Mobile number portability
The Authors
Ewan Sutherland, Visiting Professor, GSTIT, Brussels, Belgium.
Acknowledgements
Presentations based on this material were made to the Communications Users Association of South Africa (CUASA) and to a seminar at the University of Strathclyde. Comments and questions from both audiences were useful in revising the text.
Abstract
Purpose – The purpose of this paper is to present a review of the experiences with the implementation of mobile number portability (MNP).
Design/methodology/approach – The paper presents a structured review of global experiences from markets where MNP has been introduced.
Findings – The paper finds that results have been disappointing, apparently arising from complex regulatory processes and sub-optimal implementation.
Research limitations/implications – The paper has a lack of sufficient analysis of the effects on competition.
Practical implications – The paper highlights the need to measure national performance against global best practice and for NRAs to share experiences.
Originality/value – The paper is much broader in scope than previously published work in the area of MNP.
Article Type:
General review
Keyword(s):
Mobile communication systems; Regulation; Competitive strategy.
Journal:
info
Volume:
9
Number:
4
Year:
2007
pp:
10-24
Copyright ©
Emerald Group Publishing Limited
ISSN:
1463-6697
Introduction
Mobile number portability (MNP) allows customers to retain their telephone numbers while changing to a different mobile network operator (MNO). Although ignored or overlooked in the creation of mobile telecommunications markets, it has become a feature added by regulation, considered necessary to:
- reduce switching costs;
- facilitate consumer choice; and
- ensure effective competition on retail markets.
However, public authorities have faced stiff resistance from MNOs in many countries, greatly reducing the effectiveness of its implementation and diminishing the improvements to competition in mobile markets.
For fixed networks, number portability (NP) was introduced as part of the so-called ladder of investment, allowing operators gradually to build out networks from the international gateway, to major switching centres and finally to local exchanges in order to reach individual customers. The ladder was supported by a number of regulatory measures including carrier selection (CS), carrier pre-selection (CPS) and NP. New entrants had to obtain fresh blocks of numbers and also required portability of pre-existing numbers, considered essential to allow customers to change supplier with the least cost and inconvenience. This was especially important given the perception of customer inertia – that there was a reluctance to move away from traditional monopoly suppliers.
For mobile markets it is less likely that MNP is being introduced to deal with a monopoly operator, more commonly it involves two well-established players and a third and perhaps a fourth smaller operator(s). MNP is considered very important for new entrants, if they are to obtain a significant market share in a reasonable period of time, especially where a large proportion of potential customers already has at least one mobile number. In developing countries the absolute number of customers already possessing a cellphone is less important than the extent to which existing operators have been locked in the higher spending customers and especially subscribers.
Once consumers and businesses have access to cheap, timely and effective MNP, they are in a significantly stronger position to negotiate deals with their existing operator or with a rival. The threat of competition may be sufficient to obtain better terms. Operators with strong brands can use MNP to attract customers from rivals. It is not that MNP causes customer to churn, rather it frees customers to express their latent dissatisfaction with the prices and quality of their current providers.
The approach taken by many operators to regulation has been characterised as a “3D strategy”, that is deny, delay and degrade (Sutherland, 2001). Operators first deny the need for the measure, usually claiming markets are fully competitive, then draw out the discussions in order to meet the “special” requirements of a given national market and finally create administrative and marketing obstacles to its use, to the point of inhibiting anyone who is less than doggedly persistent.
In most cases the legislation sets out only the principles and broad terms of portability, leaving to the NRA and the operators the detailed implementation. These efforts at light-touch regulation have frequently resulted in extensive and somewhat repetitive national debates about how MNP should be administered and concerning the technical details. Many MNOs have used these discussions as a means to undermine and, in some cases, entirely to frustrate the objective of the legislation. Moreover, the NRAs have been unable to use their regional networks to contain these problems and to keep close to global best practice. Instead, they have acquiesced in very specific national implementations that appear to offer no obvious consumer benefit over neighbouring countries and are often appear worse.
While the introduction of MNP has been underway, there have also been significant technological changes, not least in the introduction of third generation (3G) mobile networks and voice over internet protocol (VoIP), with the prospect of widespread deployment of next generation networks (NGN). This reduces the importance of traditional telephone numbers and puts more emphasis on the use of internet names. There has also been a growth in services offering telephone numbers at remote locations, for example, in the city of New York. Some of these also allow nomadic access, through VoIP, wherever the customer happens to be.
