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INTERCONNECT COMMUNICATIONSA Telcordia Technologies Company




Les OliverInterConnect Communications

Number Portability in Emerging Markets Appropriate Solutions for Specific Market Requirements

Number Portability in Emerging Markets ii

© InterConnect Communications 2009

Written and published by: InterConnect Communications Ltd Merlin House Station Road Chepstow Monmouthshire NP16 5PB United Kingdom

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SynopsisIt has long been recognised that Number Portability (NP) is a key enabler of a competitive telecommunications environment, encouraging users to contemplate changing service provider and making market entry a more inviting prospect for new operators.

Emerging markets, however, may face unique challenges in terms of infrastructure and market development, with mobile services meeting the bulk of demand. Also, it is often the case that the mobile market mix of prepaid to post-paid in these countries shows a higher propensity for customers to use prepaid services and to take services from multiple operators.

Number Portability has now been launched, or is being implemented extensively worldwide, using a variety of technical and administration solutions. This paper examines the situation in predominantly prepaid markets where mobile NP is often not the first priority and focuses on reasons why National Regulatory Authorities and operators in emerging markets may wish to look at the international experience in a slightly different way.

Number Portability in Emerging Markets 1


Contents

Synopsis 1Introduction 3Drivers for NP 4 Market Drivers 4 Regulatory Drivers 4Challenges of MNP Implementation in Emerging Markets 5 Market Comparisons 6 The ‘Prepaid’ Effect 8 Average Port Rates 9 The Value of Porting Customers 9 On-Net to Off-Net Pricing 9 Overview 10 Conclusion 13MNP Options 13 Types of Number Portability 13 Administration and Routing 14 NP Technical Routing Solutions 16 Costs 19 Cost-Effective Solutions 19Overall Conclusion 20References 21About The Author 22 InterConnect Communications 22



Introduction

In any competitive environment, operators will compete in all manner of ways in order to attract customers, increase market share and ultimately increase revenues and profit. This is entirely consistent with the principles of a competitive sector.

It is widely stated that some of the benefits of that competition are:• Downward pressure on prices;• New and innovative products and services;• Improved quality;• Greater choice of services and service providers for users and consumers.

Thus, in an established telecommunications market, customers are (or should be) free to take service from any of the operators and, if the customer so chooses, to switch between operators in order to secure a better deal. It therefore follows that any system, which allows a customer to switch between operators whilst retaining the same telephone number, should be of interest. Number Portability (NP) is such a system.

Many developing countries, however, face unique challenges in terms of infrastructure and market developments with mobile services providing a higher penetration rate than fixed services, even though that penetration rate is often below the average mobile teledensities experienced in some other parts of the world.

Secondly, it is often the case that the mobile market mix of prepaid to post-paid in these countries shows a higher propensity for customers to use prepaid services and to take services from multiple operators.

Number Portability has now been launched, or is being implemented extensively worldwide, using a variety of technical and administration solutions. This paper, however, examines the situation in predominantly prepaid markets where mobile NP is often not the first priority. The focus of this paper is why National Regulatory Authorities and operators in those countries may wish to look at the international experience in a slightly different way.



Drivers for NPMarket DriversIn established markets the drivers for NP are very often unambiguous and lead to the obvious conclusion: implement sooner rather than later. In such circumstances, it is common for the following conditions to be exhibited in the market:• New entrant and smaller operators requesting (or even demanding) that the National

Regulatory Authority (NRA) introduces number portability as a matter of urgency.• Customers requesting the introduction of number portability. Customers’ requests

can be expressed in several ways:- Though user associations;- Directly to the NRA;- Through operators.

• Market conditions:- The market is saturated and there is no room for growth. This results in stagnation

in the market unless operators can gain market share by churn;- Prices are rising despite the fact that there may be more than one operator

– competing operators have decided that there are sufficient disincentives for customers to switch and so they can charge more without threatening their existing customer base;

- Products and services are not improving – again, operators have made the decision that there are sufficient disincentives to switch and they do not need to invest in service or product improvements;

- Often the management of numbers becomes an issue, with individual operators demanding their own distinct number ranges. NP breaks down the link between number ranges and operators.

