Vodafone Blocks MyToday

MyToday is a set of opt-in SMS services from our company, Netcore. MyToday has around 3.8 million subscribers. Since you cannot receive the SMSs from MyToday without first sending an SMS to MyToday requesting the service, you cannot get spammed. Stopping the service is as simple as sending a “Stop” SMS to the same service.

Vodafone, one of the bigger mobile operators, has blocked the MyToday SMS alerts since today morning, as this Business Standard news item reports. I suppose the MyToday free SMS services is hurting Vodafone’s paid services. My blocking MyToday’s services, Vodafone is doing what any profit-maximizing firm does — kill competition.

See Rajesh Jain’s post on this matter for more on this.

My analysis is however in the larger context of competitive markets and their welfare implications.

Disclosure: I have an interest in the commercial success of NetCore as I am an employee.

Competitive markets lead to welfare-maximizing outcomes. But there are specific conditions which have to occur for markets to be competitive. If firms within a market have market power, the market is not competitive. Market power is a cause of what is called market failure. Market failure means that the outcome of the market is not welfare maximizing.

In the specific case of mobile operators and the mobile telephony market, the operators have a certain degree of market power. This arises from the stickiness of subscribers because of non-portability of the numbers. I would in a heartbeat drop my current carrier but I am reluctant to do so because I have had my cell number for years and were I to change my mobile service provider, I would lose this number.

By mandating number portability — my number moves with me when I change services — the telecom regulator would improve the market outcome because the operators would lose some of the market power they enjoy today. So you can imagine that number portability is in the interests of the users of mobile phones but are not in the interests of the operators.

Competition is like that. There are two different types of conflicting interests. First, there is an inherent conflict among the competing firms in the market. Vodafone can gain only at the expense of the other carriers. Second, the conflict between the suppliers and the consumers. The suppliers would like to sell as dearly as possible, and the consumers would like to buy as cheaply as possible. In this conflict, all the mobile operators are in it together. They gain from the market failure (non-number portability) at the expense of the consumers.

NetCore’s MyToday service hurts the interests of the mobile operators but helps consumers. We are in the second conflict.

Competitive markets are good for consumers. But they do not arise spontaneously in any activity that has high fixed costs and have network externalities. To make these markets competitive (or as competitive as possible), they have to be regulated. In this specific instance, the regulator is TRAI — Telecom Regulatory Authority of India. TRAI gets its inputs from users as it is supposed to be in the public interest. The public has to tell TRAI that the operators’ market power is hurting the consumers’ — and therefore the national — interest. TRAI listens to people like us.

I will write to TRAI today asking that number portability be mandated. I suggest you do the same.

Update: For those who want to email TRAI, the email addresses are: trai@del2.vsnl.net.in and ap@trai.gov.in

(Hat tip: Kumar_N)

Author: Atanu Dey

Economist. View all posts by Atanu Dey