Articles : December 2007

A mobile company advertises its phones on TV as the names of people. It is quite funny, but buttresses the message that a mobile phone number is a person’s identity. Thus changing a mobile number and getting a new number is like changing one’s own identity. In most of the advanced countries, consumers are able to switch their service providers without losing their number, thus retaining their identity. Fortunately, India is also moving in this direction.

The issue of mobile number portability (MNP) policy has been a hot issue of debate among operators as well as industry experts. No doubt it will affect the market share of few operators. However, in the end, consumers will be benefitted by improved quality of service and lower tariffs. Initially, MNP will be implemented in all the metro cities: Delhi, Mumbai, Chennai and Kolkata on a trial basis by the fourth quarter of 2008, and in the second stage, it will be extended to the rest of the country.

This move by the government is expected to promote healthy competition by providing consumers with a choice of service providers as has been argued in the recent study: “Competition & Regulation in India, 2007” done by CUTS with assistance from the UK government. Once MNP is in operation, a consumer will be able to switch his current service provider without losing the number within the same service zone. Presently, if consumers wish to change their provider, they will have to surrender their number and thus get into the rigmarole of notifying all their contacts. Further, quite often mobile phone Companies launch various plans to attract new customers to increase their market share. Generally, these plans are not available to the existing subscribers. For example, the subscribers enjoying a lifetime plan scheme are not allowed to subscribe to other tariff plans of the same service provider. There are a number of other fair and unfair means limiting the consumers’ choice.

Why would a consumer want to change his service provider? The answer is very simple. This is because either the quality of service is poor or the charges payable are not competitive, or both. However, the practice of retaining the same phone number compels the subscriber to stay put with the existing service provider. Undoubtedly, change of phone number will impose certain switching costs etc. With the launch of the new MNP policy, operators will have to compete with each other to retain the existing subscriber base, and attract new consumers, thus improving the quality of service and reducing the tariff.

On the basis of international experience, it is reasonable to assume that MNP will promote competition to benefit the ultimate users. Consumers have benefitted in many countries including US, Canada, and most of the European countries. Recently, two of our neighbours: Sri Lanka and Pakistan have also launched the MNP. Experience of these countries reveals that the introduction of MNP has forced the service provider to improve quality of service and adopt cost cutting strategies.

According to statistics, a larger number of subscribers changed their service providers in all the above mentioned countries. In the first year in the US about 8 million customers shifted from their current service providers. However, the churn rate in Pakistan was reported to be very low, 0.14% during the last eight months. But it was reported somewhat higher in Australia (0.82) and UK (1.5). It shows that churn rate was not as high as expected. Because, the Companies woke up to provide quality service to retain their existing subscribers.

However, for India at this stage the most important issue to allow the consumers to derive the benefits of MNP is to find ways to effectively implement the MNP policy. DoT has asked TRAI to frame the required guidelines for implementing MNP. Establishment of Logically Centralised Database (LCD) and a Central Clearing House (CCH) have been proposed to facilitate MNP through neutral third party operation. The DoT has asked the operators to bear the initial cost of implementation on a sharing basis. Apart from the cost of regulation involved in MNP, TRAI will have to address some technical issues so that technology is not a barrier in creating a level playing field for all operators.

The issue of the locked-in phone handset provided by CDMA operators to consumers would also need to be resolved, if the MNP policy has to succeed across the two technologies. A consumer using CDMA services would be unable to shift to a GSM service using the same handset. It is because CDMA services would not adapt with the GSM SIM card unless it is unlocked by the CDMA operator. The problem is also reversible.

There are two feasible options before the regulator. One, it may ask CDMA operators to keep the handset adaptable for both outgoing as well as incoming customers. Another option is directing them to issue a phone on the basis of security deposit or purchase back scheme etc. At the time of surrendering the handset, the consumer’s deposit may be refunded. Whatsoever be the mechanism developed by TRAI, the choice to consumers should not be limited by technology constraints. TRAI needs to address these challenges in a transparent and accountable manner to facilitate the MNP by the targetted time.

The author is an Assistant Policy Analyst at the CUTS Centre for Competition, Investment & Economic Regulation and can be reached at rk2@cuts.org

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