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Tele Data

Mobile Subscribers Yearwise comparision

TRAI's consulation paper on MNP - Cost-benefit analysis of introducing mobile number portability

August 15, 2005

The Telecom Regulatory Authority of India (TRAI) recently brought out a consultation paper on mobile number portability. Is the Indian telecom market mature enough for introduction of this facility? What are the likely benefits and potential bottlenecks of such a move? Industry experts give their perspective...

Is the Indian telecom sector ready for number portability?

Nilangshu Katriar: With a teledensity of 9.26 per cent and an annual growth in mobile services of almost 55 per cent for the year ended March 31, 2005, the Indian telecom environment is just about right for the introduction of number portability. The market size is appropriate to throw up implementation risks and additional costs in manageable proportions for it to be evolved as an acceptable operational feature.

However, having said that, based on the experience of other mature economies, porting is bound to be yet another case of "hype exceeding expectations". Introduced with hopes of more competition in many markets, the real effect on competition is muted (in the first year of introduction in the UK in 1999, only 1.5 per cent mobile users ported their numbers; in Australia, only 90,000 of the 11 million users did so; in the US, where it was introduced in 2003, it has not been a huge success). While some consumers are using number portability, they are not doing so in large numbers.

Mohit Saraf: Yes, the Indian market is mature and ready to accept number portability. Unfortunately for the moment, though, the technological challenges incumbent in such a scheme exclude portability in fixed lines. The readiness of the market is best indicated by the consumer demand for number portability. TRAI, in its consultation paper, records that "30 per cent of mobile subscribers are likely to shift to an operator offering better services, if given the option". Though the teledensity in India is low compared to other countries that have implemented number portability, the size of the market (mobile subscriber base of no less than 57.4 million) and the impressive growth rate (55 per cent for mobile services, and 122 per cent per annum for WLL(F)) speak volumes for the readiness and, importantly, the eagerness of the market to implement number portability.

Archana Sasan: The Indian telecom sector is ready to discuss issues relating to number portability. It is difficult to say whether the sector per se is ready when we still have service providers who are not happy with the very concept. Yes, all those concerned are ready to discuss the issues relating to the introduction of number portability, which is the correct approach, as India is a part of the global village and hence needs to keep pace with other countries with respect to technological advancements.

It is pertinent to note that operator and service portability have been implemented in various countries. Though some may suggest that the facility is a feature of mature markets, it has been implemented in countries where cellular penetration was not very high. Therefore, it is certainly not too early for India to start the groundwork for implementing number portability. The Indian telecom market has matured considerably since the opening of the sector more than a decade ago. If implemented in a proper manner, number portability can provide many benefits to the sector, the operators and, most importantly, the consumers. The concerned authorities could consider introducing number portability in a phased manner since, being a timeconsuming process, many issues can only be resolved once implementation is under way.

Mahesh Uppal: Yes. The country has close to 45 million lines and several operators. Number portability will make competition more vigorous, which should be good for all.

What are the key benefits of introducing number portability?

Nilangshu Katriar: Customers will have the option to move from their existing operators to other favoured service providers while retaining their telephone numbers. There will be further consolidation of subscribers by service providers, and the wireless industry will benefit from at least a small net inflow of landline customers as wireless mobile number portability may remove a potential barrier to wireless substitution (assuming deployment of wireline to wireless).

Mohit Saraf: Implementation of mobile number portability would be an important step forward as it bridges the chasm between the consumer and choice. Presently, dissatisfied consumers are deterred from changing service providers because of the costs and inconvenience involved in changing numbers. For operators, the writing is on the wall –­ "compete or perish". Currently, the sector is driven by consumer acquisition; mobile number portability will ensure the focus is changed to consumer retention.

Archana Sasan: Number portability would increase competition and may reduce prices (over a period of time) of the services being offered. Competition between service providers could also result in improving the quality of services. While migrating from one service provider to another, consumers would not need to inform their potential callers about the change in their number. This would be of immense use to travelling professionals and businessmen. Further, it would hasten the convergence between wireless and wireline services. New entrants (with a strong financial background) in the telecom sector would be able to compete on an almost equal footing with operators who have a large existing market share. As we are all aware, a competitive market generally augurs well for the consumers.

Mahesh Uppal: People are generally reluctant to change their operators even when they are unhappy with the service or its price. This is usually because of the hassle of having to inform their friends and associates of their new numbers. For businessmen, these costs can be very high and can be compounded if you have to reprint documents and stationery. With number portability subscribers can keep their original phone numbers and take their business most conveniently to the operator who they perceive to be providing the best quality of service and value for money.

What are the disadvantages, if any, of number portability?

Nilangshu Katriar: There is general agreement that number portability will make the market more competitive. However, telcos must factor in associated non-porting costs such as promotions and advertising, customer services and value-added services required to keep up with enhanced competition. These costs will most likely increase in relation to churn and competitive impacts. But then again, they might increase the churn while having meagre or no impact on profitability. Successful deployment will be further complicated by transactions between carriers (for example, roaming partners) and business partners (for example, in the supply chain and distribution chain partners, and such integral third-party vendors including porting clearing houses, if deployed).

Mohit Saraf: Consumerism, in addition to choice, hinges on transparency. With mobile number portability, identification of a number with a service provider would no longer be obvious to a consumer. Thus, a consumer would not know which service provider he is dialling and thereby not know call charges in advance, resulting in a loss of tariff transparency. This can be rectified by use of either a voice message or a display on the phone. Secondly, SMS has been the catalyst for the impressive growth in the mobile sector. The technology for porting calls in some cases may create a problem in the porting of messages. This technical hitch needs to be appropriately addressed.