For emerging (and small) markets, however, NP is not the only means by which NRAs can introduce competition into the mobile market place. Other methods can 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. When considering the methods to adopt, NRAs must take a view of the gains that can be made in a reasonable timescale given an often limited resource. Consequently, in many cases, decisions concerning the implementation of NP have become tactical and pragmatic.

Regulatory DriversNumber Portability may be driven by regulatory intervention at several levels. This can be an absolute legal requirement as is the case in the European Union, or it can stem from a regulatory need to encourage competition, especially from new entrant operators, or to correct a perceived failure in a given market.



Absolute Legal RequirementAll member states of the European Union are required to introduce NP. This stems from Article 30 of the Universal Service Directive1, which provides:

1. Member States shall ensure that all subscribers of publicly available telephone services, including mobile services, who so request can retain their number(s) independently of the undertaking providing the service:a. Inthecaseofgeographicnumbers,ataspecifiedlocation;andb. In the case of non-geographic numbers, at any location.

Thus, European citizens have a fundamental right to retain their telephone number(s) when switching between operators and all Member States are obliged by Community Law to ensure that this right is preserved.

Licence ConditionNRAs in countries outside the EU can decide that NP is an appropriate initiative

given their particular circumstances. They can then enforce that decision through the powers invested in them by Law, Statute or other appropriate governmental action. This then usually manifests itself in national telecommunications Licence Conditions or General Conditions of Service and NRA Decisions, Regulations or Decrees.

Operators within that country are then obliged to provide NP as a condition of providing telecommunications service. However, the choice of implementation solutions should be agreed by negotiation, particularly in emerging markets where cost effectiveness can be the overriding consideration.

Challenges of MNP Implementation in Emerging Markets

In examining the options to implement NP, NRAs and operators will look to take advantage of the experience of other countries. This enables them to develop a solution which mirrors international best practice whilst avoiding well documented miscalculations. Within this paper, however, we are focusing on the particular challenges presented to emerging markets - markets where competition is in its infancy and the control of costs is paramount.

For that reason, the mobile number portability experience of some other countries needs to be considered in regard to the unique conditions that exist in many emerging markets, which often include the following:

1 Directive 2002/22/EC of the European Parliament and of the Council of 7 March 2002 on universal service and users’ rights relating to electronic communications networks and



• Penetration rates are relatively low;• A high percentage of customers are prepaid;• Low to medium Average Revenue Per User (ARPU);• Customers tend to have prepaid services with multiple operators with resultant low

churn rates; • Projected low porting rates;• A small number of competing operators;• Poor infrastructure roll-out into rural and/or remote areas.

This has often led these countries to the conclusion that introducing NP is not viable, the predicted costs greatly outweighing the corresponding benefits. There are, however, now examples of countries successfully implementing NP despite a projection of low porting rates because they have low populations (by international standards). These countries have had to be realistic about the cost effectiveness of the solution adopted and therefore more ‘open-minded’ about the range of options available.

Such countries have recognised the need to identify and utilise a low cost solution to overcome the absence of volume-related cost savings achieved in large established markets. Thus they have examined the low cost solutions that may have been rejected elsewhere, understood the reasons for that rejection and ensured they do not reject an option just because it is ‘out of fashion’.

The same logic can be applied to emerging markets. In order to ‘prove’ the case, however, we must look at examples of the experience encountered and also make some predictions of the future.

Market ComparisonsIf we compare an ‘average’ European market and a hypothetical ‘emerging’ market we start to understand some of the issues for the emerging market. All the data used is taken from studies conducted on mobile services, competition studies and mobile number portability studies, distilled into average figures to provide a comparison (see References section).

Within the European Union we have the following average figures2:• Mobile penetration of 120%;• Average prepaid to post-paid split is 60% - 40%;• Average number of annual ports (2007-2008) is 3.2% (and growing);• Average ARPU is €300.

