpot.tv, a Washington-based TV advertising analytics company, Consumer Cellular had aired at least 15,000 similar commercials around the nation so far that year (in 2018) at a cost of $76 million. Those ads had been seen more than 6 billion times.
The marketing strategy, which would cost about $100 million by the end of the year, put Consumer Cellular in the top 4% of all national television advertising spenders that October. Even so, it forms just one reason why the business, one of the largest and fastest growing in Oregon, is about to crest another mind-boggling metric.
In early 2019, this private company with no outside investors and no debt will top $1 billion in annual revenue. It has 1,850 employees and is so thirsty for more, it is chronically understaffed. In October it officially hit 3 million active subscribers — up from 2 million in 2015 — and it now adds on average 50,000 new subscribers (the same as the entire population of its hometown, Tigard) every month.
All of this is all the more stunning when you consider few people under the age of 50 have ever even heard of Consumer Cellular. The average age of its customer is 64 years old.
How the company grew revenue 32% on average, year over year, for the past decade, hinges on a history of impeccable timing, robust marketing and the somewhat accidental discovery of a consumer base that had little interest in paying big bucks to adopt the latest and greatest iGadget and every intention of filling out the value-oriented ranks of the technological rear.
Now the company wonders what else it can do with its deep knowledge of the market: How to provide more efficient caregiving, how to curb elderly loneliness and even how to help solve problems of senior mobility all seem within its grasp.
Consumer Cellular was founded in 1995 by a then-30-year-old Willamette University graduate named John Marick and his 29-year-old friend, Greg Pryor, on a $25,000 small-business loan. Neither had started a business before.
Cellphones had come a long way from “bricks” like the Motorola DynaTAC 8000X, a phone that weighed nearly 2 pounds, took 10 hours to charge and sold in 1983 for more than $10,000 in today’s money, but few people owned them.
“They were Gordon Gekko phones,” Marick recalls, referencing Michael Douglas’ character in the 1987 film Wall Street. “Only stock brokers, real estate agents, people who could make money by having one had one.”
Consumer Cellular sought to upend that. For about $100 down plus $25 a month, anyone could have a phone with access to a cellular network. Actually using it, however, would cost a fortune — about 35 cents a minute — so phones were stashed in the glovebox for emergencies only, mostly. The idea that you could buy portable peace of mind for relatively little resounded strongly with one group in particular: seniors. The age of the “I’ve fallen and I can’t get up” button was over.
The messaging would only become more specialized. “The big picture for the market is fragmented with each company addressing specific niche segments,” says William Ho, founder of 556 Ventures, a telecommunications analytics and consulting firm in Northern Virginia. “Consumer Cellular is clearly doing something correctly, addressing the happiness of its customers.”
That was on display last fall. Ms. Carmichael’s call made its way from Alabama to a “colo,” or colocation data center, in Hillsboro, where a computer guessed the nature of the call by cross-referencing the phone number against Consumer Cellular records. If the caller had a record of, say, struggling with technical issues, the computer would scan the company’s five contact centers in Oregon and Arizona to find a representative with a strong record of handling such calls.
In this case, not much popped up, so the computer looked for anyone available. It found Adam Brown, 36, on duty inside an 80,000-square-foot building in Redmond. He took the call seated comfortably in a flannel shirt at a spotless, ecru desk.
Adam Brown on the phone with a Consumer Cellular customer
Brown listened as Ms. Carmichael explained her situation. Eventually, he recommended an $80 Motorola Moto E5 Play or a $100 Samsung Galaxy J3. For $20 a month, she could call and text all she wanted with no contract, no activation fees and a money-back guarantee. Data cost extra but the plans were flexible. A smartphone would be a big, unfamiliar leap for her.
“We’ll help you with it every step of the way,” Brown said.
“Every step of the way?”
“If I call back, will I get you?”
“No, ma’am, but anyone here can help you with anything you need.”
“Yeah,” Ms. Carmichael said a bit wistfully, “but I like you.”
If there is still one thing that unites us all, it could be our near universal disdain for airlines, cable companies and wireless carriers. The ire goes nuclear when we must contact a call center. A 2018 report by the American Consumer Satisfaction Index said calling such centers remains a “principal pain point” for consumers.
