Number Portability and Number Evolution Planning ...

Number Portability and Number Evolution Planning toward IMT-2000: The Case of Korea’s Telephone Service Jin-Ki Kima and Suk-Gwon Changb a

Research Fellow, Div. of Telecommunications and Broadcasting Policy, Korea Information Society Development Institute (KISDI), 1-1 Juam-dong, Kwachun, Kyunggi-do, 427-070, Korea [email protected] b

Dept. of Business Administration, Hanyang University, Sungdong-ku, Seoul 133-791, Korea [email protected]

Abstract Number portability is an effective policy vehicle to enlarge the competition among players in the telecommunications market. During last several years, many research issues have been raised with regard to the deployment of number portability in Korea. They include technical issues about the implementation methods and its impact on Korean telecommunications market evolution toward IMT-2000. This paper attempted to analyze those issues explicitly using decision tools like decision diagram, cost-benefit analysis and sensitivity analysis. Three kinds of benefits were identified and estimated based on a survey data collected directly from consumers and service providers. Also, the sensitivities of them to the policy parameters like implementation method, churn rate and market evolution scenario toward IMT-2000 were analyzed. Several number portability deployment paths were generated and analyzed in view of their impact on the future IMT-2000 market development.

1. Introduction The Korean telephone service market has witnessed a fundamental restructuring during last several years. Hanaro Telecom entered the local  This work was partially supported by the Brain Korea 21 project in 2001.

telephony and high-speed Internet access service market in 1998 as a new competitor to the long-lived market incumbent, Korea Telecom. Meanwhile, Shinsegi Telecom and Hansol PCS, the third and the fifth mobile telephone carriers in Korea, were acquired by SK Telecom and KT Freetel in December 1999 and in June 2000 respectively. This market restructuring is basically attributable to the MIC (Ministry of Information and Communication)’s deregulation continued throughout the 1990s. But the M&A among the mobile telephone carriers seems to be directly initiated by the holding companies’ significant degradation in profitability after the foreign exchange crisis in 1997 on the one hand and by the IMT-2000 license allocation scheduled in late 2000 on the other hand. The result of this market restructuring is quite apparent. The linkage across the fixed and the mobile telephone markets, as well as within the mobile telephone market, was greatly strengthened to form differently streamlined competitive groups of players. The effective number of major competitors in the Korean mobile telephone market reduced to three, and the rule of the game among players has been greatly changed. The competition among players has been further extended across the fixed and the mobile telephone markets. The market players are becoming to see greater chances to bundle fixed and mobile services to provide customers with better quality of services. MIC, the regulatory body of Korea, who wants to retain the degree of market competition in an appropriate level in order to protect the consumers’ welfare, began to investigate the negative impacts of the market restructuring. The rigidity of the telephone number, which cannot transfer across the service providers, was identified as one of the most critical barriers to prevent the future fixed-mobile converged market from becoming more competitive. Also, various policy issues concerning the number portability (NP) deployment in the Korean fixed and mobile telephone markets have been raised. Number portability has been studied worldwide in late 1990s in both technical and regulatory points of view [1, 3-6, 14, 15]. Recent studies are more focused on developing IN (Intelligent Network)/AIN (Advanced Intelligent Network)-based architectures [9, 20], on extending the geographical area for which the number portability is applied [8], or the country-specific issues of number portability implementation [16, 19].

In line with these researches, this paper addresses the problem of number portability deployment and number evolution planning in the Korean reformed fixed and mobile telephone market and suggests a decision diagram for the numbering policy optimization. Though it is true that the numbering scheme for IMT-2000 goes beyond the E.164 format of ITU-T to the Internet naming and addressing schemes as indicated by Roberts [17], we restrict our analysis to the numbering issues of the fixed and the mobile telephone markets evolving toward IMT-2000.

Until late 1990s, the Korean mobile telephone service market has been separated from the fixed telephone service market, each having a differentiated market structure. The mobile service has no market hierarchy, while the fixed service has an explicit market hierarchy of local, long distance and international services. The market competitors in the mobile service market, which are two cellular mobile carriers, SK Telecom and Shinsegi Telecom, and three PCS carriers, KT Freetel, LG Telecom and Hansol PCS, had been only weakly connected to their fixed service siblings. There seemed to be no explicit interactions across the fixed and the mobile markets and no fixed mobile converged service was observed.