2 Numbers have been rounded for ease of following calculations



These are relatively high averages and result from EU-based operators:• Enjoying access to significant marketing budgets;• Attracting mobile customers knowing that there is a reasonable likelihood of them

being post-paid (they sign a contract).• New customers typically having a good-to-high ARPU, thereby providing the gaining

operator with a fair level of (average) income that justifies the expense of capture.

If we look at an average EU market we see the figures:

In fact these figures are very close to those of the UK which has a 120% penetration rate on a population of 60 million. Their prepaid figure is 60% and they have a porting rate of 3.8% (2007 figure). Finally, their churn rate is 37%.

The prepaid to post-paid split is very important when assessing the likely port rates as it is known that post-paid customers are more likely to want to keep their number when moving from one operator to another. Further, in markets where significant differences between on-net to off-net tariffs are experienced, it is very common for customers to take prepaid services with multiple operators, thereby taking advantage of the on-net tariff for each call.

Average figures for emerging markets are not so readily available but, based on InterConnect’s international experience, we estimate the following:



Population 60 millionPenetration 72 millionNumber of post-paid customers 28.8 millionNumber of annual ports 2.3 millionTotal ‘value’ of porting customers €6.9 billion

Table 1 - Average EU Market

Population 60 millionPenetration @50% 30 millionNumber of post-paid customers @ 5% 1.5 millionNumber of annual ports (all customers) unknownTotal value of ‘ported’ customers unknown

Table 2 - Average Emerging Market

The ‘Prepaid’ EffectLet us now consider the unknown elements of Table 2 above, firstly, the number of ports per annum. As we are talking largely about countries that have yet to launch MNP we have to look at the data available from countries that have launched and make some intelligent assumptions.

In their paper on Mobile Number Portability Around the World (2008) the Telecommunications Management Group (TMG) provided a table (Table 5) entitled ‘Mobile market indicators, January 1, 2008’. With acknowledgements to them, I will not re-produce that table here but have used the base data to indicate some interesting facts.

TMG studied some 43 countries that had launched MNP by the date of publication. In those figures we find the following - • In countries where there are more than 50% post-paid (23 countries), the average

percentage of customers who keep their number when they churn is 36.07%;• In countries where there are less than 50% post-paid (20 countries), the average

percentage of customers who keep their number when they churn is 8.56%;• However, the average churn rates are fairly closely aligned at 22.18% and 26%

respectively.

This is a significant difference and demonstrates that post-paid customers are far more interested in keeping their number when they churn than are prepaid customers (approximately four times higher). Therefore, a market with a very high percentage of prepaid customers, as many emerging markets have, will have a (relatively) low percentage of ports.

In the same paper, TMG states:

‘According to some, MNP is not relevant for the prepaid segment:

“…number portability has no relevant impact in the prepaid segment, where subscribers place little weight on keeping their mobile phone number.” 3

There are also often a number of users with multiple prepaid cards for different mobile networks that would reduce their desire for MNP. Reasons for having prepaid subscriptions to different networks include making on-net calls when needed, using one for business and the others for personal calls or to maintain anonymity for some calls.’

What effect does that have on our Table 2, above?

3 “Lower house approves number portability – Colombia.” Business News Americas. May 23, 2008.http://www.bnamericas.com/news/telecommunications/Lower_house_approves_number_portability



Average Port RatesThe average port rate for an EU market is 3.2% on a post-paid average of 40%. Our hypothetical emerging market has a post-paid percentage of 1/8th of the EU average; that means we assume they have 1/8th of the porting rate. That would be equivalent to a figure of 0.4% which is 120,000 ports per annum. However, the average port rates for countries with low post-paid percentages (TMG figures) are just one quarter of the markets with higher post-paid percentages. That would give a per annum port rate of twice the previous figure – 240,000. Let’s assume the median – 180,000 per annum.

Is that a reasonable figure?

