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Creating competitive telecom environments in countries hitherto having monopoly control of services by incumbent operators is a continuous process. With the appearance of new operators, prices rapidly fall and new, innovative services reach market more quickly. However, as the market matures, other issues start jeopardizing the benefits of competition that customers can effectively enjoy. One key hurdle to the growth of real competition is users’ inability to take their telephone numbers with them when they switch operators—the lack of number portability.

The cost and time implications of communicating this change and altering internal telecommunications systems act as a disincentive for customers wishing to switch between service providers and as a barrier for new operators trying to compete.

The downside for carriers is potential rise in induced subscriber churn following the introduction of number portability. A recent survey done by In-Stat/MDR group for US market found that the willingness to churn could go up to 52 percent, after number portability is introduced.

Degree of Portability
Number portability can have three key forms:

n Service Provider Portability: Allows the customer to retain his number when changing the network operator or the service provider (while not changing the service or the location).

Service provider portability is most critical from the perspective of encouraging competitive practices and ensuring consumer protection, and thereby usually comes under the purview of a regulator. Compelling as the need for service provider profitability is, there are also significant challenges to implementation. In particular, there are serious technical and management issues to consider. Number portability involves far more than simply redirecting calls from one operator to another. Additional factors concern service creation and billing, customer identification, sales and marketing relationships, network and service management, directory services and interconnection, as well as all billing and accounting among different operators are needed.

n Service Portability: The customer can retain his number when changing the service (while not changing the location or the network operator or service provider).

Service portability allows customers to change their service, for example, migration from a fixed line to a cellular service or to ISDN. Service portability is currently available only to a very limited extent even in the leading telecom markets across the world.

n Location or Geographical Portability: This allows the customer to retain his number when changing location within a geographic numbering area (while not changing the service or the network operator or service provider). However, because number ranges determine call routing and call charging structures, the availability of location portability across larger geographic areas is often determined by call charge boundaries.

Only Finland has made any positive move towards the introduction of this service with the allocation of a new block of numbers that have no geographical significance, and so local destination codes maintain their significance.

Recovering Costs
It is the mechanism of recovering costs that usually becomes a sour point, delaying implementation. The economic problem with number portability is that the benefits fall on select customers, and the costs fall on the operators (and hence on all their customers). This leads to two core issues:

n How to evaluate whether the overall benefits outweigh the costs, and hence whether number portability is worth introducing?

n How should costs incurred be allocated?

Some of the accepted methods of allocating the costs of service provider portability are:

n The donor service provider, where the number was originally used, pays all costs

n The recipient service provider, where the number is used since its last porting, pays all costs

n The costs are shared between the donor and recipient service providers according to a ratio fixed by national regulation

n The cost allocation is negotiated between the service provider, possibly linked to certain limits derived from national regulation on interconnection agreements

n The costs are borne directly by the customer who is porting the number

n All parties bear their own costs

Implementation Models
Number portability could be implemented with a focus on either customer interaction or operator interaction.

n Customer Interaction models: The ‘one-stop shop’ model involves the recipient service provider taking the onus of interface with the donor as well as other service providers, whereas in ‘do it yourself" model, the customer is required to interact with the recipient and the donor both.

n Operator Interaction Models: Operators can have bilateral arrangements among themselves or outsource the requisite management interfaces through a centralized model.

Technology approaches for implementation are essentially switch-based, initiated by individual operators, or off-switch, using a centralized national database.

Switch-based solutions are viewed as short-term, usually meant for operators with small customer base and using call forwarding functions like onward routing (OR) to direct calls to another operator. This approach is not scalable and as demand for number portability increases beyond a certain point, the switch can quickly become overloaded.

Off-switch Intelligent Network (IN) solutions offer longer-term and scalable options. Here, the number-related information is placed in separate, independently operated database that can be interrogated by each operator’s switch as it originates a call.

This makes routing more efficient, without deteriorating switch performance as the traffic grows. It also greatly reduces the operational and engineering overheads of operators.

An added advantage of deploying centralized database solution through an independent third party is creation of a level playing field between operators, with innovation and pricing becoming the criteria for success.

A major factor determining the choice is subscriber base. Centralized database model becomes worthwhile with 20–30 percent of the subscribers willing to adopt number portability.

The Scenario Worldwide
Fixed line service providers in most European, Scandinavian and select Asia-Pacific countries have implemented local number portability (LNP) in their service areas. The degree of adoption of wireless number portability (WNP) for cellular networks, however, varies considerably. In some parts of Europe and Asia-Pacific, while nearly all service providers have implemented it, countries like France and Ireland have just initiated the process.

Cost Implications
The argument for delaying implementation is the huge costs involved. In the US, each of the large carriers would need to spend $50–60 million to institute the service and an equivalent sum to maintain it. The Federal Communication Commission (FCC) has given wireless carriers in the US another year, up to November 2003, for resolving implementation issues.

The experience of developed countries exhibits that local number portability for fixed wireline was introduced within two to three years of introduction of competition to incumbent state telcos. In the Indian context, however, TRAI has so far not considered introducing number portability even for fixed line subscribers. Though BSNL and MTNL offer universal number service, it is more in the category of location portability. Also, given the steep tariffs charged, it is largely positioned as a premium service.

Going forward, TRAI will need to look at putting in place number portability regulations, to ensure that competition in each service area effectively translates into a value proposition for subscribers.

Puneet Chopra IBM Business Consulting Services

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