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Five months after the introduction of number portability, barely any phone and mobile users have taken advantage of the service allowing them to switch phone companies and take their phone number with them.
Some 35,000 customers have switched so far but this represents just a tiny proportion of phone users - 1 per cent of landline phones and 0.4 per cent of mobiles.
Analysts say that with only two mobile market operators - Telecom and Vodafone - there is little competitive pressure to drive people to switch carriers, and only the entrant of a third carrier would see more customers swapping.
The two operators also use different network technology, requiring customers to buy a new handset when they switch.
This will change when Telecom's planned $300 million GSM network goes live in late 2008.
Number portability was introduced in April, allowing phone customers to take their mobile or local number with them when they switched carriers.
At the time Communications Minister David Cunliffe welcomed the long-awaited move - it had taken nearly a decade of planning - saying it would remove some of the costs associated with changing providers.
IDC telecommunications analyst Tim Shepheard said neither Telecom or Vodafone - which have the mobile market roughly split between them - would be concerned over that level of churn, as there was likely to be an even split between them.
"Number portability will become a threat for mobile providers when, and if, a new player enters the market," said Shepheard.
"A new entrant will need to be particularly aggressive to gain a customer base, placing competitive pressure on the two incumbents."
The most likely new mobile market entrant is NZ Communications, formerly Econet Wireless, but after seven years of operation it has failed to establish a mobile network.
Mobile offers will soon be available from Compass, M2 and Orcon, which have signed wholesale deals with Vodafone, and TelstraClear, which recently switched from Vodafone to sign a deal using Telecom's network.
CallPlus is understood to also be negotiating to offer mobile services via Telecom.
Shepheard said number portability would become more important in the fixed-line market as local loop unbundling gains momentum.
This allows telcos to install equipment in Telecom's exchanges and directly compete for fixed-line customers.
Telecom wholesales 120,000 residential phone lines to its competitors.
"There is little customer loyalty among consumers who often switch to the provider that is offering the best deal at the time," said Shepheard.
As a result, phone companies were offering bundled packages which required customers to take fixed-line, mobile and internet services together in order to get a cheap deal, he said.
They were also locking customers into contracts for a minimum of 12 months, he added.
TelstraClear's head of corporate services, Mathew Bolland, said the overall experience of number portability had been good.
He said around 80 per cent of customers moving to TelstraClear wanted to retain their existing number.
"It clearly is opening things up for people to move around," he said. "You keep customers based on the quality of the services you are giving them."
He said the company's experience of porting nearly 1100 staff mobile numbers from Vodafone to Telecom in the last week had gone smoothly.
Telecom spokesperson Katherine Murphy said the company had seen a steady uptake of number portability across both landline and mobile. She said porting customers to and from Telecom was going well and the company was happy with the increased choice the service gave consumers.
The telecommunications industry is understood to have spent $100 million preparing systems to handle number portability.