MNP can cause consumers to be unaware of the additional charges they incur for calling other mobile networks, mistakenly believing that a call is on the same network, and thus reducing the potential consumer benefits. Indeed, MNOs may have increased their termination rates in order to exploit this, with potentially negative effects for mobile customers.
This paper reviews the value of numbers and of the porting of numbers. It then reviews the contributions from economics, followed by the technical and operational experiences of implementation from a range of countries. Finally conclusions are drawn.
The value of numbers
The value associated with a telephone number, fixed or mobile, arises from the customers who make and receive the calls. It is they who have propagated the numbers to:
- customers and suppliers;
- colleagues; and
- family and friends.
It is their caller identity that people recognise and use to accept the call or to read the text message. An increasing number of customers actively filter incoming communications to avoid unsolicited calls, spam over IP telephony (SPIT) and attempted fraud. There is also growing use of instant messaging (IM) with presence management. Thus identifiers are of greater importance and value to customers. Names in personal or commercial directories allow people to initiate calls. In these ways, customers generate the inbound and the outbound traffic that creates revenue for the operators.
There is a test case of marketing calls made to randomly generated numbers, which frequently creates considerable resentment from recipients. So much so that a Do Not Call database was created by federal legislation in the USA, allowing millions of people to make their preference not be disturbed known to direct marketing companies. Whatever their benefits to the caller, unsolicited random calls have a significant and negative value to a great many recipients.
In some countries operators have used the initial digits of their blocks of numbers as a marketing tool in ways unintended by the public authorities. By charging high rates for calls to other networks and low rates for calls remaining on their own network, operators endeavour to create an incentive for groups of customers to be on the same network. By promoting “their” code number as part of the brand, they try to strengthen this, reinforced by high mobile termination rates.
The value of numbers and the sources of that value are important in reaching any decisions about public policy, in particular in assigning any value to operators, since it is they who have demonstrated such clear opposition to MNP. Numbers are merely indicators of customers, often in a specific role (e.g., as a colleague, friend or parent), and thus the value belongs to them as creators.
The value of portability
Demand for number portability is potentially high, since there is a reluctance among customers to switch providers without being able to keep their existing number, because of the associated costs. For example, the reprinting of business cards and other stationery, including product packaging, the repainting of signs, vans and trucks. Most of all there is the potential loss of business.
People have moved from dialling numbers to using numbers that have been previously stored in databases in electronic devices. Consequently, it is necessary that the person changing his or her number persuade all those who have stored that number to update the stored entry in their mobile phone handset, personal digital assistant, electronic mail client, electronic diary and possibly several of these. This is a higher threshold of interest than, say, replacing a business card in a Rolodex, and one that will often not be reached or will be postponed, then forgotten.
The benefits of MNP for corporations are considerable and diverse. Over time, many individuals and departments acquire their own mobile phones on different networks and with different contracts, some are paid directly by the firm, while others are reimbursed from expenses. With the possibility of consolidating this spread of contracts the corporation can gain considerable negotiating advantage. MNP is a pre-requisite for such negotiations, unless employees are to be told to change their numbers.
Once consolidated onto a single operator it becomes possible to obtain traffic data that can be subjected to thorough analysis, which in turn reinforces the ability of the corporation to negotiate with the operators. It also permits greatly improved financial control over expenditure, in particular the identification of heavy and exceptional users. Additionally, it becomes possible to check for errors on all bills, usually resulting in quite significant further savings.
In the case of small businesses and sole traders, MNP presents very significant advantages. Where a dressmaker, painter, plumber or taxi driver has given their number to customers and has advertised it, however informally, then any change of number entails a potential but significant loss of business. In particular repeat business or personal recommendations will become difficult or impossible. Thus, even if the customer is using a pre-paid service, it is important that the number be portable in order that the customer not be locked out of the benefits of competition or forced to trade off a better wireless offer for loss of business.
For individuals, switching between operators involves less tangible costs and savings. The concerns of most consumers are limited to a modest number of family and friends. Some will only too happily give up a number in return for an incentive. Given the offer of an apparently “free” top of the range handset, many will happily accept the inconvenience they create for others, nor will they question the higher call charges.