Consumer Cellular has no brick-and-mortar stores at all, but it has built retail partnerships with the late Sears, Target and now Best Buy, a fact that Ho says may be limiting distribution. But the company has nurtured any point-of-sale gains by minimizing the pain of doing business over the phone. It does so by focusing largely on its employees, who collectively field more than a million calls a month. “In many ways, we’ve been very successful in very unremarkable ways,” says Marick, now 54.
An array of different smart phones on offer to Consumer Cellular customers
Seniors generally dread being transferred, so Consumer Cellular puts new employees through a rigorous all-day, all-week, month-long training boot camp that drills down on every conceivable aspect of customer service, from the hard realities of billing, sales and troubleshooting to the softer skills of how to talk to seniors, many of whom don’t know what it means to swipe or to press a home button.
“To them it’s not a hashtag but a pound sign,” says Angela Jones, a senior vice president with AARP. “Things like that really help.”
How this all plays out is a product of Consumer Cellular’s management team, which is tiny and tight-knit, a group of husbands, wives, family and friends who own houses in Sunriver and take vacations together. Each understands that excellent training means nothing if frontline workers feel exploited and bitter.
Wages start at $12.25 an hour and quickly rise to $14.09 an hour, and overtime kicks in at 32 hours at time and three quarters. There is ample room for promotion, as well as benefits packages, holiday bonuses and 401(k) plans, but the firm also strives to make employees feel a part of something bigger, too.
The day of Ms. Carmichael’s call was a special day at the Redmond center, which sits near the airport in a building once occupied by T-Mobile until Consumer Cellular took it over in 2012. Inspirational quotes from Nelson Mandela and Thomas Jefferson hang on the walls.
Bulletin boards highlight star employees who have the most sales or the least cancellations. One of them, Jenna Noble, spent the greatest portion of her September shifts on “auto in,” which means at her desk, ready to take calls — an exhausting 99.96%.
John Marick speaking at a company employee event in the fall of 2018
To celebrate the company’s 3 millionth customer, employees are heading by bus to the Deschutes County Fairgrounds for a free lunch with Marick and other top managers who have come over from the Portland area to personally thank everyone.
The company is donating $1.5 million to three charities that employees have picked. A few lucky tables get showered with $10, $20 and $50 bills in random cash drawings, as Billy Idol’s “Mony Mony” pounds through the loudspeakers.
After some informal presentations about the old days of scrounging for inventory, and some new tales about dealing with Apple — “You have to have tough skin,” says Damonn Levine, purchasing manager — there’s a spirited round of group singing.
“If you’re happy and you know it, shout 3 million!” (Clap! Clap!)
The crowd hoots and hollers.
“It’s kind of cool that they take time to come over here and do this,” an employee tells me in passing. “It makes you feel appreciated.”
Marick and Pryor plucked the idea for these twice-a-year, company-wide rallies from their days together at McCaw Cellular Communications in Portland, the Cellular One provider that AT&T bought in 1994 for $12.6 billion.
The morale boosters seem to be paying off. It has racked up numerous customer service awards from various tech magazines, including eight from Consumer Reports.
In August it won its fifth JD Power award in a row for excellent customer service. “You haven’t just pushed the boundaries of innovation and customer experience to exceed even your own goals, but you’ve also sustained this work in a highly dynamic and fast-paced environment,” JD Power CEO Dave Habiger said in a video message to employees.
What’s particularly striking, however, is the halo effect this focus has on other aspects of the business.
Consumer Cellular employees at a company event
To illustrate it, Marick points to a series of Consumer Reports surveys that show Consumer Cellular customers overwhelmingly believe their cellphone service is more reliable than AT&T and T-Mobile customers perceive their service to be, which is demonstrably false. That’s because Consumer Cellular uses the exact same towers and the exact same hardware to provide the exact same coverage as AT&T or T-Mobile. Consumer Cellular simply buys the unused bandwidth provided by those bigger companies and folds its customers into one network or the other. When it comes to dropped calls, dead spots or slow connections for all but the heaviest users, there is zero difference.
