Ofcom chief Ed Richards is on a fresh rampage, backed by Brussels, and UK operators can only delay the inevitable. Separately, Tesco issues 12 month contracts. Watch out Charles Dunstone
By Dominic White
It’s one of the biggest hurdles to switching between mobile phone service providers and the telecoms watchdog has just moved to knock it down.
From April 11, 2011, mobile phone users will be able to transfer their number to a new provider in one working day, Ofcom has declared.
At the moment the networks have to allow customers to move their number to the new provider within two working days. That’s down from a whopping 25 days in 1999 but it’s not good enough for Ofcom chief executive Ed Richards (pictured), who’s on a fresh rampage.
“Ensuring customers can switch between communications providers by removing unnecessary barriers is one of Ofcom’s priorities. Being able to switch quickly and easily between mobile providers is an important part of healthy and effective competition,” said Richards.
The new regulations will require mobile operators to make changes to their systems and processes.
They will also require the porting authorisation code, or PAC (which consumers need to switch provider and keep their number) to be issued either immediately over the phone or within a maximum of two hours by text message.
Richards has a point here. The hassle of switching telecommunications providers is one of the biggest reasons why former monopolies like BT have managed to maintain such large market shares without dropping prices as much as their rivals.
Customer inertia is great news if you’re an incumbent player, like O2, Vodafone or Orange-T-Mobile, with a huge subscriber base to protect.
But it’s a great pain if you’re a smaller, younger operator like Hutchison Whampoa’s Three UK.
And so the scene has been set for what could be a debate that promises to be almost as intense as the ongoing row about termination rates.
“It is not in the interests of the larger operator to accelerate the mobile number porting process, and they will inevitably attempt to further block or delay the process with legal challenges,” says IHS Global Insight analyst Peter Boyland.
The debate has already gone to court so that precedent has been set.
Richards’ team lost out in Autumn 2008 in its efforts to impose a shorter porting time period, when Vodafone successfully appealed against proposed changes, based on the argument that the regulator’s cost estimates were inaccurate.
Then, a year ago, Ofcom launched another consultation on porting aimed at cutting the time taken to port numbers to less than 24 hours.
Ofcom also published estimates of the costs involved to operators of the implementation of a portal hub, which would help to accelerate the porting process.
“The regulator estimated that such a hub would cost between £1.8 million and £14.2 million of initial capex, and between £1.6 million and £3.8 million of annual opex, depending on which model is implemented,” writes Boyland.
In the context of the billions of revenues generated every year by the industry, that would appear to be peanuts, but the figures are bound to be disputed.
Three UK has been very quick to respond. It actually thinks that the regulator, for all its talk about protecting consumers, has not gone far enough.
The network has pointed out that the UK is unique among European mobile markets in that consumers are forced to ask permission to take their number with them when they choose a new operator. In other markets the onus is on the new mobile provider to put in the request.
Three UK also argues that the need for the number porting process to be made easier has grown due to the merger of Orange and T-Mobile in the UK, which has reduced competition and consumer choice.
The battle has just begun but Three’s trump card in all this could prove to be Brussels.
“The formation of the European Union (EU) so-called ‘super regulator’ BEREC will have the power to force national regulators to reverse decisions made on issues like mobile number portability and the EU has made it clear it sees MNP delays as a barrier to the development of competition,” writes Boyland.
“Pressure from the EU is seeing legislation spread across the newer bloc members to ease mobile number portability, while the European Court of Justice has recently ruled that national regulators can set maximum prices for number porting services below the cost for operators providing the service, following a test case in Poland.
“The dominant operators in the UK and elsewhere will no doubt continue to resist the changes, but with the weight of the EU behind the domestic regulators, they can only hope to delay the inevitable.”
Meanwhile, Carphone Warehouse, Phones 4U and the networks face a new threat from supermarket giant Tesco, which is moving into the contract market with a twist.
Sailing against the tide, Tesco says it will offer shorter, 12-month mobile phone contracts as part of efforts to rev up at its telecoms business by appealing to consumers nervous about making long-term financial commitments in these uncertain times.
Tesco Mobile, Tesco’s joint venture with 02, has done well in the prepay market but the retailer has come under pressure from the City to get into contracts.
Tesco Telecoms chief operating officer David Taylor told Reuters he believed the 12-month contracts would appeal to customers because, thanks to the networks’ efforts to reduce churn, 12-month contracts now account for just two per cent of the contract mobile phone market, with 18-month deals on 39 per cent and two-year deals 59 per cent.
Taylor said Tesco had carried out research among 4,000 consumers which showed that one in four Britons would opt for a shorter-term mobile contract if they were more available.
It looks like a savvy move but then again if Britain was to go into a double dip recession I reckon the prepay market would also get another boost as it did during and immediately after the global financial crisis as more people lose jobs and churn off contracts.
Tesco is also expanding its in-store Phone Shops. It has 120 Phone Shops at presents, says it will have 200 by March 2011, ultimately sees potential for about 500 Phone Shops and plans to start trials on introducing the format to smaller supermarkets.
Watch out Charles Dunstone.