One of the many factors that regulators have introduced to increase competition in voice telephony is the concept of number portability. Because many customers are reluctant to change phone numbers in order to change carriers, number portability is key to an open market in wire-line voice. The FCC has set Nov. 24 as the deadline for number portability to be applied to wireless phones.
Much has been said about the technology involved in number portability, and frankly, most users aren’t interested in how it works. So instead of looking at the direct technical issues, I want to explore what wireless number portability (WNP) might mean to the carrier market.
Almost everyone in the industry acknowledges that profitable voice communications is moving to wireless. Wireless phones are convenient, offer simple and powerful fixed-price dialing plans, and have the kind of cool features that young consumers demand. Until now, wireless phones have been more immune to churn, or customer changes in carrier, in part because number portability hasn’t applied to wireless. Now that it will, what will happen?
First, the thing that binds the average customer and wireless carrier together is a contract, not lack of number portability. The fee to get out of these contracts is formidable, so even portability isn’t going to induce those under contract to switch.
This means getting users to sign contracts will be a high priority. About 25% of wireless customers are well beyond their contract period, and fully 50% have either no contract or less than a year’s contract to run. WNP is going to push carriers to work to re-sign these customers, luring them with signing bonuses such as free high-end phones. Enough new gadgetry could be promoted this way to revive the moribund handset industry, but how might the carriers be affected by the costs of WNP and the competition it creates?
Push them to data, maybe. Let’s face it, no carrier really cares much about the “public good”; they care about the private profit. DSL is essential to the regional Bell operating companies because it provides a profit boost, and content services are interesting to interexchange carriers and RBOCs alike for the same reason. As long as carriers can reap dependable profit margins from wireless voice services, there’s less incentive to try that strange new world of consumer broadband. Make wireless voice less attractive, and broadband could become more attractive.
Even broadband wireless? That’s the big question. The ultimate differentiator in wireless is broadband, and current wireless trends, such as built-in digital cameras, could create applications for fast data connections to a portable handset. If wireless carriers decide to use phone features to induce customers to sign new contracts, data is a good feature to include in the package. But if WNP is expensive, what’s cellular broadband if not super-expensive?
Which brings us to the endgame. It’s likely that WNP is going to reverse the trend of spinning out cellular business from wireline business because factors such as WNP and broadband wireless are tending to move the wireless and wireline networks in a converging direction. We already have local number portability in the wireline space, and we already have at least a broadband commitment. There are already many common elements between wireless and wire-line networks, and WNP is only going to increase them.
Is this good for data, for broadband? In the long term, it’s certain to be. In the short term, there’s the risk that Wall Street, still antsy about investing in telecom, will punish the carriers if they try to take on too much at once. Until the financial markets get over the fright of the bubble, carriers might have to choose between upgrading wireless and providing broadband. Too bad, but too true.