2. Market Structure and Numbering Scheme 2.1 Korea’s Telephone Market Structure Fig. 1 depicts the Korean telephone market, which are reshaping toward a fixed mobile converged IMT-2000 market. In the figure, arrows indicate the ownership relations among the fixed and mobile telephone carriers. Fixed international and 3G mobile service

Fixed

Mobile

Fixed long-distance And 2G mobile service

Dacom International

Shinsegi

Dacom long-distance

Fixed local service

Hanaro LG

SK Telecom

SK-IMT

SK

LG-Global** LG Telecom KT

KT local

KT long-distance

Mobile

SK Telink

In 1999, MIC announced the government’s policy guidelines for IMT-2000 licenses, which said that only three IMT-2000 service providers will be licensed and the licenses will be allocated to new industrial consortia. This announcement had a great impact on both the fixed and the mobile carriers. The fixed service providers, who have been suffering from a significant degradation in profitability of their services, regarded the IMT-2000 service as a new source of profit and wanted to join the IMT-2000 market. Meanwhile, the five mobile carriers, who experienced an excessive competition in the 2G mobile market, have seriously concerned about the possibility of the 3G mobile services replacing their 2G services in the end. This market recognition served as a key driving force underlying the Korean telephone market restructuring occurred in late 1999 and thereafter. Two M&As in the 2G mobile market had been attempted and five 2G mobile carriers have been streamlined to form three effective competitive groups as can be seen in Figure 1. As of January 2001, only two groups have succeeded to get the IMT2000 licenses, but the market expects all of those three groups will enter the 3G mobile service market in the end1.

KT Freetel Fixed KT M.com*

In addition to these major groups of market players, Onse Telecom, Powercom, Thrunet, G&G, Dreamline, Postech, Samsung and Qualcomm will

KT International

Fixed

KT-IMT

Mobile

* New name of Hansol PCS after the acquisition by Korea Telecom ** The dotted lines toward LG-Global indicate just a market expectation as of January of 2001.

Figure 1. Reshaping of the Korean telephone market

1

Two IMT-2000 licenses have already given to the industrial consortia, SK-IMT and KT-IMT, led by SK group and KT group respectively. The third licence is scheduled to be allocated in March, 2001. This license, as contrasted to the first two licenses, will be given to an industrial consortium on the condition that the service should be based on cdma2000 technology. Hanaro Telecom declared to apply for that license, while it is uncertain whether the LG Telecom, who preferred W-CDMA as a technological vehicle for the IMT-2000 service, will take the initiative in applying for this cdma2000-based license or not.

surely play important roles in the evolving Korean telecommunications market too. But their roles are more likely to be limited as a niche market player. 2.2 Telecommunication Numbering Scheme Based on the E.164 recommendations of ITU-T, the telecommunication number in Korea has the numbering structure as shown in Figure 2. CC (Country Code)

NDC (National Destination Code)

SN (Subscriber Number)

Table 1. Numbering structure, capacity and number of subscribers by operators Services

Local

Two digit NDC is used in most cases to identify a geographical numbering area or a nation-wide mobile service, while up to four-digit NDCs are used for value added services and some special services like facility-based resellers. Figure 3 shows the first two digits of NDCs used in Korea. Note that a prefix 0 is used to identify an NDC from an SN when dialing. 2nd

0

1

2

3

4

5

Int'l Int'l Int'l ** (KT*) (Dacom) (Resellers Cellular Pager TRS/ VAS Pager (SKT) (SKT) Data (RO) Seoul Kyunggi Inchon Kangwon Chungnam Taejeon Chungbuk Pusan Ulsan Taegu Kyungbuk Kyungnam Chunnam Kwangju Chunbuk Cheju

0 1 2 3 4 5 6

6

PCS (KTF)

7

8

Int'l (Resellers) Cellular PCS (STI) (KTM)

