Issues around Number Portability

1. Introduction

Number portability (“NP), the facility enabling customers to keep their existing telephone numbers when changing supplier, is currently being deployed throughout the UK’s access networks. This innovation follows a prolonged debate about the economic costs and benefits of portability. The prevailing view of the regulatory regime was that the corresponding reduction in costs of switching from one operator to another was an essential requirement for effective competition in the local loop.

Indeed, several operators argued that the absence of portability was the single most significant impediment to competition in the UK telephony market. This was confirmed by OFTEL’s consumer survey which revealed that a significant proportion of residential and business users declined to switch to other operators mainly because they wanted to keep their telephone numbers. However, the survey did not provide any strong evidence of how much switching would result from the introduction of NP. This was expected to depend on a number of factors, including the strength of marketing by cable companies and other suppliers; the speed with which the cable networks are built; the price discounts offered compared with BT; and the extent of charges for NP.

This note will give an overview of the UK regulatory regime governing the NP. The note will cover NP for fixed services and mobile services.

2. Costs and Benefits

As said in the introduction, OFTEL carried out consumer survey in the early 1990s about users’ attitudes to keeping or changing telephone numbers. The results of the research confirmed that not being able to retain their number is one of the factors that deter residential customers from changing suppliers. As a result of these findings, OFTEL consulted with the industry following which it was established that portability was technically feasible in the short term although the delivery technology will certainly have to evolve over time.

The second precondition for NP was that its benefits should outweigh its costs. OFTEL commissioned a group of economic consultants to investigate the costs and benefits of several different technical methods of providing portability. Three categories of prospective benefits were identified:

· benefits accruing directly to the customer who port their numbers including savings from not having to change number, from switching to lower costs operators; and from the convenience of dealing with only one operator.

· benefits accruing to all UK telecommunication customers arising from efficiency improvements and associated price reductions which result from the increased competition in the telephony market due to the availability of NP.

· benefits meaning general savings accruing as a result of there being fewer number changes including fewer misdialled calls and fewer calls to directory enquiries.

Finally, there was an issue of costs i.e. how the costs should be allocated between operators. The problem with cost allocation is obviously that many of the costs of NP are borne by parties that do not gain the benefits. In particular, the operator losing the customer bears some administrative costs and the costs of re-routing calls to ported numbers, as well as losing revenue from the customer. Meanwhile, the new operator has some costs of administration, but gains the benefit of the revenue stream from the new customer.

3. Fixed Number Portability

3.1. European Directives

Although NP for fixed services has been available in the UK for a number of years where the telephone companies have chosen to provide it, it was only as a result of the Numbering Directive 98/61/EC amending Directive 97/33/EC with regard to operator number portability and carrier pre-selection that made an important change to the UK telephony market by allowing customers taken on by telephone companies to require them to provide NP. This requirement applies to numbers for fixed telecommunication services only.

3.2. The UK Regulation and its effect

The Directive 98/61/EC was implemented in the UK by Telecommunications (Interconnection) (Number Portability etc.) Regulations 1999 (SI 1999/3449) (the “Regulations) which came into force on 19 January 2000 and applies to all operators or service providers providing fixed telecommunication services. The Regulations were made under section 2(2) of the European Communities Act 1972 and amend the Telecommunications (Interconnection) Regulations 1997 (SI 19976/2931) and the Telecommunications (Licence Modification) (Standard Schedules) Regulations 1999 (SI 1999/2450). The Regulations introduce new licence conditions to the existing licences granted under section 7 of the Telecommunications Act 1984 and impose NP obligations on Systemless Service Providers, that is those telephone operators that do not operate under a Telecommunications Act licence.

The Regulations require that subscribers should be able, if they wish, to keep their telephone numbers when they change the operator providing their fixed telecommunications services i.e. telephone services using geographic[1] or non-geographic numbers[2]. Only those customers that remain at the same address will be able to change operator and keep their geographic number under this new portability regime (although some telephone companies may, on a voluntary basis, provide a service to allow customers to change operator and address at the same time). Mobile and paging numbers are not covered by the Regulations. Numbers for mobile services are however, already portable between mobile operators in the UK (see below).

