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PHONE NUMBERS NOW HOT PERSONAL ASSET

Consumers take ownership and topple service providers' marketing strategies

Mobile phones have become the de facto standard contact point for many people – especially with the explosion of small and networked business structures. Until recently mobile service providers held customers to ransom as they were seen to own the telephone number, making it very difficult for customers to switch even if they were not satisfied with service levels. The cost of the change was simply too high in practical terms.

Now with new legislation in place on both sides of the Atlantic to shift the ownership of the telephone number to the individual, there has been a massive shakeout in the number of service providers and the emergence of new service brokers that have created turbulence amongst the network operators.

In a new report issued this week, research company SpaceDust, claimed that real costs of mobile telephony have dropped by almost 70% in the past 5 years. That’s a real victory for the consumer, and it won’t stop there – now a number of industries are about to be hit with similar legislation, including banking, insurance and…

(read more in our detailed Analysis/Synthesis section – for subscribers only)


ANALYSIS >> SYNTHESIS: How this scenario came to be

Background

Originally mobile telephone numbers were tied to the network operators. Switching was a major personal impact as you had to have a new telephone number. Laws and regulations are changing everywhere in favour of the consumer – you will now be able to switch between networks while keeping your own phone number (including the mobile service providers prefix! This will clearly improve competitive conditions and encourage users to swop around – a phenomenon that is setting the open market cats amongst the network operator and service provider pigeons!

Timeline

2000: UK legislation leads the way
New legislation switches ownership of mobile phone numbers to customers rather than service providers. With number portability, a customer can switch mobile service providers at will. Two million users switched in the first year! Big problem is consumer awareness – for obvious reasons, the mobile networks simply don’t advertise it! It’s up to consumers themselves to become aware.

2001: Regulators pile in
Fearing that network operators are resisting the move to number portability, UK regulator, OFTEL, sets a new standards that will force network operators to effect switch times in 5 days (rather than the previous average of more than 25 days) by September 2001. Sofware developer, Softwright, is given the contract to develop this Mobile Number Portability (MNP) system to be implemented between competing networks

2002: Virgin gets on board – US lags
Virgin Mobile advertises “We transfer your mobile number to Virgin in just 5 days!”

In the USA, number portability is still being reviewed. At this stage just 2.7% of mobile customers switch supplier every month.

2003: US begins to get serious
During June-October US service providers start a mad scramble to sign up customers into new 2-year contracts with superb deals, before the new regulations come into place. Providers base their strategies largely on consumer ignorance of the impending new regulations. This year just 35 million subscribers switch networks.

On 24 November new US federal regulations come into force that, for the first time, allow users to keep their mobile phone numbers when they switch service providers. It is expected that the real impact of this new regulation will only be felt when these ‘sweetener contracts’ expire at the end of 2005.

2004: Mobile bandwidth prices plummet
Many mobile networks are now run on the same packet-switched architecture as the Internet. The backbone of all mobile networks are shared with other network capacity. It is only the last few hundred metres of the mobile network that is in fact mobile.

Mobile bandwidth is becoming so plentiful that new brokers are selling it like a commodity – but with a very service-oriented front-end to the customer. Brokers are able to offer customers the best deal from among the network operators – they use their buying power (of millions of subscribers) to switch millions of users from one network to another based on total cost of service and service quality.

The network operators are in uproar and look for legislation to prevent them from an eternal price war. They say the industry has become “impossible to predict and plan for”. They have lost not only the interface to the consumer but are now being held hostage as brokers are seen to buy only from the lowest bidder. Brokers claim “All networks can provide similarly excellent levels of service today – some are just more inefficient than others. We help consumers weed out this inefficiency!”

2005: Profits shift from Vodafone to Virgin
Virgin, the biggest European mobile service broker, reports massive profits even as network operators dip into the red. Vodafone begins to diversify into financial transactions and purchases US mobile broker VeriOne.

In the USA, 10% of mobile customers now switch supplier every month, making the average contract period less than 1 year for the first time. Less than 20% of consumers now have a formal contract with a service provider; 60% are with brokers and 20% have other relationships.

2006: A new mobile consumer boom
As the cost of network bandwidth approaches zero, network operator profitability has reached alarming levels even while mobile service providers are booming.

Research company SpaceDust reports a massive win for mobile consumers worldwide. In their report “Five Year Consumer Boom” they report that there are almost 3 billion mobile phones in use world-wide and that more than 60% of them are used to access Internet-based services. Voice now represents less than one-third of network revenues and gaming is the next biggest usage category.

Warning: Hazardous thinking at work

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