9

PCS (LGT)

Hanaro Telecom SK Telecom Shinsegi Telecom KT Freetel PCS KT M.com Mobile LG Telecom SK-IMT IMT2000 KT-IMT Undecided Cellular

Numbering structure

Number Number of capacity (000s) subscribers* (000s)

02-NXXX-XXXX (Seoul) NDC- NXX-XXXX (Regional)* 02-6XXX-XXXX (Seoul) NDC-NXX-XXXX (Regional)* 011-NXXX-XXXX 017-NXX-XXXX 016-NXX-XXXX 018-NXX-XXXX 019-NXX-XXXX IMT-AXXX-XXXX IMT-BXXX-XXXX IMT-CXXX-XXXX

**188,110

21,932

11,890

372

80,000 8,000 8,000 8,000 8,000 10,000 10,000 10,000

10,935 3,518 5,285 3,131 3,948 -

N: 2-8, X: 0-9, IMT: an NDC for IMT-2000, and A, B, C: any one digit between 2 and 8 * There are 15 Regions designated the regional identification number in Korea. ** It is computed by subtracting the Hanaro Telecom’s capacity from the total number capacity.

3. Decision Diagram for Numbering Policy Optimization 3.1 IMT-2000 Number as a Target Personal Number

7

8

Operators Korea Telecom

Figure 2. E.164 numbering format

1st

With these NDCs, the numbering structure and the number capacity vs. actual number of subscribers as of the end of 2000 are summarized in Table 1. Note that eight digit SNs of the form NXXX-XXX have been already used for Seoul, the largest geographical numbering area, and for SK Telecom, which has more than ten million mobile subscribers of its own. For the other geographical numbering areas and the other service providers, the conventional seven digit SNs of NXXXXXX are used.

Toll-free number

LD (KT)

LD (Dacom)

LD (Onse/R)

9

* KT: Korea Telecom, SKT: SK Telecom, RO: Regional operators, KTF: KT Freetel, STI: Shinsegi, KTM: KTM.com, LGT: LG Telecom, LD: long distance, and R: Reseller ** The shaded area indicates an unused or reserved number block.

Figure 3. National Destination Codes used in Korea [13]

Given the market structure and the associated numbering structure as in Figure 1, Figure 3 and Table 1, we are interested in what NDC is most appropriate for the IMT-2000 service, taking into account its implications on the numbering policy and the market competition among the fixed and the mobile carriers. Two different schemes are worth investigating. The first option is to use the NDCs already assigned to the current 2G mobile services. In this case, 3G mobile

numbers can only be discriminated from 2G mobile numbers at the first three or four digits of their SNs. The second option is to allocate a new NDC, 010 for instance, exclusively for the IMT-2000 service, in which case the IMT-2000 service providers are discriminated at the first digit of the SN. IMT-2000 number listed in Table 1 is based on this numbering scheme.

  

Different numbering schemes should have different implications on the market competition among the 2G and the 3G mobile carriers. It is true indeed as far as the rigidity of telephone numbers serves as a barrier for the users to switch to a different service provider. With the first numbering scheme, a particular 2G mobile customer can easily upgrade his service to a 3G service without changing his/her mobile phone number. But if he/she wants to switch his/her service provider, he/she should suffer from a switching cost induced by the phone number change. With this option, a service upgrade within carrier is encouraged, while the one across carriers is significantly discouraged. This asymmetry can be avoided with the second option. Every service upgrade to a 3G service requires a change in the mobile phone number regardless of whether the customer change his/her mobile carrier or not. The problem with this option, however, is that the market transition from 2G to 3G is likely to be delayed for some time due to the lack of number portability. MIC, who has concerned about the oligopoly two recent consecutive M&As formed in 2G and 3G mobile markets, wants to have a firm regulatory position, which is fair and pro-competitive among the market players. Furthermore, MIC recognizes the possibility that the IMT-2000 number could ultimately evolve to a UPT(Universal Personal Telephone) number. Based on this fact, we regard the second option as a target IMT-2000 number in the following discussions, though not necessarily excluding the first option. 3.2 Key Policy Decisions on Number Portability Deployment Many policy decision variables can be identified with regard to the number portability deployment in Korea. Among them, the most important might be the following: 

