Number Portability Outlook in Latin America and the Caribbean
Number portability (NP) is a policy that was included in regulatory frameworks during the process of opening up fixed telephony markets in Latin America at the end of the 1990’s, or more recently, via Free Trade agreements signed with the U.S. In both cases, the implementation of NP has not been obligatory, meaning that specific regulation is required. Furthermore, this should be understood only as an expression of good will until market evolution justifies the addition of this service offering. Prior to the launch of Number Portability in Mexico, in July of 2008, this policy was only in place in Puerto Rico. This is because, as a territory of the U.S., it is under the jurisdiction of the Federal Communications Commission (FCC).
Signals Telecom Consulting highlights that in the non-Spanish speaking Caribbean, non incumbent operators, like C&W Antigua and market regulators, like those in the British Virgin Islands, Jamaica, Trinidad & Tobago, and the five members of the Eastern Caribbean Telecommunications Authority (ECTEL), have considered NP and in some cases included it in their plans, without yet having actually implemented NP. Although the possibility of NP exists in the U.S. Virgin Islands, which are also under the jurisdiction of the FCC, NP has not been implemented due to alleged technical inconveniences that won’t allow incumbent operator Innovative Telephone (Vitelco) to implement this service offering. On 1 April 2006, however, number portability did become law in French Guyana, Martinique, Guadalupe, St. Bartholomew and St Martin. These markets fall under the jurisdiction of the French regulatory agency ARCEP.
The greatest impact of NP can be seen in the benefits it provides to users, via changes in the behavior of service suppliers present in the marketplace. With the advent of NP, operator strategies are focused in protecting the most profitable part of user bases via rate reductions, an increase in the number of promotional efforts and more facilities that allow clients to gain access to value added services, etc. Moreover, efforts are made to improve customer service, both at customer service centers as well as by telephone. Operators try to reduce response time for fixing problems. Fixed line suppliers seek to cut line installation times and, via promotions, reduce the cost of the installation itself. Finally, operators invest in infrastructure for minimizing and/or eliminating network congestion problems.
Independent of the type of NP to be implemented in the marketplace, for it to work, there must be two operators offering service in the geographic area where the user that wishes to maintain their number and move over to another operator resides. Historically, areas having only one supplier are those having the lowest income levels. Such areas lack coverage provided by other local operators because said operators do not see any reasonable possibility of a achieving a positive return on investment by launching commercial services there. In the short run, beyond household accounts (fixed telephony) and individuals enjoying high levels of disposable income, Signals sees the impact of NP implementation as being an increase in competition for the corporate and small and medium sized business sectors. As for fixed portability, the household has the possibility of not only disconnecting its telephony service but also other services that generate revenues for the operator such as long distance, pay TV services and broadband services.
Number Portability in Mexico
In July of 2008, Mexico became the second Latin American country to implement number portability. In this market there are some Telmex and Maxcom clients that lack a commercial alternative for the offering of fixed telephony. It is important to point out, however, that the PCS 1.9 GHz spectrum licenses held by various operators not only allow them to offer mobile services but also fixed telephony services via WLL. As such, both lusacell (marketed under the commercial brand name lusatel) and Telcel (without much publicity) offer fixed telephony services, something that could increase the amount of national territory covered by two operators at the same time. Signals, however, thinks it highly unlikely that Telcel will want to take advantage of the implementation of number portability in order to try and attract Telmex fixed telephony clients over to its service offerings.
As for fixed telephony, approximately 42% of Mexican households with a telephone line only have Telmex as their supplier of the same (if wireless fixed telephony alternatives that lusacell and Telcel could aggressively pursue are not considered), meaning these users are left out of the potential market for number portability. Signals believes that post paid mobile users together with those places having a minimum of two fixed telephony suppliers represent a total annual revenue volume of more than US$ 12 billion. On other words, each 1% of the total quantity of fixed + mobile numbers held by users in Mexico could represent approximately US$ 120 million in annual revenues.
Signals highlights the fact that operator client retention strategies, an increase in the number of geographical locations having more than one fixed telephony line supplier, driven by the expansion of CATV operator networks, and packaged services rate discounts are variables that will directly effect the size of total market revenues of the potential number of mobile and fixed lines that could be carried from one operator to another under the newly implemented NP policy.
Posted to the site on 11th August 2008