Well, it may be for the first year of porting but, a market with a 50% penetration rate enjoys lots of headroom for growth. This means that the total number of mobile customers will grow and, as the market grows, so will the number of post-paid customers as a percentage of the total. Let us assume that over a five year period the population will grow 5%, that the penetration rate will move to 70% and the post-paid share will move to 10%. That means (in year 5) we may have an annual port rate of 352,000, a five year total - say - of 1.327 million. Still a low figure in international terms.

The Value of Porting CustomersWhat about the ‘total’ value of those porting customers? This figure is quite subjective and does not show the value of a customer to an operator, but shows the total value of the business ‘on the move’ and therefore available to capture by successful operators.

ARPU figures for emerging markets are not easy to obtain, but they are certain to be significantly below the EU average of €300, if only because of the lower Gross Domestic Product (GDP) per head of population. We estimate one quarter of that figure – €75. That provides a total of €26.4m in year five, or €99.5 million spread over the five year period.

This will have an effect on the number of competing operators entering a particular market place. Where the overall returns are high, because of a substantial customer base and high ARPUs, the return for an operator is also potentially good. Where ARPUs are low, however, an operator must use volume to fill the gap. If that is difficult because of the low rates of churn or the lack of MNP, operators are likely to consider other markets first.

On-Net to Off-Net PricingFinally we have the issue of the natural evolution of the market, and particularly the move away from significant differences between on-net and off-net tariffs.



Anecdotally, the equalisation of on-net to off-net prices is happening in established markets. In reality, however, it is probably not because of MNP and tariff transparency. The concept of on-net pricing (and the promotions that went with that, e.g. free evening and weekend calls, family share plans, etc.) was introduced by operators to create incentives in order to retain and grow their subscriber basis, which, initially worked very well. With penetration rates now at 100+% in many countries, and the erosion of profits as result of competition and resulting downward price pressure, on-net pricing has lost its effectiveness in attracting new customers.

On-net pricing is becoming a marketing initiative of the past. Operators are moving towards flat rate or quasi flat rate subscriptions e.g. think about how many minutes you get now for a flat monthly subscription compared with five years ago for the same spend on rental and per call pricing services. Eventually, mobile operators will stop metering all together, which is happening on the fixed line side already.

For emerging markets this will have the effect that the prepaid – multiple SIM customers will reduce in percentage terms to become prepaid single SIM customers, whilst the post-paid ‘contract’ customer percentage will increase. As already shown, this will have an effect on overall porting volumes. However, the timing of the evolution and the volume of the ‘drift’ from prepaid to post-paid is impossible to judge on a country-by-country basis.

We therefore have to conclude that, for the purposes of this paper, the consequential impact of reduced multiple handsets/SIMS and a move to post-paid contracts will not have been factored into the cost benefit considerations. However, we believe that this should be part of an overall feasibility study for an individual country looking to implement MNP.

OverviewFor completeness we should look again at that emerging market table again, but this time we should fill in the gaps from the calculations made above:

Now we shall revisit the ‘challenges’ stated previously, which were:



Population 60 millionPenetration @ 50% 30 millionNumber of post-paid customers @ 5% 1.5 millionNumber of annual ports (all customers) 180K (year 1)

352K (year 5)Total estimated value of ‘ported’ customers €13.5m in year 1

€26.4m in year 5Table 3 - Average Emerging Market

Penetration rates are relatively low.And maybe lower than one thinks due to the habit of people in emerging markets to carry several handsets (or at least SIMs) to take advantage of on-net to off-net tariff differences.

This is both an opportunity and a threat.

Low penetration rates provide lots of headroom for growth, so operators (especially established operators) will deny the need for MNP. However, without the drive of true competition (including MNP) the operators can continue to maintain on-net to off-net differentials and consequently the percentage of prepaid services will remain high. This may deter inward investment on the part of potential new operators, making the market less competitive and robbing the country of financial opportunity.

A high percentage of customers are prepaidEmerging markets tend to have big differentials between on-net and off-net prices, this represents an attempt by mobile operators to retain market share as described in the section above (on-net to off-net pricing). Market maturity tends to erode the value of this strategy for mobile operators and it is reducing or disappearing in several markets.

