With IT and Communications Minister A. Raja allowing mobile number portability (MNP) in the four metro circles, competition in the telecom sector is likely to intensify further. While CDMA operators have welcomed the move, some GSM operators have opposed it. tele.net presents the views of industry associations and experts on the issue…
How will mobile number portability impact the dynamics of the wireless sector?
S.C. Khanna: MNP is an important tool for ensuring effective competition and improving quality of service (QoS) in the mobile telecom service sector. MNP will ultimately benefit the subscribers, who will be able to retain, at a reasonable cost, the same number while switching between service providers. The Association of Unified Telecom Service Providers of India welcomes DoT’s decision to introduce MNP in Delhi, Mumbai, Chennai and Kolkata.
Usha Rajeev: MNP will shake up the market to the extent that customers will no longer stick to an operator only to save themselves the trouble associated with changing mobile numbers. MNP will be more relevant to post-paid customers. Prepaid customers, who account for about 80 per cent of the Indian mobile subscriber base, are virtually already “portable” as they churn frequently amongst operators.
Operators will give greater attention to QoS, customer service and value propositions in order to retain existing customers and attract the high-value customers of other operators. Improving QoS, especially in dense coverage areas like metros and large cities, will be a challenge as it will entail significant additional investment in infrastructure. Improving customer service will also require significant investment in training of customer service agents. An operator would have to adopt robust processes to succeed as a differentiator.
All in all, MNP opens a “Pandora’s box” of challenges that the operators will have to face to ensure that they are able to continue the growth story.
T.V. Ramachandran: The key intention behind introducing number portability is increasing competition to provide greater benefits to subscribers. MNP is important both as a faci-litator of consumer choice and as a catalyst for effective competition. But it has to be kept in mind that competition in the Indian mobile segment is already very intense, as a result of which the tariffs are the lowest in the world. There are already seven to eight mobile service providers in the four metros where MNP is proposed to be introduced first. On the other hand, in Category B and C circles, the number of mobile operators is less and hence the choice for subscribers is limited. Therefore, MNP should be implemented concurrently in all service areas and for all users, mobile and fixed.
Another aspect of market dynamics that needs to be kept in mind is that GSM accounts for about 75 per cent of the total mobile subscriber additions. Thus, in a fiercely competitive market, GSM operators enjoy high customer preference and are happy to embrace number portability. We expect that more and more subscribers will opt for GSM services.
Prashant Singhal: MNP has been long awaited in the sector. And there is reason to believe it will heighten competition in the telecom industry. QoS will improve as service providers will make a greater effort to prevent customers from switching to competing service providers. The new policy could be the harbinger of a unified telecommunications regime, leading to the “death of distance” and ultimately improving user convenience.
MNP will strongly serve consumer interests by delivering benefits such as improved business and professional productivity. It will also lead to easy dialling and improve call quality by reducing traffic congestion, eventually accelerating the growth of the telecom sector.
How is MNP going to be implemented for CDMA operators?
S.C. Khanna: It will be implemented in India in the same way as it has been in the rest of the world. MNP has been implemented in the US, Australia and other countries where there are CDMA players. The technicalities are being worked out, which is why the government has given time up to December 2008.
Usha Rajeev: The implementation path is yet to be chalked out ?? both for GSM and CDMA. But for CDMA, one of the additional issues that needs to be addressed is unlocking handsets. CDMA customers who wish to port to another service provider will find that the cost of a new handset is a hidden barrier to portability. If CDMA subscribers opt for GSM, even unlocking the handset will not work and they will need to invest in a GSM-compatible handset, unless they have a dual-system handset. Global precedents lie on both sides of the spectrum.
T.V. Ramachandran: As of now, although GSM subscribers are free to switch service providers, there are some barriers in the case of CDMA subscribers. CDMA handsets should not be locked. India still does not have the concept of unlocked CDMA handsets. CDMA operators invariably lock their handsets, as a result of which their subscribers become captive. In the US, in response to a class action, a CDMA provider agreed to unlock all handsets so that they could be activated by competing service providers. Therefore, in the interests of consumers in India and to ensure smooth implementation of MNP, DoT and TRAI should immediately make CDMA operators unlock handsets.
Prashant Singhal: There are two schools of thought on this subject. One section of the industry believes that number portability is related to the telephone number of the user and not to the technology or platform of the wireless network. The other section suggests that whereas GSM subscribers will be free to move from one service provider to another, CDMA subscribers will have potential issues to face. Industry reports suggest that since CDMA operators invariably lock the handsets, subscribers are restricted to their service provider.
The consumer benefit of MNP should be extended to all services and consumers, and thus fixed wireline and fixed wireless domains should also be brought within the purview of this regime.
What is the international scenario with regard to mobile number portability?
S.C. Khanna: Number portability is there in the Arab countries, Pakistan, Australia, European countries and the US.
Usha Rajeev: MNP exists in different avatars globally. Apart from mobile local number portability, which has been proposed in India, there are other types of portability including service portability ?? retaining the same number while switching from one service to another service (for example, from fixed service to mobile service) ?? and geographic location portability ?? retaining the same number while moving from one geographic area to another (for example, moving from one circle to another in India).
MNP was introduced globally for the first time in Singapore. Since then, more than 25 countries have mandated local MNP, including most European countries, the US, Canada, Australia and several countries in the Asia-Pacific. It was recently mandated in Sri Lanka and Pakistan.