When and how the LNP among fixed telephone service providers is deployed

 

The geographical coverage for which the NP is deployed. Two options are relevant; one is the full geographical number (NDC+SN) option and the other is the subscriber number (SN)-only option. When and how the number portability among 2G mobile carriers is deployed. When and how the number portability among 3G mobile carriers is deployed. Whether the cross number portability between fixed service and mobile service is deployed or not. If deployed, the time when it is deployed. Whether the cross number portability between 2G and 3G is deployed or not. If deployed, the time when it is deployed.

Figure 4 shows how these policy decisions are related each other. It is clear from Figure 3 that number portability can be implemented even across the mobile numbers and the national geographic numbers too. However, it is more or less impractical as compared to the other kinds of number portability, thus omitted in Figure 4. 3G mobile service

NP among 3G mobile carriers NP across 2G and 3G mobile carriers

2G mobile service

Fixed longdistance and int’l service

NP among 2G mobile carriers

Pre-subsctiption

3G mobile service NP within carrier 2G mobile service NP across fixed and mobile carriers Fixed longdistance and int’l service

NP among national geographic numbers Fixed local service

Local NP*

Player 1

Fixed local service Player 2

* NP means ‘Number Portability’.

Figure 4. Various NP deployment scenarios

3.3 A Diagram for Number Portability Deployment Planning Based on the key policy decision variables derived in the previous section, a decision diagram for number portability deployment planning is suggested in this section. Figure 5 shows this decision diagram.

Market factors  Transition scenario from 2G market to future 3G market (M1)  Churn rates from market incumbents to new market entrants (M2)

Fixed + 2G Mobile

8

14

Fixed + 3G Mobile

9

Fixed 10 1

17

2 3 4

No NP 5 7

6

15 11

Fixed + 2G Mobile + 3G Mobile 18

12 2G Mobile

2G Mobile + 3G Mobile

13 3G Mobile

socio-economic impact of the NP deployment associated with each arc in the diagram. The other is a causal model, which relates the social-economic impact with important market factors and key policy decision variables. We identified two relevant environmental factors and four policy decision variables.

Key policy decision variables  NP implementation method (D1)  Time to deploy the associated NP (D2)  NP cost recovery policy (D3)  IMT-2000 number structure (D4) Since the decision diagram depicted in Figure 5 can be viewed as a statetransition diagram, each transition, denoted by an arc in the diagram, can be evaluated. Let NB be the net benefit for a particular arc. Then it can be written as

16

Figure 5. Number portability deployment diagram In constructing this diagram, a long-run target number portability is assumed, with which the subscriber number is portable across and within local POTS, 2G mobile and 3G mobile services. In the diagram, “+” denotes the number portability is deployed for those services connected by “+” at the same time. For instance, the circle “Fixed+2G mobile” indicates the number portability being deployed across the fixed telephone service and the 2G mobile telephone service, as well as within individual services.

NB  CBA (M 1 , M 2 , D1 , D2 , D3 , D4 )

(1)

where CBA denotes the cost-benefit analysis. Let NB i denote the net socio-economic benefit optimized in (1) with respect to {Di , i  1,...,4} for the arc i in the policy decision diagram depicted in Figure 5. Then, the optimal NP deployment policy can be found by the following evaluation procedure. Step 1:

The arc in the diagram indicates a policy change on the number portability, which requires an enlarged implementation of NP. The arc, numbered 10 for instance, corresponds to the policy decision that NP is deployed throughout the 2G and 3G services at the same time, on the condition that NP has already been deployed in fixed local services.

Step 2: Step 3:

Two functions should be equipped for the diagram to be used as a complete policy decision tool. One is the cost-benefit analysis module for evaluating the

Step 5:

Step 4:

Generate a set of plausible assumptions on the market factors and evaluate key policy decision variables {Di , i  1,2,...,4} . Evaluate each arc in the diagram to obtain {NDi } for all arcs. Search for an NP deployment path which maximize the sum of NDi ’s on the path. Explore other beneficial deployment paths to be implemented additionally without any contradiction to the already chosen deployment paths. Repeat Step 1 through Step 4 with different market scenarios until a satisfactory NP deployment policy is found.