MNP also has benefits for operators. It can be an opportunity to increase market share and, in particular, to target high-ARPU subscribers. MNP aids operators in managing churn rates, by offering customers deals that play to their brand strengths (KPMG, 2003).
Most countries have ranges of numbers for value-added services on fixed networks, notably for toll-free or freephone. These have been developed into substantial markets, both for customer care and marketing services, closely related to outsourcing, with traffic being routed over international networks to distant call centres. Number portability enhances competition in the supply of such services. Competition between operators drives down the cost and improves the quality of these services, encouraging companies to use toll-free numbers and allowing the market to grow (Viard, 2004).
In terms of public policy, the value of portability is in improving competition in the market place, both between established players and in allowing new entrants onto the market. This is measured, in the medium term, by churn rates and by lower market concentrations.
Thus for each group of customers there is value, often considerable value, in being able to port a number to a different operator.
The economics of MNP
The need to change number when moving to a different operator creates a switching cost that reduces consumer welfare. It also has anti-competitive effects, by deterring market entry and by preventing price reductions, since customers would be less likely to take advantage of these offers that, in turn, reduced potential consumer welfare. Additional costs arise from the negotiations and for the technical systems to implement MNP, which must be met from one source or another, again reducing potential consumer welfare. These need to be weighed against the high customer acquisition costs.
Aoki and Small (1999) made an initial analysis of the economics of NP on fixed networks. They argued that in a well-developed telephony market, with high penetration rates, it would be possible for consumers to receive less surplus following a reduction in the cost of switching between carriers as a result of the introduction of number portability. They also noted the need for empirical studies including a demand side analysis of consumer valuation of portability and information on the costs of implementing portability, and the difference that this would make to current levels of switching costs.
A property rights approach to fixed NP was explored by Gans et al. (2001). They argued that NRAs, rather than viewing NP as a traditional cost allocation problem with a technological choice should give consumers ownership of “their” phone numbers with a right to portability, encouraging them to search for socially efficient outcomes. Their proposed solution both freed the regulator from making difficult assessments and made consumers the main beneficiaries of the flow of social rents. It also retained the incentives for maximum network competition. However, the property rights created by operators over their network codes need also to be considered.
Gans and King (2000) drew attention to the problem that MNP reduced the information value of the “operator code”, creating the possibility that a caller would not know that an off-net call was being made and that a termination rate fee was being incurred. They also looked at the likely effects of signalling to the caller that a call was not on net. Buehler and Haucap (2004) looked at a framework for costs where there is incomplete tariff transparency.
These issues have also been considered by the European Regulators Group (ERG, 2005) in some detail, having surveyed 23 European NRAs. They identified the risks for callers and ported customers. In particular, they commented on the risk that warning messages might cause callers to discontent rather than complete the call. In the near future it would be necessary consider similar issues for video calls.
Haucap (2003) has also applied the property rights approach, primarily to the initial assignment of numbers. He addressed the rights of owners of numbers to port to alternative operators, considering the relative merits of payment for the service by consumers and by operators. He argued that, given the information and incentive problems, it would be more appropriate to require operators to pay for the introduction and implementation of NP.
Buehler et al. (2005) address the causes and effects of MNP in Europe. They noted the considerable variations and low levels of portings reported by the European Commission compared with economic forecasts. They also considered the charges and the administrative delays.
Lyons (2006) has argued that MNP caused a significant increase in churn rates and also in average retail prices. His analysis attempts to account for the staggered introduction of MNP using an econometric analysis of international time-series, cross-section data in order to estimate the average effects of MNP.
MNP cannot cause churn, since all it does is to free customers to express their dissatisfaction by switching to another operator. Thus, at worst it has a catalytic or enabling effect. The extent of any increase in churn is likely to depend on the perceptions customers about prices and quality, the pre-existing levels of dissatisfaction and the ease of portability. Consequently, it will be necessary to consider survey results on the quality, coverage and prices as perceived by customers and to relate these to the introduction of MNP. Moreover, given the apparently variable quality of MNP it would appear to require a “blind shopper” test to determine the quality of MNP before further analysis is possible.
