WLNP to Accelerate Fixed-Mobile Substitution?
By Steve Wallage, Tue Nov 04 08:30:00 GMT 2003
The rise of fixed to mobile migration, and the growth of the mobile only household, will get limited assistance from regulators but it will have some interesting side-effects.
Wireless local number portability (WLNP) has been a major issue in the US. The FCC regulations should come into force on November 24, but there has continued to be major lobbying by mobile operators. They are right to be concerned about its impact. The Management Network Group (TMNG), forecasts 30 million subscribers will change mobile service providers during the first 12 months of WLNP. An earlier TMNG study found that about 24% of large businesses are ready to switch services.
However, at least as interesting, and often ignored in the discussions of WLNP, has been the opportunity to port between fixed and mobile. Although it is still unclear how quickly and in what form this will be implemented, Verizon Communications and Verizon Wireless have already confirmed that they will offer customers the opportunity to port their phone numbers between Verizon local and mobile services. This will allow some fixed pricing and bundling plans to be available to mobile users - and leads quickly to the question, will consumers need a fixed line?
Knocking Down Barriers
According to research from Gartner Group, the inconvenience of changing numbers has been a real drag on consumers switching to a mobile only household. They found that 9% of fixed US subscribers would transfer their service to mobile if they could keep their telephone number.
The Regulatory Uncertainty
Although the FCC has been pushing WLNP hard, it will take several years before it mandates full, unrestricted fixed-mobile LNP. The mobile operators have learnt from their fixed counterparts (or, in many cases, parent company) that delay is one of their biggest weapons in dealing with regulators. If they can, at least create the impression, that portability is difficult, expensive and potentially problematic, then they can reduce its impact.
Will other regulators follow the FCC moves? There is little evidence that there has much thought of fixed-mobile portability in other countries, and such is the difference in the US regulatory environment, that there is no reason to think this would be quickly copied. However, evidence of the impact of WLNP increasing user choice and service would make other regulators take notice. However, they would have to overcome tremendous resistance from fixed operators.
The Evidence So Far
When looking at fixed to mobile substitution, much of the discussion normally centers on substitutions of calls or minutes, rather than lines.
The UK regulator, OFTEL, has found that there are around 8% mobile only households in the UK, and this number has started to stabilize. The major segment is widely thought to be students and the 16-24 year old age group. This is supported by research commissioned by O2 and undertaken by NOPWorld. It showed approximately 40% of this age group in the UK have no fixed line.
However, as Julian Hewett, chief analyst at Ovum, recently wrote, "But most homes and virtually all businesses will retain a fixed line. Why? Because you need a fixed line for Internet access." Gartner Group research finds that US fixed still has five key advantages over mobile service; service quality and coverage limitations, equal or better value proposition, safety, security and survivability during a power outage, definitive emergency E-911 availability, and voice quality and clarity.
For US operators used to providing a wide range of bundled services to consumers, such as Verizon Freedom, WLNP provides additional opportunities to widen this package and potentially further lock in customers. For example, by tying all their fixed and mobile usage and tariffs into one integrated package
Mobile operators' desire to see increased mobile usage from the home may also have a longer term ambition. For example, part of the rationale behind the O2 Home tariffs is to introduce Bluetooth technology around the home. O2 expect 'consumer' Bluetooth to be a commercial reality in late 2004 or early 2005.
The Need to Offer Fixed and Mobile Services
This regulation also shows how important it will become for operators to provide fixed and mobile services, and how marketing and packaging may start to blur the distinction between fixed and mobile offerings. Although the aim of fixed to mobile portability is to increase competition, it may just strengthen the position of the operators able to offer both services.
A CIO at a major European multinational recently told me that he was close to signing a deal with a mobile operator for a major deployment. One small component of the deal was fixed line support. The mobile operator refused to get involved with this element. The CIO wanted a single provider, and so went to a mobile operator willing to provide both. The irony was that the mobile operator didn't own a fixed network, but was happy to manage the fixed connection anyway.
Mobile operators need to remember that to offer the best packages to their customers, they will need to include fixed as well as mobile elements. And regulation may accelerate this requirement.