T.V. Ramachandran: In most countries, MNP was implemented after mobile penetration exceeded 50 per cent. In fact, in many countries, mobile penetration was about 80 per cent when MNP was introduced. Further, nearly all countries introduced MNP only after fixed number portability (FNP) was introduced. There are also the examples of Switzerland and the Netherlands where FNP and MNP were implemented simultaneously.
Consumer response to MNP in countries such as the US, the UK, Australia, Singapore and South Korea has been rather muted. MNP was introduced in the UK in 1999. Till January 2007, merely 7 per cent of the subscribers had made use of the regulation. The percentage was much lower in countries like France, Germany and Portugal.
The experience in other countries also indicates that customer benefit from increased competition has been limited. Subscribers have not embraced number portability to the extent it was expected.
Prashant Singhal: The experience from mature markets suggests that MNP is unlikely to be a resounding success in the short term. The major hindrances to the successful adoption of number portability include the porting fee charged by operators in some countries as well as the time taken to port a subscriber successfully. For instance, only 1.5 per cent of mobile users in the UK made use of MNP in the first year of its introduction, while 90,000 of the 11 million subscribers did so in Australia. Other West European countries also had very low uptake in the short run.
In India, there is no single agency to administer phone numbers centrally, like there is in the US. This might cause additional delay in MNP implementation. One must remember that the US took seven years to implement MNP.
What are the costs involved in implementing mobile number portability?
S.C. Khanna: Normally, MNP comes at a very reasonable cost to the consumer. Every country has its own way of implementing MNP. For example, in the UK, a Vodafone connection comes with a free phone if the buyer agrees not to switch to another network for a period of one year.
Usha Rajeev: The direct costs for operators involved in implementing number portability include cost of infrastructure and ongoing operational costs. The operators will need to upgrade their infrastructure to enable appropriate rerouting of calls made to subscribers who have switched networks. The upgrades, having both network and signalling elements, include hardware and software costs.
Also, operators will need to invest in setting up an MNP administration database, which can either be centrally administered and accessible to all operators, or be operator specific. The former is a global good practice. The investment will include the cost of initial development and set-up costs as well as the ongoing cost of operation and maintenance. In some countries, the central number portability administrative centre is managed by a third party, and the costs are shared by all the operators. Global precedents vary on operators being allowed to recover such additional costs from the subscribers.
In certain countries, including the US, when number portability was implemented, the regulators allowed local operators to collect a small monthly charge for a period of five years from subscribers who were switching networks. This was done to help operators cover the cost of implementing MNP. In fact, the US allowed the recovery of costs even from customers who had not changed service providers, on the basis that even such customers benefit from number portability when they call subscribers who have switched. Globally, regulators that allow cost recovery, base the framework on fundamental principles that mandate cost minimisation, efficiency and competition.
T.V. Ramachandran: Portability needs a complex set of back-end actions. The MNP set-up and initial oneoff costs can be categorised as follows:
Prashant Singhal: A porting charge is applied when a customer switches to another operator. This could be a deterrent for price-sensitive customers. Switching between CDMA and GSM operators might also result in the additional cost of changing handsets.
Service providers, for their part, might incur additional porting as well as non-porting costs. These include management and logistics expenses, the cost of upgrading switches and infrastructure, and marketing costs related to advertising, promotion, customer service and value-added services. Operators with low market share might find it advantageous, but the risks involving operational, regulatory, revenue management and intercarrier costs are crucial and need to be appropriately addressed.
What are the key issues that need to be addressed before MNP is implemented?
S.C. Khanna: There are no issues.
Usha Rajeev: Number portability promotes competition and serves customer interest. But the devil lies in implementation. A transparent and complete regulatory framework for number portability is the most critical requirement for successful implementation of MNP. The key issues that need to be addressed include the technical and operational framework for implementation, responsibility of the donor and recipient networks, administration of network portability databases, cost determination and recovery from customers and amongst operators, and the framework and path for other forms of number portability and customer choice. These will be critical elements which the operators will need to consider while implementing the initial phase of local MNP. The regulator will also need to review and assess the impact on current regulatory levies and the interconnection usage charge.
While the regulator will lead in the setting up of the framework (including the time-frame), the differing time periods taken for implementation by different operators, the platforms chosen, and the interoperability of platforms will also be key in implementation. In particular, the mechanism chosen for the portability database and the ongoing maintenance and operation work can be the make-or-break factors. These will determine whether MNP implementation results in seamless, “within a couple of hours” portability and continued service to the customer, or a painful process involving several days and lost calls and messages.
T.V. Ramachandran: MNP will require proper planning and implementation of a complex set of backend processes. For example, the issue of proper implementation and maintenance of the central database will require a lot of attention. This is vital to ensure that call details are not lost and all calls are completed successfully.
Another issue linked to the central database is that of subscriber verification. This will have to be addressed in an appropriate manner to ensure that subscriber details are not lost when a user switches from one operator to another.
In India, 85 per cent of the subscriber base is prepaid. For prepaid subscribers, the issue of transfer of balance will need to be looked into. The unlocking of CDMA handsets is another problem area.
Prashant Singhal: With the advent of the MNP regime, telecom players will have to focus on customer retention. Consumers could be retained through contracts guaranteeing minimum revenues and retention for a certain time period. Telecom companies will have to pay special attention to the distribution channels that will need to be upgraded to handle porting requests. It is crucial that the time lag between the request and actual transfer is minimal. In certain developed markets, the delay is as long as two weeks. Undoubtedly, service providers will need to draw and redraw some aspects of their business plans and accordingly plan a rollout map for number portability.
