Mobile Number Portability
Mobile number portability (MNP) is the ability to retain subscribers’ phone numbers when changing the subscription from one service provider to another. It allows competition by allowing consumers to switch service providers, yet retaining their old mobile phone number. As a result, mobile carriers will need to actively compete, and provide innovative as well as improved customer service, in order to retain and expand their subscriber base.
MNP is increasingly accepted as an integral part of a competitive environment and is being considered for introduction in a number of liberalizing countries (Bueler and Haucap, 2003). Its purpose is to foster consumer choice and effective competition by enabling subscribers to switch between providers without the costs and inconvenience of changing telephone numbers. From the late of the 1990s, many telecommunications regulators in the world proposed to implement MNP as a tool for reinforcing competition in the mobile market.
It started in Singapore in 1997. MNP was enforced in Malaysia starting from October 2008 (MCMC, 2008). The main objectives of MNP have been the benefits to consumers as competition between carriers lowers the prices. In particular, the availability of MNP has been expected to bring substantial benefits to subscribers: lower price, greater choice, higher quality and a greater range of services. In particular, it would allow subscribers to take full advantage of the choices that will become available in a more competitive telecommunication market.
They will also be able to choose the provider that best meets their needs without incurring different switching costs by changing their phone number. 1. 3 The characteristics of the Malaysian mobile telecommunication services market Malaysia is among the largest mobile market in Asean countries. The Malaysian mobile telecommunication industry exhibits typical aspects of the industry reaching the saturation stage. Malaysia had a mobile subscriber base of more than 35. 7 million at the end of third quarter 2011, representing a penetration rate of 124. % (MCMC, 2011).
The penetration rate implying that Malaysian market is already matured and saturated. There are four network operators i. e Celcom, Maxis, Digi and U-Mobile resulting in intensive oligopoly market. MNP in such a saturated market was expected to increase subscribers’ churn rate and to drive the mobile market to new level of competition. When launching the implementing MNP, the MCMC concluded that, “MNP takes away the inconvenience associated with switching service providers.
Consumers will no longer need to worry about losing their contacts when changing service providers. MNP is about improved service quality, better packages, better customer service and giving consumers choice. ” Service providers are currently allowed to charge up to RM25 each time a subscriber changes his/her service provider. This will give mobile phone users choice and freedom to choose their service providers without the inconvenience of having to change their numbers. 1. 4 Purpose
With a full hope that MNP will benefit Malaysian subscriber, after 3 years of its implementation, according to MCMC only 1. 17% in 2008, 5. 06% in 2009 and 2. 89% in 2010 of subscribers have submitted their request for MNP. With the average 70% success rate, the actual ported subscribers are still low and insignificant. It could be a truth during the launching 4 year ago, a CEO of one of the service provider has downplayed the effect of MNP and has stated that the MNP is just hype. It seem that the industry analyst also agreed with him, at least for the time being.
After spending for great promotion on MNP during its launching year, none of the 4 Telco’s has reported significant migration of new subscriber to or from their subscriber base. Up to now, MNP appears to have no significant impact on the churn and competition landscape in the mobile market and hence the objective of MNP is still far ahead to be achieved. 1. 5 Motivation While there have been live discussions whether MNP increases competition in mobile markets, more fundamental question may be whether subscribers are able to switch carriers without significant switching barriers.
In this light, this study focuses on the subscribers’ response to MNP: the effects of MNP on the switching barrier, switching cost and subscribers’ perception, and the structural relationship among those factors in the Malaysian mobile subscribers. This research is interested in investigating the effect of the introduction of MNP on subscribers’ behaviors and perceptions, and how it affect their motivations for changing or retaining with service providers with the introduction of MNP. Earlier studies on MNP mostly focus on the industrial aspect of MNP.
The present study aims to fill this gap by analyzing the consequences of MNP at the subscriber level. An interesting question may be how regulators make MNP more effective to give benefits to customers, instead of how mobile carriers secure their existing subscribers against increasing churn and seize the market share opportunities at the expense of customer benefits. In this context, the core of research question of this study is if this MNP regulation has achieved its intended objective particularly in switching behavior and subscriber benefits.
Although there have been many studies looking at the effect of number portability on competition at the industry level, little attention has been made on the individual level such as subscribers’ behavior and perception. Since the primary goal of MNP lies in subscriber benefit, a fundamental and a important question needs to address the subscriber’s actual responses. 1. 6 Important & Contribution The results of this study will reinforce the effectiveness of MNP implementation in Malaysia, increase competition and hence brings benefit the customers.
Literature review on MNP Most studies on MNP have developed from the framework of service provider competition, mostly by adding switching costs to the model. Studies on the impact of MNP on competition tend to have macro perspective using economic analyses. Aoki and Small (1999) is the most frequently cited research that directly investigates the effect of MNP implementation. This work gave the interpretation of MNP as a reduction in switching costs accompanied by increase in fixed and marginal costs of the firms.
