STANFORD, Calif.—Number portability has translated into lower wireless costs for consumers due to increased competition, according to research done at the Stanford Graduate School of Business.
Since the Federal Communications Commission mandated wireless local number portability in late 2004, average prices for wireless plans with intermediate and large numbers of minutes decreased by about $3 and $8 pre month respectively, according to research conducted by Minjung Park, a business school doctoral student.
Brian Viard, assistant professor of strategic management at the business school, predicted three years ago that lower “switching costs”—such as extra fees or higher rates that companies charge customers once they are ‘locked in’ and switching service would be inconvenient—would lead to lower prices overall for consumers. Previous research had concluded that switching costs always lead to higher prices.
“If there are enough new customers coming into the market, firms will compete to grab them and will therefore price their products or services lower overall,” said Viard. “If, however, there aren’t enough new customers in the market, then firms focus on exploiting the customers they already have who are ‘locked in’ and price higher.”
Viard concluded that “the evidence thus far indicates that building lock-in is a good strategy for firms and reducing it is a reasonable goal for regulators hoping to help consumers, regardless of market growth.”