Wireless companies that have no network of their own are called mobile virtual network operators, and the U.S. has at least four dozen of them. Straight Talk, TracFone, Ting: These are all mobile virtual network operators, a sector that’s expected to corner $32 billion of the market by 2025 with a compound annual growth rate of 7.2%, according to a 2018 report by Grand View Research.
When these operators first emerged in the 1990s, the relationship between the big network providers and the smaller virtual operators was often adversarial, since the federal government had required the larger companies to open their networks to competition. That stipulation expired in 2002, and attitudes around the operators have changed a lot since then.
In 2005 the $41 billion AT&T Wireless/Cingular merger gave the country its first national cellphone carrier, which opened big doors for Consumer Cellular as well. “I don’t want to detract from any of their accomplishments, but they did gain some significant advantages from having a couple of people who worked with them at McCaw end up in positions of influence at the old AT&T Wireless, the subsequent merger with Cingular Wireless and ultimately the current, new AT&T,” says Richard Vedder, who first met Marick in 1990 at McCaw. “That helped their business remain visible and relevant within these large corporations despite their very small size.”
Related story: Consumer Cellular hooks up seniors
The new national clout allowed Consumer Cellular to forge partnerships with national organizations like AARP, whose members receive a lot of the 50 million pieces of direct mail Consumer Cellular sends out annually. As the big carriers raced to expand their networks coast to coast, they found themselves lording over unused bandwidth that the smaller operators were more than happy to subsidize at wholesale rates.
“None of us dreamed the market would be as big as it is now,” says Pryor, now 53. “We got lucky there.”
Mobile virtual network operators still account for a fraction of the total wireless user base, with about 50.5 million subscribers at the start of 2018. AT&T and T-Mobile alone have well over 200 million, and they, too, go after the age 55-and-up market with special reduced-rate plans. (Another operator, GreatCall, specifically targets the senior crowd, as well.)
For now Consumer Cellular is second only to TracFone, owned by Mexican telecom giant América Móvil, the largest player in the reseller class with 80% of the market. Xfinity comes third, though Vedder says it’s likely it’ll overtake Consumer Cellular sometime in 2019.
“That is perhaps the most remarkable aspect of the company that John and Greg built,” Vedder says. “Their nearest competitors are owned by América Móvil and Comcast.”
Despite the heat of the battlefield, mobile virtual network operators form highly profitable revenue channels for the larger network operators, so it’s often in their best interest to have them succeed. Consumer Cellular pays hundreds of millions of dollars every month to AT&T and T-Mobile for the right to move, manage and market what amounts to surplus inventory.
In return, though, the arrangement frees Consumer Cellular to focus on what it does best.
“When you look at what business we’re really in, wireless service is at the bottom of the chain,” Marick says. “It’s really more the selling and servicing to the senior population. So, in theory, if we’re good at that, we should be able to sell any product that they could benefit from.”
While Consumer Cellular will always be a wireless company as long as its executives are, as Marick says, “having fun and see no need to sell,” the company can now leverage its customer service strengths and network access to address issues like elderly isolation and remote caregiving.
For more technologically advanced customers, the company keeps upping how much data they can use for the same rate.
In May Consumer Cellular announced a plan to sell the GrandPad, an 8-inch Android tablet with a stripped-down interface and oversize buttons to help seniors make video calls with family and see pictures of grandkids without the hassles of social media.
It will soon release a wireless hub and collection of home motion-detecting sensors that can alert a loved one if a relative did not get out of bed or went to the bathroom more than usual — both early warning signs of potential health issues.
And in the first quarter of 2019, Consumer Cellular subscribers will be able to call those contact centers to arrange a Lyft. You can watch the driver arrive on a GrandPad.
“One thing that’s true for all of us is that one day we will either be caring for someone or being cared for,” Jones of AARP says. “What they’re doing to help people stay independent is incredibly important.”
As for Ms. Carmichael, she soon seemed more interested in just talking to Brown. She’d never been to Oregon before. They compared the weather. Her nieces were the ones who wanted her to text.
Brown took the opening to gently steer the conversation back to business.
“Well, I don’t move too fast anymore,” Ms. Carmichael said. “I won’t decide right now.”
“That’s OK, ma’am, you take your time,” Brown said. “We’ll be here.”
She paused for a moment.
“I think I’ll go with that Samsung.”
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