Table 3. Benefits for each market participant

4. Cost Benefit Analysis for Policy Evaluation 4.1 Framework of the Cost Benefit Analysis The framework of the cost benefit analysis employed in this paper is basically the same as the one NERA performed upon the request of UK’s OFTEL [14]. However, some enhancements were made to meet the functional requirements described in (1). Three types of benefits obtained from deploying the number portability were identified as in [14], and were summarized in Table 2. Table 2. Classification of benefits from the number portability Type of Definition Benefit The benefits to customers who retain their telephone number Type 1 benefit when switching suppliers, net of any effects on these suppliers The social welfare induced from the price-down the Type 2 benefit increased competition will make. The other resource savings arising from fewer number changes (fewer misdialed and directory inquiry calls, less Type 3 benefit frequent updates to directory information and fewer changes to information stored in customer equipment) In order to estimate Type 1 benefit, economic benefit or welfare is derived for each of three mobile market stakeholders, that is, customer, incumbent carrier, and competitive carrier. Table 3 summarizes the relevant benefit terms, using the concepts and notations in the following:

V PI PC CI CC SO

SW

Value placed by customer on having a telephone and making calls Telephone service charge customer pays the incumbent carrier Telephone service charge customer pays other competitive carrier Marginal cost of the incumbent carrier to provide the service Marginal cost of the competitive carrier to provide the service Switching cost a customer has to suffer when he/she switches the service provider with the telephone number change Switching cost a customer has to suffer when he/she switches the service provider with the ported telephone number

Beneficiary

Customer

Incumbent carrier

Incumbent carrier (1)

V  PI

PI  C I

Competitive carriers: Without NP (2) Competitive carriers: With NP (3) Net benefit from carrier switching because of NP: (= (3) - (1)) Net benefit from carrier switching while keeping number anyway: (= (3) - (2))

V  PC  S O

PC  CC

V  S O  CC

V  PC  SW

PC  CC

V  SW  CC

PC  CC

CI  CC  SW

Supplier

PI  PC  SW

CI  PI

SO  SW

Competitive carriers

Total

V  CI

SO  SW

The fourth row in Table 3, obtained by subtracting (1) from (3), measures the net benefits each market stakeholder will have for each customer who switches the carrier because NP is deployed (We call this customer a type A customer). Likewise, the fifth row, obtained by subtracting (2) from (3), means the net benefits each market stakeholder will have for each customer who switches the carrier regardless of whether NP is deployed or not (We call this customer a type B customer). It is clear from these derivations that the total net benefits in the fourth and the fifth row are composed of three items, C I  C C , S O and S W . If we assume further that the customer who switches carrier will not pay any switching cost with the help of number portability, only two terms are relevant to the computation of total net benefit since SW  0 . If we let W1 denote the total net type 1 benefit over the switched customers per unit period, then it can be shown that

W1  n AT (C I  CC )  n B T S O

(2)

where n A and n B denote the number of type A and type B customers respectively and T is the average number of calls per customer per year.

As defined in Table 2, the key factor in estimating the type 2 benefit is the price-down which the NP policy will bring by increasing the market competition. Figure 6 depicts the customer surplus which a customers will benefit from the price-down directly. Given a demand function DD' , the usage level T increases to T ' as the price P goes down to P' . The increase in consumer surplus this price change makes can be graphically represented as the sum of two shaded regions,  PP' BA + ABC .