The approach of many economists to the problem of MNP has been overly theoretical and assumed it was an end in itself. In particular, they have ignored the games played by some operators to distort and to nullify MNP in practice. They have tended to take a somewhat simplistic view of the availability of MNP, rather than the reality of the range of consumer experiences, in which MNP is often expensive, ineffective or unobtainable. The ultimate test has to be the extent to which markets become more competitive, measured in reduced market concentrations, reduced prices and improved quality.
The technology of MNP
The International Telecommunication Union (ITU, 1998a, b, c) adopted a supplement on the use of number portability to its recommendation on numbers. Detailed technical specifications have been adopted by the ITU (1999), ETSI (1998, 1999) and the 3GPP. These describe implementation using a number of different techniques, all requiring an intelligent network, but each handling calls in a slightly different manner and with different costs (see Figure 1).
The choices made by the public authorities vary considerably among countries (see Table I). However, there are only a few suppliers of the underlying systems, primarily CMG Logica, Syniverse and Telcordia.
A report for the Conférence Européenne des Administrations des Postes et des Télécommunications (CEPT) advised that MNP be implemented quickly, but allowing time to ensure the processes worked efficiently, stressing the various features necessary to make the service workable for customers (ETO, 2000). A subsequent report from the Electronic Communications Committee (ECC, 2003) on implementation found that operators had been involved in developing the detailed specifications and in some cases the high-level specifications. It described a careful balancing of factors including cost, convenience, simplicity, speed, reliability and robustness – in which each country reached a different outcome – in order to ensure that the administrative process did not adversely affect the success of mobile number portability. Different approaches to the apportionment of costs resulted in a wide variation amongst countries.
The diversity of technical solutions appears to be very much greater than required by the nature of the problem. The range of solutions arises from the complex national debates about how to address MNP and from the efforts of MNOs to find excuses to delay implementation and to raise the costs. The scale of this inefficiency is very difficult to evaluate.
The burden of regulation
At the time of the creation of mobile telecommunications services no thought was given to the provision of MNP. Indeed each operator was allowed to create its own ghetto for customers, which they then protected by means of high termination rates and lower on-net call rates. Only much later were the low levels of competition and the high switching costs seen as problems that had to be addressed, by the introduction of MNP and other measures.
The lack of competition in mobile markets can be seen in price shadowing, poor quality of service in collusion and in prices that are unrelated to costs. Given the constraints of spectrum, it is not considered easy or practicable to introduce additional operators, so that more direct interventions are required. MNP is considered a prerequisite for further effective market entry.
The ability of customers to switch suppliers is a sign of a properly functioning market. The obstacles to switching include the need to inform people of a new number and any contractual commitments, plus customer inertia. Where different technologies are used, then the purchase of a new handset can also be an obstacle, though operators are usually so keen to acquire customers that they will reduce the cost by cross-subsidies. In New Zealand, where the two operators use different technologies anyone contemplating switching, must buy a new handset. In Japan, it is not the differences in the network technologies, but the close binding of the handset to the interfaces for value-added services, that requires a customer to change handset when changing operators.
The Telecom Regulatory Authority (TRA, 2003) in Bahrain found that it would be counter to its goal of increasing benefits to customers and would be unfair to businesses if they were required to incur costs because NP was not available. It observed that appeals by mobile operators against the introduction of MNP in other countries had consistently failed and that competition commissions and courts of appeal had found in favour of the competitive benefits to the consumer.
Portability is only one of many engagements between NRAs and MNOs. Other issues include the reduction of mobile termination rates (MTRs) for calls and SMS, the introduction of mobile virtual network operators (MVNOs) and the regulation of international mobile roaming (IMR) charges. This means that NRAs must take a pragmatic view of which battles to fight and in which order. Consequently, in many cases decisions concerning the introduction and implementation of MNP became tactical and pragmatic.
Churn is the rate at which customers change operators. The high churn rates observed in mobile telecommunications are the result of poor quality of service (e.g., lack of coverage and dropped calls), excessive prices and of inadequate customer care. When high levels of churn are combined with high customer acquisition costs, the mobile operators can be seen to be very inefficient.
The lack of competition has been demonstrated by general market analyses and by specific interventions that have invariably favoured the introduction of MNP. The counter arguments have, at most, caused delay or complicated implementation. However, effective implementation is another matter.
The experience of MNP
Over a period of years, MNP has been introduced in many countries (see Table II), though with very different experiences.
