Number Portability Enhances Competition in Mexican Phone Services

Implications: A decisive measure to boost competition in the telecoms industry and lower phone rates, portability started to be implemented last July 5 in 40 of the largest Mexican cities. Amid technical problems, only six out of 22 operators involved in the portability program have been able to complete 100 per cent of calls.  Reluctantly, Telmex and Telcel agreed to participate in exchange for being allowed to provide TV services.

Analysis: Last July 12, Mexico became the first country in Latin America to deploy number portability for fixed and mobile lines. Subscribers are now able to change operator while maintaining the same phone number.

The Convergence Agreement, launched in October 2006 to boost competition in the telecoms industry, included three conditions to allow Telmex to provide TV services: interconnection, interoperability among networks and number portability. The former two conditions are already in place and now it is the turn of portability. At the outset, Telmex fiercely resisted it but ended up embracing the plan and its network was the best prepared to initiate the program.

Some analysts forecast that in the next months portability may cause phone rates to decline up to 30 per cent. Currently, Telmex controls 90 percent of the country's land lines. Telmex faces competition from Axtel SAB, as well as cable companies that sell phone service. Telcel controls three-quarters of the Mexican mobile-phone market. Competitors include Grupo Iusacell and Spain's Telefonica. In all, 22 operators participate in the program.

In March 2008, COFETEL awarded the country's number portability clearinghouse contract to Telcordia. This company will serve as a central number repository and a central point to process number porting transactions for 13.62 pesos (US$1.26) per port. Telcordia selected Neoris, a global business and IT consulting company, as its partner for the nationwide implementation.

Portability has involved three major adjustments: 1) Changes of network and systems. Telcel, for example, invested US$45m in technical and operational adjustments to its platform; 2) Pilot tests. All operators had to perform interconnection tests with the central data base administration system and other operators; and 3) Regulation. COFETEL set up a Technical Committee for Number Portability starting on July 5. Since then, this Committee has been in permanent session.

What are the results so far? In a press release dated July 14, Telcordia said that “the solution was successfully deployed”. However, the implementation has caused numerous technical problems. Only Telmex, Telcel, Cablecom, Cablemas Opcom, Iusacell, and Marcatel were able to complete 100% of calls. In a couple of weeks we will be able to have a more complete view of the results and to make a more balanced assessment of the kind of problems occured.

What impact will portability have on Telmex and Telcel? The measure is expected to weaken the market power of Telmex and Telcel because it is highly likely that they will end up being net donors, at least in the first 12 months after portability implementation. Already, Canitec (the chamber of cable companies) has accused both companies of obstructing the new regulation by attempting to complicate the procedure consumers would have to use to change companies.

In the meantime, Telmex continues to argue that it has been forced to comply with certain requirements before offering TV services whereby cable operators can participate in telecoms immediately. It contends that cable firms are now allowed to cherry-pick Telmex's high-income customers in urban markets without being required to offer telephone services to low-income consumers or invest in rural areas, as it has been forced to do. The company accuses COFETEL of being "anti-consumer" and protecting "monopolistic" cable companies.