The computation of type 3 benefit is basically a kind of practice, rather than a theory-based one. In estimating this kind of benefit, it is important to include all exhaustive sources of benefits to estimate it accurately. Five different sources of resource or cost savings the number portability policy will make were identified and listed below:

w 3, a

savings in service charges for misdialed calls

w3, b

opportunity cost savings for misdialed calls

Price

w3, c

cost savings associated with the number directory service

D

w3, d

opportunity cost savings for the number directory service

w 3, e

cost savings associated with the DB update in the telephone directory

P'

and memory updates in the consumer telephone equipments

A

P

B

Since the above type 3 benefits differ between the mobile-to-mobile call and the land-to-mobile call, we need to estimate those terms for mobile service and fixed service separately. If we discriminate them by attaching a superscript, M for mobile service and F for fixed service, we have

C

T

T'

D'

Usage

e

i a

i a

(4)

where n M and n F represent the number of mobile customers and the number of fixed service customers respectively.

Figure 6. Consumer surplus from the price-down Let W 2 be the type 2 benefit of our interest. Then, W 2 can be decomposed into the benefit W 2I for the customers of the incumbent carrier and the benefit

W 2C for the customers of the competitive carriers. Thus, we have W2  W2I  W2C

e

W3  n M  w3M,i  n F  w3F,i ,

With these estimates for three types of benefits, we finally have 3

6

i 1

i 1

NB   Wi   C iNP ,

(5)

(3)

The computation of W 2I and W 2C in (3) is rather straightforward, thus omitted here.

where {CiNP , i  1,2,...,6} denote the six categories of NP costs, which include research and development cost, switch upgrade cost, cost associated with OA&M system change, signaling and intelligent network-related cost, number porting cost and some transmission cost. Note that though not explicitly represented, the benefit and cost terms in (5) are the functions of the market factors and key policy

decision variables. In the next section, we deal with these relationships more explicitly. 4.2 Empirical Results An empirical study was performed on the Korean mobile and fixed telephone market, which will evolve toward IMT-2000 services. Based on the policy guidelines announced by MIC and some previous researches, various environmental and policy parameters were estimated a priori and used in the analysis. Among several NP implementation methods, QoR (Query on Release) is assumed as the NP implementation method. This assumption is based on a recent announcement by MIC [11] that the NP deployment in Korea will be based on QoR. Also, it is assumed that the market transition will be occurred from 2G to 3G as represented in Figure 7, based on a recent research report by MIC. Based on this scenario, the number of 3G users will exceed the number of 2G users late in 2006.

Subscribers(1,000)

2G(Cellular, PCS)

With these assumptions, we first tried to exclude some arcs in Figure 5 which look impractical or can not be implemented because of some pathdependent characteristics of policy decisions. Considering the fast market transition from 2G to 3G, the option of deploying 2G NP after 3G NP is excluded from this analysis. Also, based on a recent announcement by the MIC that LNP will be deployed in 2003, the option of deploying 2G NP before deploying this LNP is excluded too. Figure 8 shows the simplified diagram.

Fixed + 2G Mobile

8

14

Fixed 10 1

No NP

3G(IMT-2000)

2 4

Fixed + 2G Mobile + 3G Mobile

Figure 8. The Simplified number portability deployment diagram

35,000

Using the methodology suggested in this paper, four different NP deployment paths and the associated deployment time schedule were evaluated with different churn rates. The field survey data [16] were analyzed and used to estimate the market and cost parameters. Also, the empirical data from the fixed and mobile telephone carriers [19] were used to estimate the NP cost terms. Table 4 summarize four NP deployment scenario to be evaluated in this paper and Figure 9 shows the net benefit evaluated annually for each scenario given the churn rate of 10%.

30,000 25,000 20,000 15,000 10,000 5,000 0 1999 2000

2001 2002

2003 2004

2005 2006 2007

2008 2009

2010 2011

Year

Figure 7. Assumed market transition from 2G to 3G mobile market

Path 1-8-14 1-10 2-14 4

Table 4. Four NP deployment scenarios Scenario Fixed(2003) -> Fixed+2G M(2005) -> Fixed+2G M+3G M(2007)* Fixed(2003) -> Fixed+2G M+3G M(2006) Fixed+2G M(2005) -> Fixed+2G M+3G M(2006) Fixed+2G M+3G M(2005)

* The figure in the parenthesis is the year deploying the corresponding NP.

