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Number Portability: Learnings From Other Countries And Impact On India

Number portability enables mobile phone users to retain their mobile phone number even when they shift to a different service provider. Consumers can take their number with them to a different service provider for better deals, connectivity, plans or coverage in certain areas. No longer will the mobile phone number be owned by the service provider and no longer will dissatisfied customers remain hostages to apathetic wireless service providers. Number portability will have a significant impact in India where the total number of mobile subscribers was more than 450 MM at the end of August 2009.

Experience from Other Countries

While Mobile Number Portability (MNP) is about to be implemented in India in 2010, a number of other countries have already migrated to this plan, and we can get a sense of what to expect from their experience. There are currently over 30 MNP implementations globally. International benchmarks show a high variation in MNP impact across the different markets ranging from 0.36% in Portugal to 14.76% in Hong Kong.

Singapore was the first country to implement MNP in 1997, and since then, UK, most of Europe, the US, Japan, Australia and New Zealand have all introduced and implemented MNP. Many studies have been conducted to measure the impact this had on service providers and customers. Unfortunately, there are no statistics on churn rates available for most European countries. Therefore, focus on the number of portings (switching from one provider to another) is used as a measure of success of MNP. The use of MNP differs widely across countries – i.e. customers reacted very differently in different countries. In the UK, Spain and Italy, more than 2 MM numbers were ported in the last few years. But in countries like Germany and France relatively few subscribers ported their numbers. In terms of percentages of subscribers, Finland, Denmark, and Netherlands show the highest numbers.

The impact of MNP can be seen in different areas as discussed in following sections.

Tariff Transparency

Post MNP, the prefix of a mobile number will not indicate the service provider or network. Customers might have no way of knowing the charges of calls. Thus MNP reduces tariff transparency and customers might be presented with bills that they did not expect. Many countries have adopted ways of informing subscribers that the call they are placing is off network. Acoustic signals may alert subscribers, or verbal announcements could inform them about tariffs when calling to different networks. While acoustic signals will let users know that they are placing a call outside their network, they might not know the call rate and thus the price of the call.

Customer Loyalty

Pre-MNP, customer loyalty programs in many European countries involved granting points to customers that they can use to get a discount on the handset while renewing airtime. This means that unless a customer has very high usage, he/she will not be able to buy a handset at a lower price than a newer customer. However, customers would rather pay a higher price than newer customers to avoid the trouble of having to give up their phone number and get a new one. Post MNP, all this changed - customers could switch to a new service provider, retain their number and benefit from lower prices offered to new customers. The artificially maintained customer loyalty was a thing of the past. In order to keep churn at an acceptable level, service providers had to give existing, loyal customers an incremental advantage compared to newer customers.

Switching Costs

The benefits of switching service providers will accrue to users to reduce their switching costs (e.g. the need to inform others friends and colleges of the changed numbers is eliminated). According to Nera, a study of mobile switching in Korea found that switching costs could be reduced by as much as 35%. The avoided switching costs ranged from USD 21 to USD 60 for personal and business customers, respectively. The lower figure reflects the cost of informing friends and contacts while the latter also includes changing stationery.

Increased Competition

While Number Portability benefits consumers that do switch, there are also benefits to non- switching consumers. MNP results in more competition among the providers of the service. MNP also lowers switching costs, in turn driving up the churn rates, thereby intensifying competition.

Number Portability in India

MNP is expected to be implemented in India by mid-2010. The need for MNP was seen with the large expanding customer base which sometimes has an impact on network quality. While it is eagerly awaited by many, experts do not expect any dramatic shifts from one service provider to another since quality of service and coverage are not significantly different.

According to a study by Monarch Project & Finmarkets, there will be an initial churn of up to 20% of subscribers, which will then taper off. Customers are more likely to shift if a new operator introduces new services or if another operator introduces an aggressive tariff plan. There is an opportunity for VAS players who can tap into this churn and get better revenue shares from operators for providing exclusive content that can drive revenue.

Number portability is expected to level the playing field even more with all operators offering the same kind of plans, reducing switching to other carriers. Even now there are many new entrants in the market who are offering much more competitive rates. Tata DOCOMO provides pulse rate of a second, so if the call lasts for a few seconds, the customer doesn't have to pay for a full minute. Operators are likely to focus on competitive plans/packages for basic services like calling and messaging rather than value added services.

In the US, the FCC does not prohibit service providers from charging a fee to recover the cost of implementing number portability as long as it does not exceed their porting costs. Here in India, the cost of porting has not been decided, but there is no doubt that the subscriber will have to pay a non-refundable porting charge to the operator. As per a TRAI announcement in December 2009, the charge is expected to be not more than Rs. 19.

Operators expect to be able to complete the porting of a mobile number in not more than four days, with the exception of Jammu & Kashmir, Assam, and the North East circles, where it is expected to take up to 12 days. Porting time is expected to come down. This compares rather favorably with other countries where porting time varies from 24 hours (Ireland) to 31 days (Germany), but most countries port in 5 to 7 working days.

Sweden’s telecom regulator implemented the MNP policy in late 2001. The porting rate increased from 2001 to 2006 and decreased in 2007 and 2008. The average is 4% of all subscribers using MNP when they change their mobile operators, but the churn rate in the Sweden mobile industry is higher than the porting rate; more than half of the consumers who switched their mobile operator did not use MNP in order to keep their number.

Impact on Service Providers

  • While competition among service providers will increase and profit margins are likely to erode, operators who have a strong customer base will be able to retain their customers by providing competitive tariffs.
  • New service providers will find it easier to enter and survive in the market by providing competitive rates and Value Added Services.
  • Service providers will also be able retain customer loyalty and build higher company value.
  • The service providers will have better control over the quality of routing.

Impact on Subscribers

  • Subscribers can now use one number throughout their life and have the flexibility of changing service providers if they are unhappy with the tariff, service, connectivity, etc.
  • Subscribers are more likely to get efficient services at lower rates.
  • A subscriber can make a porting request only after 90 days of activation of connection.
  • Subscribers can also change operators within their registered circles only. 

Overall, the impact on some carriers like Reliance (leader in CDMA services), MTNL (first to launch 3G) and Tata Indicom (ranked No. 1 in overall customer satisfaction) will be positive. Others like Idea are not likely to get benefits because of limited target group and are even likely to see a negative impact. Market giant Bharti Airtel will not see any impact either way.

MNP is expected to reduce the cost of switching operators, making the market more competitive. Even though there are both direct and indirect costs of introducing MNP, all cost-benefit studies project that the effect of MNP will be positive overall. Retail prices, termination charges, price elasticity, market shares, as well as entry and investment decisions are likely to be affected with the implementation of MNP.

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