WASHINGTON-While Calling Party Pays (CPP) has become a huge success in most of Latin America, the CPP concept recently took a new twist in Chile when Startel SA, the wireless arm of the largest local wireline operator Compania de Telecomunicaciones de Chile SA (CTC), introduced its own version: Calling Party Pays Plus (CPPPlus).
While under traditional CPP the person who initiates a call to a cellular customer pays for the call, Startel took CPPPlus down a different path. “Under CPPPlus, CTC customers that called Startel clients would not have to pay for the phone call,” explained Bruce Edgerton, senior consultant at Washington-based The Strategis Group.
Chile’s Antitrust Commission suspended the CPPPlus system 10 February as an unfair and anticompetitive practice. On 15 April, the suspension was extended indefinitely. Only Startel customers who signed up for CPPPlus between 1-10 February, when the service was valid, will be allowed to continue receiving it-until their cellular contracts expire.
The problem with CPPPlus was that there were no direct charges, according to Paulina Madrid, analyst at the Subsecretary of Telecommunications’ (Subtel’s) Department of Economic Regulation, Division of Strategic Planning. It was unclear who was paying for calls to Startel customers when they were initiated by CTC customers, she said.
Edgerton believes that CPPPlus was an effort from CTC-Startel to discredit CPP: “CTC has been fighting CPP since 1995. (With regular CPP), they will have to pay for traffic generated on their network. With CPPPlus, Startel’s parent company, CTC, would not have to pay any interconnection rates, defeating the whole point of CPP, (which is) generating greater revenue for the wireless carrier. CTC’s intransigence is a competitive issue.”
Madrid expects regular CPP to be implemented by the end of the year, after interconnection rates are renegotiated between CTC and the mobile carriers in the third quarter. Other reports have indicated CPP service will not begin until early 1999.
Startel General Manager Ismael Vasquez said he declined to comment for this story because the company has decided to appeal the Antitrust Commission’s decision. Startel will try all recourses available to it, according to Vasquez.
Meanwhile, CPP’s record in Latin America generally has been astounding. It has promoted growth on wireless networks to unexpected levels, producing roughly the same result in all countries where it was introduced: sharp increases both in the number of new subscribers and in the average monthly expenditure per customer.
While subscribing to traditional Mobile Party Pays (MPP), cellular users usually are hesitant to distribute their phone numbers. Edgerton thus estimates the calling pattern in a MPP system reflects a 70-percent to 30-percent outbound-to-inbound call ratio.
This ratio dramatically changes with CPP.
“With CPP, because subscribers do not have to pay for inbound calls, traffic balance usually shifts to a 50: 50 ratio,” Edgerton explained. “The wireless operators bill the wireline carrier for inbound calls originated on the wireline carrier’s network.”
The Washington-based International Institute of Wireless Communications (IIWC) estimates the implementation of CPP “has the potential to boost subscriber bases 60 percent above baseline projections.” In Peru, for example, four months after introducing CPP, cellular carriers experienced an 80-percent increase in the number of minutes on the network and a doubling of the subscriber base, according to the IIWC.
Besides Chile, Mexico also has been slow to implement CPP, but is expected to do so before the end of the year.
