FCC & "number portability" - Tilted Forum Project Discussion Community

seretogis · 11-20-2003, 02:43 PM

(Link at the end)

Quote:

Number Portability Decision Adds to Wireline Telecom Sector's Perfect Storm
Issue #66
November 20, 2003

by Adam Thierer

On Monday, November 24, Americans will gain a de facto property right in their telephone numbers. Thanks to new Federal Communications Commission (FCC) rules that go into effect that day, wireless and wireline carriers will be forced to let customers in major metropolitan areas take their phone numbers with them when they decide to switch providers. All Americans will gain this right by next May.

Hailed as a pro-competitive move in most circles, the FCC adopted this "number portability" measure under the assumption that it would generate more customer churn by allowing consumers to take their phone numbers with them when they want to shop around for better deals. Of course, if anyone had property rights in phone numbers it was probably the carriers that originally assigned them to us, but the FCC ignored that and re-assigned the rights to end users so they can more easily jump from one provider to another. And jump ship they will, in very large numbers in all likelihood, especially from the wireline side of the business to wireless. In fact, telecom industry pundits are increasingly talking about the "perfect storm" that now looms for the wireline telecom sector in the wake of the following developments:

(1) Internet Telephony: Although stuck on the drawing board for many years, VoIP (voice over IP) technology is now poised to quickly transform the telecom sector and poses a very serious long-term threat to the hegemony of traditional circuit-switched wireline telephone networks and providers. As Peter Huber, Michael K. Kellogg, and John Thorne, authors of Federal Telecommunications Law, summarize, "The advent of the Internet generally, and IP telephony in particular, will be profoundly destabilizing for the entire telecommunications industry." "Over the next 10 years, IP networks will take over the core of telecommunications," argues AT&T Chief Technology Officer Hossein Eslambolchi. And network guru David Isenberg of Isen.com recently told The Wall Street Journal that VoIP "destroys the incumbent telephone company business model."

It may very well do so since VoIP is a classic example of a "disruptive technology" that few telecom incumbents saw coming. Worse yet for the telcos, the cable sector, which is currently winning the broadband race by a 3-to-1 margin, is getting very serious about deploying VoIP. Once cable is capable of providing video entertainment, high-speed Internet access and IP telephony in one bundled bill, incumbent telcos could start hemorrhaging customers to cable rivals who have the economic resources to market themselves as the one-stop telecom and entertainment provider of choice in many communities.

(2) Wireless substitution: A recent FCC survey of the wireless sector noted that, "The long distance, local, and the payphone segments of wireline telecommunications have all been losing business to wireless substitution." While formal data is elusive, the FCC report sites a variety of studies claiming significant wireline displacement by wireless services. The FCC notes that one analyst estimates that wireless has now displaced about 30% of total wireline minutes and that, for the average household, wireless represents 27% of total telecommunications expenditures. Wired magazine recently reported that roughly 3% of homes have dropped their landlines and 8% are expected to follow suit in next five years. Another report by CNN noted that 7.5 million Americans have completely "cut the cord" already, although other estimates are much higher. A January 2002 USA Today poll confirmed that a gradual societal shift to wireless is well underway in America, with 18%-almost one in five-of cell phone owners surveyed saying their cell phones was their "primary phone." A more recent study by PriMetrica Inc. suggested that roughly half of U.S. households would be willing to dump wireline for cellular as wireless prices fall.

If these trends continue, "The vast majority of us are going to be using wireless phones as our main phones," in 5 to 10 years argues telecom analyst Jeff Kagan. Indeed, the U.S. is somewhat behind the rest of the world in going wireless. A recent telecom survey by The Economist noted, "Only 20 years ago, there was little reason to think that mobile phones were about to become the most popular communications devices on the planet." But now, "a mere two decades later, in 2002, the number of mobile phones overtook the number of fixed-line ones (globally)." With only 50% penetration today, the United States lags behind Europe and Asia, where roughly 80% of the population carries a wireless phone. While many incumbent wireline operators say they are ready for the wireless onslaught since they have their own wireless affiliate, behind closed doors they probably acknowledge that a customer lost to wireless-even their own wireless unit-is a serious setback since wireless subscribers are harder to retain and probably not as profitable as an old wireline subscriber over the long haul.

(3) Number Portability: And now comes the number portability decision, which adds more fuel to the VoIP and wireless substitution fire. "I think it will certainly increase the move toward substituting wireless for wire-line phones," notes Rebecca Arbogast, an analyst with Legg Mason. And Scott Cleland, chief executive of Precursor, told the Washington Post that number portability would create entire classes of people-retirees, nomads, frequent travelers and college students-who would abandon wired phones.

For the incumbent wireline operators, the impact of this "perfect storm" can already be seen in recent data on wireline access line losses. The FCC has noted that "Verizon, SBC, and BellSouth saw business and consumer access lines fall 3.6, 4.1, and 3.2%, respectively, in 2002, for a total decrease of 5.5 million lines, with wireless substitution being a significant factor." Similarly, payphone and prepaid calling cards are also taking a big hit because of wireless substitution. Significant revenue downturns have accompanied these access line losses. Wireline revenue dropped by 5% last year according to Wired magazine, and telecom consultancy Adventis predicts massive wireline losses of $14-18 billion by 2010.