One of the first regulators to introduce MNP was Office of the Telecommunications Authority (OFTA) in Hong Kong, SAR. The result has been a steady pattern of customers changing operators (see Figure 2). In the year ending March 2006, some 1.3 million numbers were ported, representing a churn rate of almost one quarter. The seasonality is caused by the advertising campaigns run by the operators, with a peak as the summer holidays end and as younger customers return to school and university.
Australia implemented MNP some years after Hong Kong and has about the same number, but only a fraction of the level of portings, given the much larger population (see Figure 3). The HHIs are respectively 2,300 for Hong Kong and 3,600 for Australia, indicating the latter is much less competitive. After considerable delays a code of conduct had been adopted by the Australian Communications Industry Forum (ACIF), a self-regulatory body. The code was then registered with the Australian Communications and Media Authority (ACMA), one the government's regulatory bodies, under section 117 of the Telecommunications Act 1997.
South Korea has long been a technological leader in mobile telecommunications, with well over 100 per cent mobile teledensity. However, it was comparatively late in implementing MNP, which it did in phases, to try to contain the market power of SKT (Park et al., 2005). Even prior to MNP, there had been rising customer churn rates, up from 1.3 per cent in the late 1990s to 3.3 per cent in the early 2000s. The introduction of 3G services was considered likely to push it yet higher. Mobile operators were expected to focus on improving service quality and offering customer-oriented services in order to improve customer satisfaction and to build long-term relationships with customers (Kim et al., 2004).
The USA is different from the majority of countries, in that it uses receiving party pays (RPP) for calls to cellphones, which means there are no differences between the prices for on-net and off-net calls. Additionally, by using what appear to be fixed numbers from the North American Numbering Plan there was a possibility of intermodal portabilty, that is between wireline and wireless networks. MNP is known as wireless local number portability (WLNP) in the USA.
WLNP was not introduced by statute, rather in 1996 the FCC determined it should be required, largely based on concerns about new entrants competing with entrenched providers, though later it was argued it would help conserve numbers (FCC, 1996). The FCC (2003) granted a series of extensions on the deadline for implementation until it finally forced operators to implement WLNP from November 2003.
A total of 11 million customers ported numbers to another operator in the period from December 2003 to April 2005, with a monthly level of a around 700,000 (see Figure 4). While a further 100,000 ported from fixed to wireless operators each month, only about 1,500 ported in the reverse direction. Monthly wireless churn rates in the USA average about 1.5 to 3.0 percent per month. While the introduction of WLNP did not result in an increase in churn, it placed additional pressure on operators to improve their quality of service in order to retain existing customers and to contain levels of churn (FCC, 2005).
The European Union introduced fixed number portability during the 1990s, with a few member states adding mobile number portability on their own initiative (Smith System Engineering, Arcome SA and NERA, 1997; EU, 1998 ). In the 1999 review, consideration was given to the wider adoption of MNP, including a significant volume of comments in the public consultations (Europe Economics and Arcome, 1999). A formal legal measure took effect in on 25 July 2003, the implementation date of the Universal Service and Users' Rights Directive (EU, 2002). The obligation in Article 30 of that Directive covered separately geographic numbers and non-geographic numbers. It was technology neutral, so that MNP applied equally to 2G and to 3G and between them. The provision was retained in the 2006 Review.
By the autumn of 2005, seven member states had still not introduced MNP. In June 2006, the EC opened infringement proceedings on portability against Czech Republic, Latvia, Lithuania and Malta.
Even where the directive had been transposed, there were many delays. Faced with procrastination by the operators, the NRA in Ireland had to intervene to impose a solution on the operators:
The industry Mobile Number Portability Committee (MNPC), which was formed in August 2001, devised and agreed a comprehensive work programme to ensure the delivery of MNP in Q4 2002. Several industry working groups were convened to develop the key technical and process protocols for MNP and a complete programme for testing the MNP product. However over recent months, the mobile operators have suggested pushing back the launch to later and later dates and now have reported to the MNPC that “despite a concerted effort on behalf of the industry” they will be able to deliver a fully tested product launch only by mid-June 2003. They have attributed this delay to the complexity of the numerous system upgrades required to support MNP and to difficulties encountered in the commercial negotiations for the mobile number portability database (ComReg, 2003).
