The International Telecommunications Society met in Perth, Australia earlier this week. Last year’s conference was in Montreal. There was an interesting paper [
pdf, 57KB] examining wireless payment models presented by Sandy Levin, co-authored by Stephen Schmidt of TELUS.
The paper contrasted the benefits of Wireless Party Pay (WPP) models (in use in the US, Canada, Hong Kong and Singapore) with Calling Party Pay (CPP) models (in use in most of the rest of the world).
CPP was put in place to encourage the adoption of mobile phones. A mobile phone owner could get a phone and keep it on and receive unlimited calls at no charge. The calling party paid, and the calling party, rather than the receiving party, would decide if the call was worth the price. This did encourage the adoption of mobile phones, but it required a separate mobile code so the calling party knew he was being charged.
The paper notes that CPP has resulted in high rates, especially for call termination, because service providers were permitted to exploit the market power resulting from their call termination bottleneck.
For whatever reason, regulators may have correctly found retail service to be competitive and as such, they did not regulate the prices of retail service. However, regulators in CPP countries have only started to turn their attention to the price of call termination even though it was a bottleneck giving the service provider exploitable market power.
The paper also has an observation about super-normal mobile penetration rates:
What is measured is the number of SIM cards. Partly because of high pricing, many customers in these countries have more than one SIM card. A visitor to a country who purchases a SIM card is also counted. All of this serves to overstate penetration rates in these countries, evidenced in part by suspiciously high “penetration” rates, often over 100%. The significantly lower penetration rates in the U. S. and Canada, where SIM cards are less common and where individuals generally have only one mobile telephone number, are a more accurate measure of actual penetration because it is closer to a measure of the number of individuals who have mobile service than in countries that count SIM cards.
The paper ends with an interesting conclusion. In countries that retain CPP, call termination rates will need on-going regulation because, even though mobile service might competitive at the retail level, mobile service providers can exploit the call termination bottleneck.