Without true competition (including MNP), the market will remain immature. Market maturity will come in time but can be accelerated by the introduction of competitive measures. This will increase the likelihood of operators developing products and services aimed at retaining customers and the equalisation of on-net to off-net tariffs is a big part of that process.

In their paper, the Telecommunications Management Group (TMG) state:‘… although some are of the opinion that MNP is not relevant for prepaid users, it has been implemented in markets with a high proportion of prepaid users such as Morocco, Pakistan and South Africa.’

Low to medium ARPUThis is linked to the GDP of the country which is directly related to its competitive position in many areas of the economy. A healthy and thriving telecommunications market is one of the means by which a country raises it overall wealth. Inward investment into a truly competitive market place improves the infrastructure and employment opportunities thereby creating wealth.

This and the rise in the percentage of post-paid customers, as other elements of competition kick-in, will raise the average ARPUs.

As in many other parts of life, one element affects another which in turn affects the first.



Customers tend to have prepaid services with multiple operators with resultant low churn ratesThis is a symptom rather than a cause. It generally indicates a less competitive market. However, it will initially directly affect the porting rates and has led some countries to decide that they should not implement MNP.

If, however, the NRA and operators choose to tackle the underlying cause rather than simply acknowledge the symptom, they will come to the conclusion that MNP, as part of a package of measures, is necessary in order to raise the competitive position and create the opportunity for growth.

Projected low porting ratesThis is, as stated above, part of the symptom rather than the cause. If the NRA and operators take the necessary steps to improve the competitive position then the port rates will improve.

There will be more operators bringing inward investment. There will be equalisation of on-net to off-net tariffs improving the post-paid percentage, and there will be an improvement in ARPU.

A small number of competing operatorsThere is an old saying which states ‘If it ain’t broke don’t fix it’. However, in this instance we say ‘If it ain’t broke, break it.’

There is a circular problem here, a vicious circle, which needs to be ‘broken’. A small number of competing operators is a symptom of a less competitive market. But, as shown above, it can also be the cause of a less competitive market that does not have MNP, with mobile operators being able to retain higher prices and lower levels of service because customers have to factor-in the cost of switching (changing their number).

Once a market place is competitive it will grow through the introduction of better packages and services and lower prices. This growth will attract higher and/or additional inward investment providing:• More operators;• Better coverage;• Lower prices;• Better products and services.

The vicious circle will be turned into a virtuous circle.



ConclusionSo, is the implementation of MNP the key to a competitive market?

The answer is ‘no’.

In fact MNP is not even the ‘silver bullet’ to gaining market share. Operators have to be able to show they are competitive on price, services, products and customer care in order to gain market share, although MNP will help to persuade customers who may not have moved because they can’t keep their number, to move to a new operator.

In his paper on Mobile Number Portability, Ewan Sutherland states: ‘Once consumers and businesses have access to cheap, timely and effective MNP, they are in a significantly stronger position to negotiate deals with their existingoperatororwitharival.Thethreatofcompetitionmaybesufficienttoobtainbetterterms. 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.’

So we conclude that, as part of a package of competitive measures MNP (and NP in general) does encourage competition. That competition will in turn drive down prices and drive up product and service offerings and will, in time, help to drive up the general economic health of the country. Our recommendation, therefore, is to implement.

MNP Options

This paper is about emerging markets looking at the evidence for MNP in a slightly different way and coming to the conclusion that it is desirable in their jurisdiction. Our examination, however, would not be complete without some information on the options that are available for implementation.

As many people understand most of the options, so we will keep this section brief.

Types of Number PortabilityThroughout the telecommunications industry the term ‘Number Portability’ is freely used, yet there are three very different implementations that are encompassed by this generic name:1. Operator Portability: This is the situation where a customer changes operator for

a similar service and retains their number;2. Service Portability: This is where the customer changes the type of service that

they use but retains the existing number;



3. Location Portability: This is where a customer changes the terminating location for calls to a given number.

These three types are not mutually exclusive and, for example, a customer may change their type of service and operator at the same time.