Their analytical investigation is focused on the MNP-caused welfare change of consumers and producers. Similarly, Srinagesh and Mitchell (1999) analyze that MNP has significantly contributed to the effective competition in the US mobile market. Gans (2001) also positively assess that MNP would encourage participants to search for and achieve socially efficient outcomes by giving consumers’ ownership of their phone number and a right to port a number. Other studies highlight the negative aspects of MNP.
Reinke (1998) argues that even if number portability can increase the competition in the telecommunication market, the means by which number portability is implemented may either ensure or threaten competition and universal service. Buehler and Haucap (2004) also investigate the effect on MNP implementation on consumers’ welfare. Novelty of this research was consideration of the effect of MNP on level of information available to consumers. They argue that under MNP number prefix has no indicative power. Callers are not able to distinguish between on-and off-network phone numbers and may end up paying higher than average bills.
They also argue that MNP implementation will benefit the entrant firm and will hurt the incumbent. Buehler and Haucap (2004) also concentrate on the analysis of fixed-to-mobile calls ignoring the more difficult mobile-to-mobile case, which involves changes of market shares. Similarly, Lee et al. (2006) estimate consumer benefit from content use with a mixed logic model, which provides a flexible specification for representing the distribution of preferences in the population and the choices of each customer.
Another stream of literature on the MNP effects is in analysis of customer behaviors toward MNP. Shin (2006) investigates the effect of MNP in the USA by focusing on subscribers’ perception and behavior on MNP. Lee (2004) estimate subscriber preference of considering attribute of choosing a carrier through conjoint analysis technique.
They also estimate quantitative user’s value given to switching cost and MNP and conclude MNP is an important cause of reducing switching cost. Similarly, Gerpott et al. 2001) investigate the structural relationships of subscriber retention, subscriber satisfaction, and loyalty in German mobile subscribers. Their findings show that customer support has a significant impact on subscriber loyalty, which in turn influences a subscriber’s intention to terminate/extend the contractual relationship with his/her mobile carrier. Kim et al. (2003) use the Gerpott et al. ’s (2004) model and apply it to Korean mobile market whose findings show the two factors of satisfaction and a switching barrier which constitute subscriber loyalty in mobile service.
Their structural equation modeling among customer satisfactions, subscriber loyalty and switching show that switching cost like switching number is considered as a formation factor of an important subscriber loyalty, preventing subscriber from churning for other carriers, in the result. While Kim et al. ’s (2003) framework is a good tool to investigate a series of behavioral factor affecting switch mobile service; a question of competition in mobile carriers remains unanswered. For this question, Krupp (2005) assesses the effect of MNP in the USA in terms of competition in industry and subscriber benefit.
Krupp’s study method is purely qualitative, collecting data through six interviews from industry, regulatory agencies and selected subscribers. Bjorkroth (2005) focuses on the cost of MNP administration in Finland mobile carriers before and after MNP. Using statistical analyses, Park et al. (2004) estimate the impact of MNP on the competition and social welfare and conclude that the MNP has achieved effective competition in mobile market, but MNP has not contributed to social welfare. Jeong and Park (2003) examine the difference of subscribers’ switching intention before and after the introduction of MNP in Korea.
Their study finds the factors associated to switching: service quality, brand image and price and service benefits. Based on the factors from Jeong et al. ’s study, Yang and Choi (2003) further analyze the structural relationships of the identified factors of brand perceived level, service quality, a charge cut and value-added service. Yang and Choi’s study would have been better with a specific customer retention strategy of telecommunication carriers with MNP. Lee et al. (2004) used contingent valuation techniques to estimate the prospective demand for MNP in South Korea.
They found that the average South Korean mobile user was willing to pay an average of 3. 24 percent of his or her monthly bill for a mobile number portability option. Willingness to pay (WTP) showed a strong positive association with income, awareness of MNP, and intention to switch. The authors also found that WTP varied significantly depending on a user’s network operator: the figure was lower for customers of the incumbent operator than those using either of the alternative operators. Other demographic variables such as age, gender and occupation were not found to be significant.
Kim (2005) estimated switching costs for customers of two of the country’s mobile network operators by applying a random utility model to cross-sectional subscriber-level user data. The paper compared switching costs calculated using samples before and after MNP, and differences between these estimates were attributed to MNP. The paper estimated that MNP reduced average switching costs in South Korea by more than 35 percent. Data reported in the paper indicate that there was significantly more switching after MNP was introduced, at least among customers of the largest operators.
Though number of empirical papers grows quickly still there is enormous space for investigation. Few attempts have been made to measure the effect of MNP at subscriber levels leaving the concept of switching barriers unclearly defined terms. The present study aims to fill this gap by analyzing the actual subscriber behaviors and perceptions on MNP. The term of switching barrier needs to be clarified with subscribers’ behavior.