OFTEL has also come to the view that telephone companies marketing or offering services should proactively seek to put portability facilities in place with other telephone companies before the customer requests it and that a portability facility must certainly be in place when they contract with a customer. Indeed, the Directive requires that operators and service providers cannot take on a customer and refuse to provide them with NP and this has been reflected in the Regulation. However, one should note that the telephone companies in the UK are not required by their licence to take on new customers.

As to the provision of NP, OFTEL has taken a view that a 5-8 working day timeframe for providing NP for a basic service is appropriate. Obviously, the provision of a complicated services will take longer. Operators are also allowed to request, pursuant to a new licence condition, a Determination as to the reasonableness of a request for portability taking account of particular technical and operational characteristics of the relevant systems. However, a Determination will be granted only if exceptional technical or operational problems exist with a particular exchange or switch but this does not negate the absolute obligation of the operator to provide NP to any customer taken on by an operator who request it. Moreover, in the event of such a determination being granted it is likely to be provided on a temporary basis only.

In short, the Regulations provide that if there is no portability facility in place at the time of the contract being signed, the operator cannot contract with a customer to provide a service. Furthermore, if operators and service providers delay in establishing porting arrangements in order to seek to persuade customers to transfer without porting, OFTEL will take appropriate action. Operators and service providers may, however, if they wish, levy a reasonable charge for the provision of NP to subscribers

Licensed operators who do not comply with the Regulations will be in breach of their operating licence, whereas systemless service providers will be liable to enforcement action through civil proceedings by the Director General of Telecommunications.

3.3. Cost Allocation

OFTEL has taken a view that costs associated with portability should be based on the operators’ long run incremental cost as this cost basis is more reflective of the cost base on which businesses in competitive markets make investment decisions. However, the new licence condition recognises that the donor operator and recipient operator may agree upon a different basis, for example they may agree that charges should be on a reciprocal basis. Furthermore, one or both of the operators may ask the Director to determine the appropriate cost basis.

Costs associated to NP can be divided into the following categories:

3.3.1. System Set-Up Costs

The donor operator shall bear its own system set-up costs in full. System set-up costs are those incurred by each operator to ensure that its network and management systems can provide portability. By bearing its own system set-up costs, the donor operator will have more incentive to minimise cost.

3.3.2. Per Number Set-Up Costs

The costs most directly applicable to those incurred with respect to setting up portability for each number or block of numbers should be borne by the operator to whom the number is being ported (the recipient operator) rather than the operator that is porting the number (the donor operator).

3.3.3. Additional Conveyance Costs

The donor operator is not allowed to charge the recipient operator a specific portability charge for additional conveyance. Additional conveyance costs are the costs of conveyance of each call to a ported number additional to the costs of conveyance on on-ported calls.

3.3.4. Average Porting Conveyance Costs

The donor operator can recover average porting conveyance costs where appropriate. These are costs incurred by the donor operator acting as a transit operator for calls that originate on another operator’s network that are destined for a recipient operator.

3.4 Other issues surrounding NP

3.4.1. Functional Specification

NP must be provided in accordance with the Functional Specification. It is a document published from time to time by the Director General, following consultation with all telecommunications licensees specifying technical and other principles for efficient implementation of portability.

3.4.2. Subsequent portability

Subsequent portability covers the situation where a customer has ported a number from one operator to another and wishes to switch again to another operator, still retaining the original number, but is not returning to the operator from whom he first obtained the number. In these circumstances, the regulatory obligations would be between the licensee and the new recipient operator. For regulatory purposes, the previous recipient operator is not involved.

3.4.3. Number Mobility

Number mobility is a service offered by operators which enables a customer to retain their geographic number when they change address. This service does not come within the terms of the Regulation. Any service offered by operators to allow a customer to keep his geographic number when he changes address e.g. within the same local exchange area will be up to the operator concerned. The Functional Specification does, however, have one rule on mobility: that, for a ported number, the recipient operator can only provide mobility within the service area of the donor operator.