Administration and RoutingWhen considering NP implementation there are two distinct aspects, Administration and Call Routing:• Administration relates to the processes associated with accepting and implementing

customer orders to port their numbers; • Call Routing is the process of correctly connecting a call to the intended recipient.

Administration ArrangementsIn terms of the administration and management of port orders the most commonly used solutions are described below.

Manual (Peer-to-peer) SolutionInternationally speaking, it is rare to find current implementations where a manual (or bilateral) solution is adopted due to the availability and flexibility of modern centralised (or automated) systems. However, in markets where port volumes are projected to be low and the number of operators is also expected to be low, such manual solutions should be considered because of the perceived wisdom is that they are quick and affordable to implement, either as part of an interim solution or as part of the long term solution

By their nature, these manual solutions result in the need for ‘bi-lateral’ agreements between individual pairs of operators – there is usually a contract establishment process between each pair for the management of the relationship. A critical factor in implementing the administrative aspects of NP is the number of interfaces with other operators. Where there are only two operators, a peer-to peer relationship exists for NP as illustrated below:



Figure 1 - Simple Peer-to-Peer Administration Relationship

Operator A Operator B

However, the existence of multiple operators significantly complicates the situation and quickly leads to a highly complex series of peer-to-peer relationships, as shown below. This may give rise to management problems arising with data integrity, maintenance and dispute resolution.

Centralised SolutionTo overcome the complexities of a bilateral manual solution, the concept of a centralised service has been developed. This has become one of the most common NP solutions, being implemented in many countries worldwide despite its perceived higher initial cost:



Figure 2 - Complex Peer-to-Peer Administration Relationship

Operator

Operator

Operator

Operator

Operator

Operator

OperatorOperator

Figure 3 - Centralised Administration Arrangements

Admin Service

Operator

Operator

Operator

Operator

This does require the connectivity of the operators’ systems sales outlets to the centralised service which will vary depending on the functionality, e.g. dedicated links or a ‘Web-type’ access.

Finally there are the interface development costs – the cost for each operator to interface their own OSS / BSS systems with the centralised service. This cost can be substantial dependent on the level of automation which individual operators feel is appropriate for them, and has been traditionally considered to be prohibitive in small markets.

NP Technical Routing SolutionsFour NP routing solutions have been commonly identified and fall into two categories, on-switch and off-switch. The availability of more than one solution allows cost effective deployment, given various levels of penetration of ported numbers in different countries.

The four solutions are:

Indirect RoutingThe indirect routing solution was designed with the intention of allowing rapid implementation, and has been deployed in some markets. This solution involves routing calls via the Donor Network and is regarded as an ‘on-switch’ solution. It requires a variable amount of software development in the call processing mechanisms and in the signalling.



On-SwitchIndirect Routing (onward routing)Inter-Network Drop-back

Off-SwitchQuery on ReleaseDirect Routing (All Call Query)

Originating Recipient

Donor

Figure 4 - Indirect Routing Solution

Inter-Network Drop-backThe Inter-network Drop-back solution is an enhancement of the onward routing solution that improves the routing efficiency. It is by definition an ‘on-switch’ solution.

Query on ReleaseThe Query on Release solution is a variation of the ‘off-switch’ direct routing solution that reduces the number of calls requiring database access; hence this solution may be deployed before a direct routing solution is justified by volume and cost.

Direct Routing (All Call Query)The direct routing solution is an ‘off-switch’ solution which routes the call directly from the Originating Network to the Recipient Network, bypassing the involvement of the Donor Network. A consequence of this solution is that all calls will involve a query to data provided on or by a central (reference) database.



Originating Recipient

Donor

Figure 5 - Direct Routing Solution for Fixed Networks

OriginatingNetwork

Home/RecipientNetwork

Donor Network

VisitedNetwork

Call and non call related

Figure 6 - Direct Routing Solution for Mobile Networks

It is traditionally expected that this solution can only be cost effective when large port volumes are forecast, so may never be cost effective if implemented where small port volumes are expected.

