Perils of portability

Wireless number portability might provide a short-term benefit to Canadian enterprises by lowering prices and increasing competition, but its longer-term impact on this country’s wireless industry and customers would ultimately be negative.

That was one of the conclusions drawn in a national wireless market update last month by Mark Quigley, a research director with Yankee Group Canada.

But Iain Grant, managing director of telecom consultancy the Seaboard Group in Montreal, believes wireless number portability could benefit users without hurting wireless competition if implemented properly.

U.S. telecom regulators are pushing to implement wireless number portability south of the border by November, after extending the deadline for one year.

Canadian regulators currently have no plans to enforce wireless number portability on carriers and they shouldn’t start forming any now, Quigley explained.

“Wireless number portability might be good for consumers,” he said. “But I think a fine balance needs to be struck here between what’s good for the consumer and what’s good for the carrier population.”

Wireless number portability allows wireless customers to keep their wireless phone numbers when switching from one carrier to another. Number portability is already in place for landline connections in Canada. The reasoning behind number portability is that it increases competition by making it simpler for customers to switch carriers.

For carriers, number portability can be a headache, because it increases customer turnover, or churn. Acquiring new customers costs more than keeping established ones, so high churn rates are bad for carriers’ bottom lines.

Quigley believes wireless number portability isn’t necessary, because wireless churn rates, which average around two per cent in Canada, are already significant, meaning there’s already strong wireless competition.

Implementing wireless number portability would hurt Canadian carriers and could eventually reduce the number of carriers in the market, damaging competition in the long term, he said.

“Part and parcel of what we need to keep in mind here is that the survivability of these carriers will be integral to the health of the marketplace going forward,” he explained.

Quigley pointed to the 1999 implementation of wireless number portability in Hong Kong to illustrate his point. When Hong Kong carriers introduced wireless number portability, the result was massive price wars and a churn rate jump from three per cent to 10 per cent. The churn rate eventually returned to normal, but still spikes to between five per cent and six per cent on the anniversary of wireless number portability’s introduction, when contracts expire.

Seaboard’s Grant is in favour of wireless number portability, because it should benefit wireless users.

“I’ve got my Fido number,” he said. “Whatever incentive Bell or Telus or Rogers gives me, I’m never going to leave. Once I have the ability to take my number though, I’d be much freer to shop around.”

If the costs associated with implementing wireless number portability are too high, some or all of the cost could be passed on to consumers, Grant noted.

“People pay for personal licence plates, so why shouldn’t they pay for personal numbers?”

The question wireless carriers need to start asking, Grant said, is why people want to switch wireless carriers at all.

“If people are only staying with you because they’re wedded to their number, then you have a customer service problem that’s pretty profound,” he noted.

Grant believes number portability will eventually be extended to the Canadian wireless market.

“The only question is when,” he said.