3.4.4. Retention of existing charging rates

Due to the current telephone network billing systems, NP has some pricing limitations. Numbers that have been ported to another operator may have to be kept at the existing charging rate set by the original operator to whom the number block was allocated.

3.4.5. Existing contracts

The subscribers’ existing contracts with the operators should not prohibit them taking their telephone numbers to alternative operators. Should a subscriber wish to switch to another operator, he/she should be able to do so subject to any reasonable payments that might have to be made to compensate the existing operator for early curtailment of the contract.

3.4.6. Outstanding debts

As there are separate mechanisms for the operators for the recovery of any legitimate monies owed, the OFTEL does not consider that outstanding debts should prohibit subscribers from taking their telephone number to any alternative operator or service provider which is willing to take them on.

4. Mobile Number Portability

4.1. The amended licence condition

Portability of mobile numbers was introduced in the UK in January 1999 as a result of several studies carried out by OFTEL concluding that mobile portability was technically feasible and that there were no fundamental technical barriers to its introduction. Further, it was found that in the absence of NP only 42% of corporate subscribers are willing to change mobile operator. However, if NP was introduced, the percentage of subscribers prepared to switch operator would increase to 96%. This strongly suggested that the introduction of mobile NP would increase competition and consequently be in the public interest.

As a result, the existing mobile operator licences were amended and new conditions requiring the mobile operators to provide portability on a reasonable terms to any other operator who requests it and who is able and willing to provide reciprocal portability were included in each of the mobile operators’ licences. One should however note that the amended licence conditions only oblige the Licensee to export numbers to other operators. It does not require operators to import numbers – operators can freely decide, on a commercial basis, whether or not they wish to import numbers from another operator. In the event of a dispute, operators may refer to the Director General of Telecommunications for his determination of the reasonableness of particular terms and conditions being offered.

The amended licence conditions provide for portability not only of mobile numbers but also of “geographic numbers and “non-geographic numbers. This is because mobile operators under the terms of their licences are entitled to receive and use geographic numbers and non-geographic numbers. Therefore, OFTEL takes a view that any mobile operator, which offers geographic or non-geographic services, should also be able to provide portability for such numbers but an operator, which does not provide such services, could not be obliged to provide portability of those numbers.

In short, the amended licence conditions ensure now that customers can keep their phone numbers when they change mobile service provider or operator and mobile operators to ensure that this is offered by all service providers who sell their airtime.

4.2. Cost allocation

OFTEL has recognised that there is a considerable degree of symmetry in the mobile market in respect of costs. Nevertheless, the licence conditions have set out a limited number of basic rules on charging.

4.2.1. System Set-Up Costs

Each operator bears its own system set-up costs.

4.2.2. Per Number Set-Up Costs

These are the costs most directly applicable to setting up portability for each number or numbers and should be borne by the operator to whom the number is being ported.

4.2.3. Additional Conveyance Costs

The donor operator may not charge the recipient operator a specific ‘portability’ charge for additional conveyance. This cost should be subsumed into the donor operator’s general network costs, spreading the cost over all calls on the network.

Apart from the above mentioned costs, the donor operator may recover any other costs incurred in providing portability, provided that such costs are reasonable. All the costs should be charged on an incremental cost basis. However, the donor or recipient operator may agree upon a different basis, for example they may agree that charges should be on reciprocal basis. In addition, one or both of the operators may ask the Director General of Telecommunications to determine the appropriate cost basis.

4.3. Recent developments

Since October 2001, a new system has been put in place that makes it quicker and easier for consumers to keep their mobile phone number when changing to a different network provider. The four mobile network operators, BT Cellnet, One2One, Orange and Vodafone introduced a new automated system which dramatically cuts the time it takes to transfer numbers from 25 days to as little as 7 days. Consumers can also choose the date on which they wish to transfer their number.

For further information please contact David Roberts by telephone on +44(0)20 7367 3678 or by e-mail at [email protected]

[1] Means ordinary telephone numbers of subscribers at a fixed geographic location e.g. numbers beginning (01 or 02).

[2] For example freephone numbers (080), local and national rate numbers (0845 and 0870), personal numbers (070) and premium rate numbers (090).