Up to the end of October 2005, the implementation of MNP has been very variable between the member states and frequently disappointing, with many having seen minimal portings (see Figure 5). The total ported for the whole European Union was only 25 million, a mere 5 per cent of the total population. Less than 1 per cent of mobile numbers had been ported in Austria, Germany, France, Portugal and Greece, plus several of the new Member States where the figures for ported numbers were very low. Admittedly, there was some improvement in some member states in 2005.
The causes of the poor performances included bureaucratic obstacles created by the operators and the costs of porting. For example, in France the process has taken 30 to 70 days and been a three-desk process, which ARCEP wishes to reduce to ten days.
Figure 6 shows the cumulative proportion of the population ported against the market concentration. Few countries have managed to port more than ten per cent of their total numbers. Equally, few have managed an HHI score of less than 3,000, suggesting a strong need for MNP, given the lack of competition.
MNP has been poorly adopted in Portugal, possibly because a recorded message is played to callers warning that the number has been ported to another network. While this had been intended to protect consumers, it may have deterred them. Since most tariff plans have significant discounts for “on-net” customers are being alerted to the higher charges. This is in contrast to Spain, where the customer does not pay a fee and MNP has been used as a competitive tool to attract customers.
Article 30 (2) of the Directive requires that NRAs ensure that the costs paid directly by consumers do not act as disincentive for the use of MNP. The costs imposed vary greatly, from zero to 20, though almost any value will act as a disincentive to some extent. A judgement of the Austrian Administrative Court overturned the decision of the NRA to set a uniform fee for MNP of 19, requiring separate and cost-oriented fees to be calculated for each network (EC, 2006). The European Court of Justice, in advice to the Brussels appeals court, held that an NRA could use an abstract model, in advance of real data which it had used to ceiling of 15 (ECJ, 2006). Mobistar, part of the France Telecom Group, had contested the high costs of other operators in Belgium. The obvious comparison is with the heavy discounting on handsets.
The possibility of portability of numbers between fixed and mobile operators has been made a legal provision in Denmark and in Switzerland. However, implementation has been greatly delayed, not least because of high mobile termination rates. Following an assessment by NTIA (Telestyrelsen), the Ministry proposed that the law be amended to remove the provision for portability between fixed and mobile. The UK has assigned some mobile numbers for fixed-mobile converged services which then came under MNP rules (OFCOM, 2005).
One of the last of the developed countries to offer MNP to customers was Japan, which takes effect on 1 November 2006, timed almost to coincide with the appearance of two new entrants on the market. As in other countries, the mobile operators have demonstrated a reluctance to move from an oligopolistic to a more competitive market structure. Once implemented, portability will be very fast and efficient for customers (Mitomo and Otsuka, 2006).
The diversity of the administrative and technical implementations of MNP is considerable. The delays in the negotiations and implementation have dragged on, greatly delaying implementation and its effects on markets. The resulting processes when a customer tries to port a number vary from being cheap and efficient to entirely impracticable and so slow as to be unrelated to the use of ICTs, resembling more the processes used before computers.
Identifiers for other services
Where customers of mobile operators use value added services, they must identify themselves by means of their telephone number, their handset number, the international mobile equipment identity (IMEI). Where they change operator, they need to be able to port the service subscription.
MNOs have made significant efforts to enter the business of mobile or at least nomadic payments, that is to pay for goods and services using a handset. For example, the Felica system in Japan allows payment for train fairs by means of an RFID tag. The GSM Association has launched an initiative to promote m-commerce in developing countries, in particular aimed at boosting average revenue per user (ARPU) by providing financial services for the “unbanked”. In some cases these services use stored credit, in others the charge is added to the monthly bill of the customer.
For the 2.5G networks, the GSM operators created their own global top level domain (TLD), known as.gprs, for all devices. Users are assigned a temporary private IP address behind a firewall allowing the operators considerable control of access to services. A similar approach is adopted for EDGE and UMTS. There is no problem here requiring number portability, though some there are concerns at the potentially anti-competitive of keeping a firewall between mobile networks and VAS providers.
For many services, as with the internet, customers obtain an identifier related to the mobile operator or value-added service provider. The GSM operators with the support of some manufacturers obtained from ICANN the.mobi global TLD. The GSMA has also launched an initiative on IM, endeavouring to compete with the equivalent internet-based services. Moreover, there are also handset identifiers for handsets receiving digital broadcasts.