With all these solutions, the only mandatory requirements necessary for the NRA to specify or endorse relate to information passed across network boundaries. Actions within a network are operator-specific and need not be subject to any constraints, provided interconnect requirements are met.

However, an indirect routing solution is not really suitable for implementation in a mobile network. It carries a significant problem in that it only works for voice calls. Short Messaging Service (SMS) and other data-based services fail when handled over an onward routing solution. Consequently, customers have to be allocated a second number in order to obtain these services.

Clearly this would lead to customer frustration. Mobile customers who are told that they would lose the ability to receive text messages if they switch operator whilst using MNP are unlikely to consider using the service. This is also inefficient with regards to the scarce numbering resource.

SMS and other data services (e.g. MMS) require, as a minimum, direct routing via the Signalling Relay Functionality (SRF) of mobile network switching providing a unified service that can handle basic call and non-call related services.

In the area of general NP, an indirect routing solution is inefficient in network terms and more costly in call routing terms. These costs will be passed to customers in one way or another, as are all operator costs. If, however, port volumes remain low indefinitely and thereby calls to ported numbers also remain at a low volume, indirect routing may be a viable option.

Direct routing (ACQ) involves the implementation of a centralised database, either as a reference database (with each operator having there own ‘real time’ database, which they tend to have as an inherent component of their network routing arrangements) or as a ‘real time’ look-up database. A ‘real time’ look-up database has to meet the same standards of availability as telephony switches because, by definition, it is involved in real time routing. This makes the centralised ‘real time’ option relatively expensive. The more cost effective option is a central reference database.

The central reference database solution remains cost effective over time, whereas the indirect routing solution becomes more costly as more numbers are ported. The real time routing database remains at a high cost because of the need for continuous availability and high redundancy.



CostsIt is clear that the introduction of NP into any country generates costs - if it did not the decision to implement would be far easier! There are three distinct sets of costs associated with NP, these being:1. System Set-Up Costs – These costs are incurred by the individual operators when

establishing their capabilities to provide NP to customers and occur irrespective of whether any individual customers actually port or not. They include:

2. Administration Costs – These costs are incurred by operators each time a customer requests a NP service and ports its number from the donor operator to the recipient operator.

3. Routing Costs – These are the additional, operational, costs which are incurred by the donor and/or originator (dependent on the routing solution chosen) on a per usage basis in routing each and every call to a ported number.

There tends to be a crude (and very approximate) trade-off between set-up costs (and implementation time) and ongoing direct (administration and routing) costs. Very broadly, the administration and routing techniques that are fastest and cheapest to implement, incur the greatest costs per port or per call in the medium to long term.

The actual costs incurred by any one operator will vary dependant on a number of factors including the solution that is selected, the size and complexity of the operator’s network and the network technology used. These costs will be incurred irrespective of any competitive advantage (or otherwise) gained by any individual operator.

At the international level, there are different approaches to how the costs incurred in NP are allocated amongst the stakeholders. There are also different approaches to cost recovery.

Cost-Effective SolutionsAll of the above is extremely important because all costs imposed on operators (as viable businesses) are ultimately passed on to their customers. This could have the effect of degrading or even reversing the aim of launching NP, i.e. to increase competition, thereby reducing prices. If that is the case, then the decision could be not to launch at all.

It could also have the effect of reducing individual operators’ ability to invest in enhanced customer service and network upgrades (to provide customers with enhanced services) or network expansion (preventing the availability of the service to the wider population). All of these are key aims of any NRA in promoting competition. At worst, it could even force an operator out of business, reducing the competitive position of the market.



Given the market’s individual circumstances, it is important to assess costs realistically. Individual operators will have to develop a financial cost model for revenue and cost assessment. The cost model should also ensure that current planning assumptions, particularly CAPEX budgeting, are used consistently.

Overall ConclusionImplementation options for any market are driven by the need to be realistic, especially where the projections of port volumes are low for short to medium term. However, enhancing competition within such countries is as desirable as it is for countries where the port volumes are projected to be higher. The need for National Regulatory Authorities to work for the good of all consumers is not diminished.

