The various factions within the telecomms industry reacted in predictable ways to a new study’s findings that long-term number portability could benefit telephone users by as much as $192 million over a 10-year period.
The long-awaited cost-benefit study on long-term number portability — the ability for a telephone user to retain his/her old number permanently after changing telephone providers — was commissioned by the parties to the numbering administration deed (NAD), an agreement concluded among telcos in 1998.
TelstraSaturn leapt in quickly with a positive reaction to the findings. The report, performed by staff from the Law and Economics Consulting Group (LECG) and Amos Aked Swift (AAS), “backs what the vast majority of people have been saying for some time”, says TelstraSaturn’s general manager of industry and carrier relations Jilyut Wong, citing the upper end of the savings estimates.
Telecom says the study is “a useful first step” in evaluating costs and benefits, but that the area “needs further investigation”. General manager government and industry relations Bruce Parkes calls the benefits of portability in mobile communications marginal at best and says the analysis demonstrates that further investment in land-line portability is not worth the cost.
“That’s why we put in place in 1997 a simpler, more economically viable form of fixed number portability which works well for customers.” This is based on simple call forwarding within the Telecom network, rather than establishing a neutral switch.
Over the next three months, the parties to the NAD need to try to reach consensus on several issues. The tens of millions quoted in the report are of the same order as Telecom’s estimates, Parkes says. “Before one would even look at spending that sort of money, you would need to be sure portability was worthwhile. Going by this report, it doesn’t look as if it is.”
Tuanz chairman Ernie Newman says the quantification of costs and benefits is largely irrelevant. “You simply can’t have a competitive market without portability.” Portability means there is an increased potential for customers to change carriers and that of itself will sharpen competition, he says.
After analysing total savings, the study breaks them down into mobile and land-line markets, finding far greater benefits in mobile. This is partly because, according to market research, mobile users value a consistent number more than users of landlines.
While $192m is the upper limit of annual benefits under the condition of spreading the cost — so-called non-linear conditions — they could sink as low as $43m.
The capital cost of providing the infrastructure for portability is between $74m and $89m. These have already been subtracted in calculating the net benefit, says a spokesman for LECG. If a “linear” pricing model is adopted, where the costs are borne by those who directly receive the service, benefits sink into negative territory, ranging from $54m to $21m.
The study assumes a 10-year period running from January 2003 to December 2012 and that the costs of developing and maintaining the service are visited on all phone users, not just those having their numbers ported.