Archana Sasan: There do not appear to be any apparent disadvantages. There are, of course, several important issues that need to be addressed. Introduction of number portability would require huge investments by operators. Primarily, an interconnect exchange-cum-inter-carrier billing system would need to be set up for routing all inter-network traffic. Operators would also incur set-up and maintenance costs to provide portability in their networks, call conveyance costs associated with delivering calls after the introduction of number portability, and customer transfer or porting costs incurred each time the customer ports its number to another service provider. Operators would have to spend an extra 10 per cent on infrastructure to implement number portability. Operators who wish to introduce 3G technology are already grappling with the huge investments this would entail and would need to prioritise their investments. Further, these huge investments could lead to an increase in the cost of services, which would have an adverse impact on the teledensity. One important decision would be whether determination of the cost of such a facility should be a regulatory decision or a decision taken by the association of service providers or individual operators.

Mahesh Uppal: Customers may tend to be too ready to move from one service provider to another if the costs are too low. This could raise costs of administration, especially if the revenues of operators do not increase proportionately. However, if the customer has to pay too high a price for it, the benefits of number portability will vanish, since only a few would be able to afford it.

What are the key obstacles in the introduction of number portability in the Indian scenario?

Nilangshu Katriar: Number portability promises significant upside potential for some operators, but an even greater downside for all if the risks (regulatory, revenue assurance, operational and costs, inter-carrier and customer satisfaction) are not aggressively managed. The operators will have to strike a delicate balance between ensuring thatdeparting customers make good on their contracts on the one hand and on the other, avoiding the perception of holding dissatisfied customers hostage by delaying porting. Since most service providers have already invested in the bulk of their networks, further changes in network topology will exert extra investment pressure on them. Further, business rules will have to be stringent to avoid financial losses and descent into legal entanglement.

Mohit Saraf: There exist some key obstacles in the path of mobile number portability. A database of ported numbers is an essential technological requirement. The choice between on-switch and off-switch should be based on the costs involved. In addition, the vesting of control over such databases is a crucial consideration for the regulator, as the inefficient service provider (donor network) would be interested in deterring its customers from shifting. Any such foul play should invite heavy penalties. The regulator also needs to devise an effective cost-sharing mechanism for porting costs in order to prevent the donor network from blocking customer movement, and at the same time not permit recipient networks to use predatory practices. These obstacles can only be overcome if TRAI ensures effective policing.

Archana Sasan: There are certain key obstacles that would need to be examined before introduction of number portability. TRAI and the government would need to examine the technical solutions to be adopted for implementation of the facility and study a range of issues including roaming, operational support system modifications, call charging arrangements, interconnection between networks, support of number portability within and across mobile technologies, cost effectiveness of different solutions, etc. One of the basic issues would be to ensure that growth in teledensity is not affected by any undue increase in network costs that may increase the cost of services. Further, the National Numbering Plan would need to be modified for operator portability to be feasible, which could be a huge exercise in itself.

Administrative arrangements would also throw up peculiar issues, for instance, the setting up of a centralised or distributed database and an interconnect exchange among all operators, division of the operational and maintenance costs, issues involving an inter-carrier bill clearing house, etc. Disputes over technical and regulatory issues surrounding the interconnect exchange may have a significant bearing on stalling the implementation of number portability. Many existing operators are not keen on introducing the facility and their strong reluctance in this regard could prove to be a major obstacle.

It should also be noted that the introduction of number portability in certain countries was preceded by a series of lawsuits as many issues were left unresolved. It should be kept in mind that complex or flawed procedures would act as a bottleneck in the implementation of number portability. TRAI and the government should address the key challenges before introducing the facility.

Mahesh Uppal: There are costs associated with the technical implementation of number portability. New hardware and software will be required as will the creation and maintenance of databases that will keep track of which operator has the customer with a particular number. There can also be some issues related to tariff transparency, but these should be surmountable, if TRAI and industry associations can work together.

What will be the impact of number portability on consumers, operators, etc.?

Nilangshu Katriar: There will be net winners and losers within the industry as disgruntled customers will move rapidly on to other operators. The overarching marketing strategy for operators will be to maximise the acquisition, at an "acceptable cost" per gross subscriber addition, of "quality customers" while minimising the loss of "valued customers".

But while this drama plays out in the marketplace once number portability is implemented, below the surface there will be even greater activity to keep the complicated porting process afloat. What is important is that even as its success may be questionable, many countries initiated and accepted it as a necessary step in the maturity of any telecom market life-cycle. Successful porting will require technology changes, new and redesigned processes, rigorous revenue and operational assurance controls, and proactive measurement of regulatory compliance.

Mohit Saraf: Implementation of number portability will impact consumers and operators in many ways. For the shackled consumer, the entire gamut of service providers would be open to him. However, there could be costs for such porting services. Increased choice could also lead to increased solicitation from service providers, thus inconveniencing consumers, as our experience with banking service providers tells us. For service providers, quality would have to become the mantra for success and growth. For the regulator, there will be enhanced responsibilities.

Archana Sasan: The impact of the proposed introduction of number portability on the consumers will be positive in the long run. The consumer would be able to shift from one operator to another without worrying about changing the number. The increase in competition would lead to the consumer getting better and perhaps cheaper services. For the operators, on the other hand, new entrants who have the ability to make the financial investment would be able to attract existing customers of other operators by providing better services. Existing operators would not be able to take their customers for granted. Quality of services would improve. Though infrastructure costs are expected to increase for operators and may in turn increase tariffs, in time, the facility would help in reducing tariffs and result in better services.

Mahesh Uppal: Consumers should be able to reward and punish operators depending on the quality of service. Operators will have to improve their systems to ensure that service quality is monitored carefully. The more enlightened operators will see this as an important step towards market growth since competition reinforces customer confidence in the system. This inevitably means more users as well as usage.


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