Carrier Selection in Developing Countries, Dead-on-Arrival?

Abstract

Carrier Selection (CS) and Carrier Preselection (CPS) have been used with success as policy instruments to open telecommunications markets in developed countries, but in developing countries implementations of CS policies have produced lacklustre results. While in developed countries interest has waned and regulators seem to have stopped tracking CS developments, the negative or “ambiguous” results have created a social cost-benefit question for developing countries’ regulators. The question is whether it is still wise to require implementation of CS in a similar way as in developed countries, to modify policies or even withdraw CS from the list of access requirements.

We present results from a benchmark study on the past evolution and current status of CS in both developed (OECD) and a set of developing countries. It was found that in the latter countries negative factors are omnipresent that reduce the case for CS and we did not find considerable adoption in the studied non-OECD countries who introduced CS after 2000. Attempts by regulators to foster uptake with complementary policies that in the past enhanced adoption success of CS did not sway entrants to enter the market and launch CS.

The outcomes of the study have been used to assess the private business case for an entrant to launch CS service and develop a public cost-benefit model for implementing CS obligations or select alternative policy options. We applied the model for the case of Saudi Arabia and found that a mobile operator, who had lowered its international outbound rates after the appearance of “VoIP-apps” to that entrants price level, already squeezes the CS business case for that traffic category. The remaining case for entry with CS depends on not passing through a mobile termination rate reduction to end users.

In most developing nations the addressable market for over-the-top “VoIP-apps” is or will soon be already larger than the addressable market for Call-by-Call CS on the PSTN, due to the rapid rise of (mobile) broadband. This introduces a policy question whether instead of enforcing CS implementation to create competition for service traffic, (mobile) broadband operators should instead be prohibited to block or degrade competing VoIP- and messaging apps, inventions that stimulate the attractiveness of using broadband (wireless) platforms for end users.

Regulators in developing countries should consider whether to further spend staff time and resources on implementing CS policies on old technology platforms, with a high non-adoption risk, instead of addressing the more future oriented policy questions their market justifies.

Keywords: Developing Countries, Market Liberalisation, Carrier Selection, Infrastructure