3G Motorola A920

Oct. 13, 2003

Cellular Phone Number Portability—The US Case

　

Federal Communications Commission (FCC) Mandate on Number Portability

Pursuant to the statutory requirement in Section 251(b)(2) of the Telecommunications Act of 1996 to provide telephone number portability, we require all Local Exchange Carriers (LECs) to begin to implement a long-term service provider portability solution that meets our performance criteria in the 100 largest Metropolitan Statistical Areas (MSAs) no later than October 1, 1997, and to complete deployment in those MSAs by December 31, 1998, and that Number Portability must be provided in these areas by all LECs to all telecommunications carriers.

We require all cellular, broadband PCS, and covered SMR providers to have the capability of delivering calls from their networks to ported numbers anywhere in the country by December 31, 1998, and to offer service provider portability, including the ability to support roaming, throughout their networks by June 30, 1999.

--FCC Ruling, July 2, 1996 (Docket No. 95-116)

November 2003 is expected to be the deadline for the implementation of Cellular Phone Number Portability in the US Wireless Telecommunication market. This new regulation, mandated by the Federal Communications Commission (FCC), has been initiated for two main reasons. One is to generate a competitive and efficient market. The other is the 10-digit phone numbers, which are shared by both landline and wireless telecommunications, are going to be exhausted.

It is already the third occasion on which carriers have been given more time to formulate the policy, however, the debates are still vigorous. We are not sure if the industry is ready, nor if the consumer rights will actually be preserved.

Cellular phone number portability means that customers will be able to carry the same phone number when they switch to another service provider within the same local area. For this particular regulation to the US market, proponents consider it as a pro-competitive policy and consumer-rights conservation, whereas opponents argue that the market is already competitive and they regard the new policy as too costly a step.

The phenomenon in this market is as follows. Consumers select a wireless service provider out of the six service providers available. Choices on handsets are constrained on those enabled by the carrier’s technology. Consumers have to contract with the service provider. A heavy termination fee is required by the carrier if the contract is broken. Therefore, incentives to enforce this regulation on the demand side are straightforward. The government seeks an efficient market; consumers want good services (mostly coverage) and prices. In contrast, there are more concerns on the supply side. Incumbent carriers argue that: the Wireless Telecommunication industry in the US is already competitive, the churn rate (i.e.: The percentage of consumers who switch their carriers.) is about 2.8 percent per month now, which is considered high already, and it costs approximately 50 million US dollars to upgrade the system for the action of the new FCC regulation.

On the demand side, once the cellular phone number is portable, consumers encounter a limited switch cost when they change carriers. The switch cost contains a termination fee to the previous carrier, a number portability fee to both the previous and new service providers, a new handset, time on keying contacts to a new handset, and energy for announcing the new numbers. As a result, consumers are able to choose a carrier that best fits their needs. In order to attract more subscribers, service providers will compete by offering high quality services with reasonable prices, therefore, the market eventually becomes efficient.

On the supply side, although Australia, Britain, Hong Kong, and Spain (Countries that are use the Global System for Mobile (GSM) standards) have already provided the option for consumers to retain the same cellular phone number when they change carriers. It is because European and Asian countries tend to adopt a uniform wireless standard (GSM technologies) which makes it easier to choose mobile service. Whenever consumers want to switch to another service provider, the only thing they have to do is buy a new Subscriber Identity Module (SIM) card and replace it with the old one. A new handset is not required. A SIM card is a chip inserted in your handset, which performs like a computer.

But the implementation is far more complicated in the US. The US market is divided among three major wireless transmission standards. For example: Verizon Wireless and Sprint PCS use a digital technology called code division multiple access (CDMA), AT&T Wireless Services, Inc., Cingular Wireless and T-Mobile USA Inc. apply GSM standards, and Nextel Communications Inc., chooses another. Hence, a handset can only function within its carrier’s network. Consumers can not switch among carriers using similar technologies since carriers have incompatible phone equipment. Therefore, it is not possible for Verizon and Sprint subscribers to switch between them. Additionally, GSM technology carriers employ software to “lock” the subscriber’s handset to their network. So, it is impossible to communicate to another GSM network, for example, when you go abroad with your handy phone set if you do not unlock the phone. Because of various transmission systems, the wireless service providers claim that it would be very costly to implement mobile phone number portability. They will be forced to increase the termination and number portability fee in order to keep customers from leaving.

The implementation of cellular phone number portability ideally is supposed to bring an efficient market. Although the incumbent carriers do not provide identical services, in order to survive, they might collude and charge a higher termination and number portability fee. Additionally, because of the expense of upgrading and coordinating the systems, there might be a lag in providing good connections between different transmission standards. When it will be on the track is unknown. Yet, it is predictable that wireless service quality temporarily will go down and coverage areas will contract. The instant result is that it will be even more difficult for consumers to change the carriers and consumer rights will not be conserved.

The success of cellular phone number portability actually lies on a seamless communication technology of which is provided by the Third Generation Wireless Technology (3G). With the 3G system, we can have a high degree of commonality of design worldwide, compatibility of services and facilities, use of small packet terminals with worldwide roaming capabilities, internet and other multimedia applications, and a wide range of services and terminals. If the US government could mandate number portability and 3G technology at the same time, it would be easier and more possible to have an efficient market where consumer’s rights are actually preserved.

　

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