Number portability to internet phone: Consumer demand and welfare

Abstract

Even though Internet phone service continues to evolve in terms of quality and competitive pricing compared with the public switched telephone network (PSTN), the number of Internet phone subscribers is still lower than what experts had forecasted for South Korea. Thus, in 2008, the Korean government decided to apply number portability to Internet phone service (IPS) to revitalize the market. In this study, we construct utilities of Internet phone number portability (INP) to analyze the need for INP in the Internet phone market and express its value in monetary terms to measure consumer welfare with a constructive contingent valuation approach based on the value-structuring capabilities of multi-attribute utility theory (MAUT). With this methodology, we investigate the willingness of 316 current PSTN subscribers in South Korea to pay for INP. We apply a specific survey method called “double-bounded dichotomous choices” (DBDC) to obtain accurate data. The results show that INP is the key attribute for expanding the IPS market, and the calculated value of INP positively impacts consumer welfare.