The Hindu Business Line : Test the waters first

THE Telecom Regulatory Authority of India (TRAI) recently initiated the process of consultation on Mobile Number Portability (MNP). While TRAI seems to be in favour of initiating deliberations now and introducing MNP in India eventually, operators' associations (most notably COAI) have raised concerns about the merits of such a move.

The key question to be addressed in this whole debate, as of now, is: What will be the right time to introduce MNP in India?

For the customer, MNP removes a crucial barrier to switching - the change in his/her number. Greater choice for the customer is thus the direct benefit. There are other second and third-order benefits in terms of increased competitiveness (leading to improved Quality of Service and lower tariffs) and benefits to the callers. However, MNP solutions are known to be complex and costly and there is a risk that the costs might actually increase for the customers. The whole issue of benefits versus costs needs closer examination...

The focus for the Indian market, as of now, with a mobile teledensity of less than 10 per cent, is increasing penetration (getting more people to take up mobile phones where network exists) and increasing coverage (extending network to new areas). TRAI has proposed to increase the coverage of mobile networks in India from around 20 per cent in 2004 to around 75 per cent by 2006. Most of the operators have been extensively rolling out networks and are trying to attract new customers with low-end service offerings. This kind of growth takes up significant organisation resources. Clearly, for the next few months, the top-most priority for the Indian market should be the management of this growth. MNP, if it takes focus away from this growth (as the operators claim), should definitely be de-prioritised. TRAI cites the examples of a few low-penetration countries such as the Netherlands where MNP has been introduced and Pakistan where MNP has been considered. However, these examples are few and far between. MNP has mostly been introduced in countries with a high level of penetration.

MNP will definitely increase competitiveness. However, our analysis shows that India is much more competitive (as measured by the share held by the top two operators) than most of the countries where MNP was introduced. Each of the markets in India has intense competition amongst three or more major players. Tariffs in India are already amongst the lowest in the world. Moreover, there is no conclusive evidence that MNP will lead to reduced tariffs. While in some markets (such as Hong Kong) tariffs declined significantly, in others (such as Australia) the operators actually increased tariffs just before MNP to signal the avoidance of a price war. While differences in levels of service do exist in India, there is a need to examine the extent to which these issues can be addressed by operator level actions. Intense competition ensures that the major operators are already focusing on Quality of Service issues. Most of the operator-level issues will be addressed most likely, with or without MNP.

MNP is meant to benefit customers who are locked-in because of their numbers and cannot switch service providers despite being dissatisfied. A preliminary examination suggests that business users (large and small corporate) and professionals — who have circulated their numbers for business purposes on promotional material (e.g. visiting cards, brochures etc.) — will have the highest lock-in due to their numbers. However, for most corporate users, mobile communication is only one portion of their total communication spend, which includes wireline and long distance services as well. More and more corporate customers are now buying their communication services in a bundle and would be reluctant to switch providers just for mobile services. Hence, just mobile portability may not benefit them too much.

Very simply put, the proportion of churning customers who port with their numbers measures the direct impact of an MNP regime. This ratio is called the porting ratio and a high porting ratio denotes a successful MNP regime. Among other factors, the porting ratio is known to depend primarily on the readiness of the market for introduction of MNP, the degree of consumer friendliness of the porting regime and the collective operator response to MNP. However, our analysis shows that except for a few countries (such as Hong Kong, the US and Australia) the porting ratio has been below 10 per cent in most countries where MNP has been implemented. This suggests that despite making all the investments in MNP, the actual benefits are only minimal if MNP is not introduced in the proper way at the right time. Undue haste in implementing MNP will only result in wasteful expenditure.

MNP, if implemented in a consumer friendly manner at the right time, could bring benefits to the Indian consumer. However, the time does not seem to be ripe for introduction of MNP as of now. In a few years' time though, the Indian market, hopefully having lived up to its growth expectations, will be ready for actually introducing MNP.

(With inputs from Nirat Bhatnagar & Vipul Kedia)

The authors are with IBM Business Consulting Services, Strategy & Change Practice.

Picture by Sandeep Saxena

More Stories on : Telecommunications | Insight

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Catch `em old

Test the waters first

The overloaded `other'

In a constructive mood...

Learn online too

DLL version conflict

Trouble playing Windows Media

The deal that came through

A watch on `phishing'

A tricky balance

Quiz

Be armed to the hilt before you go to troubleshoot

Cartoon

Clear hear