$M

250 200 150 100

1-8-14 1-10 2-14 4

Path

1-8-14 1-10 2-14 4

50 0 -50

2003

2004

Table 6. Evaluation results with different churn rates ($M) Churn Rate 5% 10% 15% 20%

2005

2006

2007

2008

2009

2010

625 643 407 440

655 621 484 520

686 599 562 601

717 577 639 682

25% 747 555 717 762

$M

800

-100 700

-150 -200

600

Figure 9. Annual net benefit evaluated for each NP deployment path In order to obtain an aggregate evaluation for each NP deployment scenario, the net present worths were computed for each net benefit flows in Figure 9. Annual interest rate of government bond, 6.7%, was used as a discount rate. Table 5 compares the evaluation results for four different scenarios with the churn rate 10%. Based on it, NP deployment schedule 1-8-4 appeared to be most beneficial with 10% churn rate.

500

400

1-8-14 1-10 2-14

300

4 200 5%

Table 5. Evaluation results of four NP deployment scenarios (churn rate: 10%, $M) Path Benefit Cost Net benefit 1-8-14 1,848 1,193 655 1-10 1,816 1,196 621 2-14 1,636 1,152 484 4 1,716 1,196 520 How these evaluation results respond to the changes in environmental factors must be of our interest. Sensitivities of the cost benefit analysis to different churn rates were investigated and the optimal NP deployment paths were identified with each churn rate. Table 6 and Figure 10 summaries the results with different churn rates ranging from 5% up to 25%.

10%

15%

20%

25%

Churn Rate

Figure 10. Net benefit of NP deployment path with different churn rates It is quite interesting to observe in Table 6 and Figure 10 that the optimal NP deployment paths are different with different churn rates. With a low churn rate, say 5%, the path 1-10 turned out to be optimal, while the path 1-8-14 is optimal for moderate churn rates ranging roughly between 7% and 24%. With a high churn rate, say more than 24%, the path 4 appeared to be optimal.

5. Discussions This paper dealt with the policy issues concerning the number portability deployment in Korea. As a policy decision tool, a decision diagram for NP

deployment planning was devised. In order to demonstrate the usefulness and the applicability of the diagram, empirical studies were performed on the constructed decision diagram. With the parameter values estimated from the customer and carrier survey, it was found that a sequential NP deployment schedule from LNP to 3G mobile via 2G mobile services is preferred with moderate churn rates of 6% to 24% and oneshot deployment throughout the fixed and 2G/3G mobile markets is preferred with high churn rate greater than 24%. Number portability deployment must be an important policy decision in the reformed Korean telephone market and the emerging fixed mobile converged IMT-2000 market. Depending on how well the implicit barriers like the rigidity of telephone numbers are released and how much the cross-market competition is encouraged, the evolution paths and the speed to the future IMT-2000 market will be determined. Though not dealt with explicitly in this paper, additional policy decision variables like NP cost recovery policy, not only from customers, but also among the stakeholders, should play additional roles to achieve the ultimate policy goal with the NP deployment. Many areas for future research remains, which include the incorporation of such additional policy variables and the technical and political risks embedded in the NP implementation.

[5]

FCC, Telephone Number Portability, Third Report and Order, CC Docket No. 95-116, RM 8535, FCC 98-82, 1998. 5. 12.

[6]

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FCC, Telephone Number Portability, First Report and Order and Further Notice of Proposed Rulemaking, CC Docket No. 95-116, RM 8535, FCC 96-286, 1996. 6. 27. [4] FCC, Telephone Number Portability, Second Report and Order, CC Docket No. 95-116, RM 8535, FCC 97-289, 1997. 8. 18.

[17]

[2]

[3]

[16]

[18]

[19] Sicker, Douglas C. and Martin B. H. Weiss, "Cost and Policy Implications of AIN-Based Local Number Portability Implementations," Proceeding of 6th International Conference on Telecommunication Systems: Modeling and Analysis, 67-76 (1998). [20] Song, Jae-Do, and Jae-Cheol Kim, “Is Five Too Many? Simulation Analysis of Profitability and Cost Structure in the Korean Mobile Telephone Industry,” Telecommunications Policy, Vol. 25, No. 1/2, 101-123 (2001).