Number Portability: The Next Best Thing Or Blunder?

Number portability will finally be inducted in Q3-2008

Angelo Mathews December 21, 2007 11:00:32 IST
Number Portability: The Next Best Thing Or Blunder?

Number portability is a service, which assists in switching over to a different service provider, without having to change the number. With such a convenient facility being available, the question still arises about who will really benefit, or whether it’s just another attempt to make the mobile business grow bigger and more lucrative.

According to the COAI and the GSM industry number portability is welcomed with open arms, keeping aside how complex the process is really going to be and also the realignment of the profit loss analysis of a customer. The report on number portability issued by the government in early November, states that the move will be by the operators in the four metros Delhi, Mumbai, Chennai and Kolkota, to begin with. This means it will be first 'tested' on 3.5 % of the total population, or just 20 % of the mobile subscribers in the four metros.

Intense competition already exits in the metros between the GSM and CDMA providers. This will move on to the next level, with the number portability coming into the picture, in the third quarter next year.

The Big IT Juggle

The most inevitable phenomenon that will take place, would pertain to upgradation that will be required at any cost. All network providers are tight lipped about their strategies, upgrade implementations and anything to do with MNP. It will definitely be a big IT jigsaw, as TRAI states there will be a need to set up a centralised database and shall be managed by a third party.

In order to chart out a roadmap for effective and smooth implementation of Mobile Number Portability and to deliberate on various issues, TRAI has decided to set up a steering committee consisting of Operators, the Industry Association, and the Telecom Engineering Centre (TEC), under the aegis of TRAI.

The steering committee will address issues involved in the implementation of MNP with special reference to the methodology of MNP implementation, level of centralisation of the database in terms of national v/s regional setup, time frame and so on. Another very important arena is the billing system, wherein the steering committee will discuss the transparency of off-net and on-net calls billing system, which makes the database record the calling routed from one network to the other, hence saving confusion that may arise from porting.

According to COAI, the estimate of implementing number portability could cost as much as Rs.3, 000Crore, which could have been used, in increasing rural coverage. In its recommendations, TRAI said that it was appropriate to implement MNP in a phased manner, starting from the metros and A category service areas, followed by B and C category service areas within an interval of six months.

According to one of the officials of TRAI, the upgrade in the infrastructure will include both hardware and software implications. As per the feedback received by TRAI, most of the operators in India have Signaling System # 7 (SS7) networks with Service Transfer Points (STP) and Service Control Point (SCP) functionalities needed for implementing number portability. Thus, these networks will only need to upgrade the switch, STP/SCP and associated software. Considering that labour is cheap and software costs are lower in India (software comprises a major part of the cost), it is assumed that operators having a STP in their SS7 signaling networks will have lower upgradation costs.

But in most countries, a substantial portion of the cost is borne by the customer to avail the service. TRAI argues that customers could easily pay up to Rs. 200 (one-time cost) for the service. This results in a scenario where the telecom operators need not cough up more than Rs. 300crore. If that amount is divided amongst six national operators, the sum could amount to Rs. 50 crore. This is just a hypothetical situation and the costs could be higher than what have been estimated. Based on European assumptions - operators would spend over Rs. 2700 crore.

Competition All The Way

International Data Corporation (IDC) India, conducted a survey and found that 30% of mobile subscribers are likely to shift to an operator offering better service, if given the option.

Frost & Sullivan believes that a few other factors should also be taken into consideration, in assessing the success of MNP implementation. Some of these include, decrease in mobile tariffs and increase in mobile-related usage, improvement in customer service and satisfaction, differentiation and innovation in mobile packages and value-added services, introduction of new technology, ease of market entry for new participants and fair market competition.

The biggest focus after the MNP service is launched would be the churn rate of customers. Consumers, who are likely to change their service providers, are those opting for the best promotional offers and the lowest pricing of the latest services in the market. This is a major characteristic of prepaid users. Since they have already contributed to the bulk of churn subscribers as compared to postpaid users, MNP is expected to marginally increase churn rate from this subscriber segment. The existing churn rate as per IDC India, is around 5% which will go up to 13% due to MNP.

Currently, all the advantages associated with number portability are severely limited. The top four players in the mobile space have market shares ranging between 19-21%, so there is no single dominant player. Secondly, tariffs across service providers are virtually similar, so there is no compelling reason to shift to another operator. Thirdly, the quality of service, which is another determining factor for customers to shift - is unfortunately dependent on extraneous factors (spectrum, or the shortage of it) outside the service operators' control. The only differential is customer service, or the fact that some may want to shift from one technology to another (GSM to CDMA) because of their needs. India has the lowest calling rates in the world, and MNP may or may not further lower the prices.

Competition has always been good in any industry and with more healthy competition expected, more innovation, solutions, and competitive pricing is anticipated from mobile service providers. This will subsequently lead to more consumer interest and usage, thus resulting in revenue growth.

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