In these circumstances operators will be very concerned about the cost of such an implementation and will want to be sure that there are benefits to be gained for the customer, and rightly so. They have a duty of care for their customers which drive them to challenge any development which seems to be being pursued at ‘any cost’.

However, this is different from the well-recognised stance that incumbents and established operators often take, one of resistance in order to preserve the status quo. Such a standpoint, once recognised, has to be rejected by the NRA.

The traditional view has been that NP is acceptable for large markets with big customer bases and large (projected) porting volumes, but not for markets with smaller (projected) port volumes. More recently, this has changed and NRAs in all countries should be actively engaged in examining or re-examining the possibility of providing customers with a proven competitive tool such as NP.

Cost effective solutions do exist, and in addition, providers of centralised administration services and/or reference data-bases have recognised the desire of National Regulatory Authorities to enhance competition by making centralised solutions even more cost effective.



References

The European Economic and Social Committee and the Committee of the Regions. Progress Report on the Single European Electronic Communications Market (14th Report). {COM(2009) 140 final} Brussels, 24.3.2009

Mobile Number Portability – Ewan Sutherland

Mobile Number Portability Around the World – Telecommunications Management Group. Inc. (2008)

ECC Report 31. Implementation of Mobile Number Portability in CEPT Countries (October 2005)

Mobile Number Portability in Europe (Stefan Buehler, Ralf Dewenter & Justus Haucap - July 2005)



The Author

Les Oliver is a Senior Consultant in InterConnect’s Commercial Services team, and is closely involved in advising regulators and operators on a range of numbering matters, including number plans and number portability.

Les has worked in the telecommunications industry for over 35 years, initially with BT where he fulfilled a variety of roles, latterly as Product Manager in the Wholesale Equal Access Team with individual responsibility for Non-Geographic Number Portability, Carrier Pre-Selection and Local Loop Unbundling. In addition to leading the teams developing all aspects of these services, Les also

represented BT on UK industry forums and worked with industry teams and the UK regulatory authorities in developing the relevant technical, process and commercial parameters for these products. He then worked in a series of business development roles for Telcordia Technologies and Context Connect Inc before joining InterConnect in 2005.

Since then, Les has participated in and led a series of projects in Europe and the Middle East. In addition to his consulting work, Les is a regular presenter at a variety of industry conferences and workshops, not least InterConnect’s Telecommunications Regulatory Master Class (TRMC) on numbering, and is currently the Chair Person of the UK Industry (fixed) NP Commercial Group.

Les may be contacted on +44 1291 638405 or e-mailed at [email protected]

InterConnect Communications

InterConnect Communications is a wholly-owned subsidiary of Telcordia Technologies Inc., based in the United Kingdom, and a leading provider of consultancy services on numbering and related issues from both operational and regulatory perspectives.

InterConnect can provide expert assistance in reviewing or developing an existing numbering regime or assist in the design and implementation of new regimes. Our team of specialists can assist with a wide range of requirements, including:• The preparation of numbering policy documents; • Analysing the current status of the numbering framework; • Establishing guidelines and instructions for managing the National Numbering Plan (NNP), and

defining principles for number plan development; • Reviewing the impact of new technological developments i.e. Next-Generation Networks (NGN)

and Internet Telephony (VoIP); • Reviewing the impact of introduction of Number Portability on numbering; • Establishing approaches to setting and calculating numbering fees and charges; • Understanding the relationship between interconnection and numbering schemes; • Establishing and maintaining Numbering Databases.

For more details of InterConnect’s numbering services, please visit http://www.icc-uk.com/numbering.php or e-mail us at [email protected]



Merlin House, Station Road, Chepstow, Monmouthshire, NP16 5PB. United Kingdom

Telephone: +44 (0) 1291 638400 Facsimile: +44 (0) 1291 638401 Internet: http://www.icc-uk.com





number portability in emerging markets - icc-uk.com that reason, the mobile number portability...

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