The development of new services may raise problems where customers accept additional identifiers that are specific to an operator. However, these problems are not significantly different from the fixed internet, except that there may be less choice of operator with the mobile internet. The question of financial transactions raises other issues about competition on the market, but not concerning MNP. While IP addresses may cause problem of undue control, portability is not an issue. However, identifiers that are specific to an operator raise switching costs for the customers.
Conclusion
The value associated with mobile telephone numbers has been created by customers. The ability of those customers to take their numbers and the associated traffic to another supplier is essential for the proper operation of markets. In particular, new market entrants must be able to entice customers away from established operators with their numbers and their traffic, in order to increase competition in markets that are still heavily concentrated. While this could be considered self-evident, it was not built into mobile markets at their creation and has had to be forced on operators, often in the face of strong opposition.
Although MNOs will advocate competition, many will also quite happily avoid it. They have proved very adept at delaying the implementation of the legal instruments that would enforce MNP and in creating administrative arrangements worthy of Kafka. They have also introduced inexplicable and unjustifiable technical variations between countries. In these ways they have frequently managed to frustrate the objectives of the legislation, namely effective portability in order to increase competition. The arrangements can be so expensive, so complex and so protracted that they successfully discourage customers from exercising their legal right or make it senseless to do so.
A key to the success of MNOs in these rearguard actions has been the process of determining only the framework in the legislation and leaving the details to negotiation amongst the operators, with the involvement of the NRA. Here the operators have, too often, been allowed to play for time and for complexity. Calls for self-regulation and light-handed regulation have frequently failed to deliver results, at least for MNP.
The opposition of mobile operators is in part a general and visible resistance to any regulatory initiative. It signals to the national regulator and to those in other countries, both resistance and power, especially if they can cause an NRA to doubt that it will succeed. For the financial markets the operators must report churn rates and ARPU, which by opposing MNP they hope will not deteriorate, at least in the short term.
Many NRAs have allowed operators to delay, to over-engineer systems and to create processes that make the service unattractive to customers and which fail to increase competition on the market place. They have accepted conditions that are vastly more complex, slower or more expensive than global best practice suggests is possible. In their defence, NRAs have been engaged with the mobile operators on a range of difficult issues which absorb their limited resources, notably efforts to reduce mobile termination rates.
In the EU, applying the test of subsidiarity, namely the lowest effective level for the administration of a task, then national implementation of MNP can only be seen as a failure. Implementation at the EU level with a common technical platform and administrative procedures could have been much faster and more effective, even if less sensitive to national needs. To rely only on ex post harmonisation measures could take a further half decade to achieve the higher levels of competition.
More generally, governments and regulators need to put a priority on measuring the level of competition in mobile markets and in taking measures to increase it. They also need to benchmark MNP against global best practice in which numbers can be ported at no cost to consumers at least on the same day or within minutes.
The dialling of numbers is declining in importance, instead people use stored names, linked to a set of numbers and other identifiers, often with an indication of their availability. The growing use of internet-based names usually tied to the supplier, rather than numbers, requires vigilance by the public authorities to ensure the competitiveness of markets. Policy options include encouraging individuals and businesses to register their own domain names and to consider which identifiers require to be interoperable and which should be portable.
Figure 1Techniques for number portability
Figure 2Mobile numbers ported in Hong Kong, SAR
Figure 3Mobile numbers ported in Australia
Figure 4Numbers ported in the USA
Figure 5Cumulative mobile numbers ported in the EU
Figure 6Concentration and cumulative numbers ported
Table ICalling routing methods
Table IIThe introduction of mobile number portability
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Further Reading
Australian Communications Authority (ACA) (2005), Telecommunications Performance Report 2003-2004, ACA, Melbourne, .
GSM Association (2006), Personal Instant Messaging, GSMA, London, .
Kim, J. (2005), “The effect of mobile number portability on switching costs in the telecommunication industry”, paper presented at the University of Wisconsin-Madison, Department of Economics Workshop, 19 October, .
Lee, S-W., Kim, D., Park, M.-C. (2004), Proceedings of the 37th Hawaii International Conference on System Sciences, “Demand for number portability in the Korean mobile telecommunications market: contingent valuation approach”, .
Corresponding author
Ewan Sutherland can be contacted at: 3wan@3wan.net