Number portability still years away
Chinese mobile users probably won't get to enjoy full number portability until 2015 at the earliest, limiting competition and innovation in the sector.
I have to admit that I feel just a little guilty for my constant critiques of China's telecoms regulator, the Ministry of Industry and Information Technology (MIIT), for its notorious slowness at doing just about anything that could create a more competitive telecoms industry. After all, the MIIT is certainly trying to improve the country's telecoms landscape, even if the glacial pace of change often means that China is years behind the rest of the world in new innovations. The regulator's notorious slowness is once again in the headlines these last few days, with word that the MIIT will soon allow consumers in three provinces to keep their phone numbers when changing mobile carriers, a practice known as number portability.
Any Chinese mobile users hoping to change carriers anytime soon shouldn't get too excited, since the latest reports say the new pilot program in Hubei, Jiangxi and Yunnan provinces won't begin for almost another year, with an official start date of April 1, 2014. It does seem appropriate that the launch date for China's number portability program is April Fool's Day, since anyone who believes this new program will bring change to China's telecoms landscape soon is probably a fool.
Number portability has been a major impetus for development of telecoms markets because it helps to create more competition and thus encourages companies to innovate. The reality is that most people are very reluctant to change telcos if it means they will have to change telephone numbers, since most have used the same number for years and worry about losing touch with friends, acquaintances and business contacts after such a change.
I'll a China Mobile (0941.HK; NYSE: CHL) subscriber, and will openly admit that I have resisted changing to faster and more reliable service offered by the country's other two telcos due to hassles related to switching my phone number. Many of my local and foreign friends feel the same way, a reality that has helped China Mobile to retain its position as the nation's dominant carrier these last three years despite its inferior 3G mobile service.
I first reported on number portability more than two years ago, when China was just wrapping up a six month trial program that was largely a major disappointment. Under that program in the city of Tianjin and Hainan province, only 50,000 people were able to successfully switch to new carriers while keeping their old phone numbers during the trial period. I said at the time that the results of the pilot didn't look encouraging, and now it seems I was right since this latest program won't come until three years later.
I wouldn't be surprised if the latest program fails to launch on the April 1 date due to more delays. Even if it does launch, it could still be another year or two before the program goes nationwide, putting China's roll-out of number portability about two decades behind the US and other western markets. I have little doubt that China Mobile is a major force resisting this change, as it stands to lose the most if users can switch carriers without have to change their phone numbers.
This snail's pace of major regulatory reform is becoming a hallmark of the MIIT, which seems to take much longer to do most things compared with its western regulatory peers. The regulator requires all mobile phone makers to go through a relatively lengthy validation process for all of their new models before it can be used on any Chinese mobile networks. Its slow pace of awarding licenses has also resulted in China's introduction of 3G and 4G services three to five years after their roll-out in most of the rest of the world.
In this latest case of numerous delays in implementing number portability, the MIIT is continuing its tradition of super-slowness in regulatory reform. That practice will ultimately undermine China's telecoms industry and ensure that it remains years behind more nimble western markets.
Bottom line: Chinese mobile users probably won't get to enjoy full number portability until 2015 at the earliest, limiting competition and innovation in the sector.
To read more commentaries from Doug Young, visit youngchinabiz.com