And yet, the regulatory status quo prevails. If this sort of perfect storm were developing in any other industry, many policymakers would likely be considering steps to shelter companies from the damage. But the exact opposite is occurring in the wireline telecom sector today. Incumbent operators continue to be shackled with a staggering array of regulations that prevent them from responding to these new competitive threats. Especially problematic are the open access mandates that force incumbents to share almost every element of their networks with rivals at regulated rates that don't cover their sunk costs.

Some regulators and opponents of incumbent telephone companies will claim it's too early to deregulate the wireline portion of the industry, or argue that new services are not on par with old wireline networks in terms of reliability. But VoIP and wireless service need not be "five nines" (99.999%) reliable to be a close substitute for traditional wireline service. Consumers are willing to trade a few dropped calls now and then for the added convenience and competition that VoIP and wireless phones offer. So while the FCC's janissary will undoubtedly say it's too soon to deregulate, it's more likely the opposite is the case; we've already waited far to long to loose the chains that bind the wireline sector. Communications is an increasingly competitive, contestable market. It's time to deregulate before more damage is done.

--------------------------------------------------------------------------------

Adam Thierer (athierer@cato.org) is Director of Telecommunications Studies at the Cato Institute in Washington, D.C. (www.cato.org/tech). To subscribe, or see a list of all previous TechKnowledge articles, visit http://www.cato.org/tech/tk-index.html.

I thought this was a great read, and there are a lot of points to discuss. Do you think that by purchasing service from a wireless co that the consumer then has property rights over the telephone number and should be able to transfer it to another service? Do you think that the wireline industry should be de-regulated in order to allow them to compete with wireless providers that are taking their customers?

Personally, I believe that a phone number, when paid for, does belong to the customer, and that they should be able to transfer it to other services. The telco does not own any digits, and so doesn't really have any claim to the number. If you want to compare this to ISPs and ISP email addresses, it's different -- the ISP owns the domain name "isp.net", so any name@isp.net email address is their property after the customer has transferred service.

As for deregulation, I don't see what harm it would cause, it would merely allow the wireline telcos to compete with the wireless threat to their business.

nirol · 11-20-2003, 07:42 PM

Quote:

I thought this was a great read, and there are a lot of points to discuss. Do you think that by purchasing service from a wireless co that the consumer then has property rights over the telephone number and should be able to transfer it to another service? Do you think that the wireline industry should be de-regulated in order to allow them to compete with wireless providers that are taking their customers?

Personally, I believe that a phone number, when paid for, does belong to the customer, and that they should be able to transfer it to other services. The telco does not own any digits, and so doesn't really have any claim to the number. If you want to compare this to ISPs and ISP email addresses, it's different -- the ISP owns the domain name "isp.net", so any name@isp.net email address is their property after the customer has transferred service.

As for deregulation, I don't see what harm it would cause, it would merely allow the wireline telcos to compete with the wireless threat to their business. [/B]

edit: fixed it for you

The provider never owned the phone number to begin with. They are assigned a certain set of numbers and exchanges when they obtain a license from state and federal regulatory agencies. In theory we all own these numbers ( the government). This is done to prevent chaos.
Allowing number portability will allow a lot more switching between providers, both wired and wireless. Also it increases capacity because fewer numbers will have to be put on the sidelines after service is canceled before being assigned to another user.

Telecom is still going through changes. The long term viabilty of wired phones for person to person communication is much in doubt. The lines will eventually be transferred to data transmission and other uses. The technology is no longer competitive with wireless in most areas, and does not provide as much freedom and productivity.

nirol · 11-20-2003, 07:43 PM

Sorry, I seemed to have screwed up copying your text.
Back to computer kindergarten for me!

Kurant · 11-20-2003, 08:06 PM

Personally, I don't think there is any debate.

It's a phone number. Maybe I'm more of a "west-wing" kinda guy, but really, don't people have better things to worry about then if they "own" they're phone number or not? It's not a car, or a house. Or somthing you just bought from the store. It's a local utility, or wireless utility. If you more from Cali to Vermont, and Verizon is in both places, you should be able to keep the number, that's one thing. But worrying about if you OWN that number?

I'm just really in shock people want to OWN phone numbers. Obviously the FCC did this out of ideas brought to the table. Personally, I think it's ridiculious. It's JUST a phone number. You can get another one!

EDIT: spellin.

SuperMidget · 11-20-2003, 08:06 PM

I am probably going to be the lone wolf on this, but I have to say I don't like this. Sure it's great for consmers but the tech's get screwed.

This is gonna be a nightmare for telco employees. (I used to be one until I was switched over to the CATV side. Granted I was only a permanent/temporary employee. Family business don't ask, it was complicated.) The reprogramming of the switches alone will cause quite a bit of time to be lost. I am not happy about this one bit. Granted it has always been possible but never very practical.

For local exchanges if this happens often, you will see rates increase due to the increased man hours in switching numbers.

ubertuber · 11-21-2003, 06:47 AM

Quote:

Originally posted by Kurant
It's a phone number. Maybe I'm more of a "west-wing" kinda guy, but really, don't people have better things to worry about then if they "own" they're phone number or not? It's not a car, or a house...

...It's JUST a phone number. You can get another one!

EDIT: spellin.

I know this isn't the case for everyone, but this is a big deal to musicians. My livelihood currently depends on people having my phone number, including people I don't know. It is how I get gigs. So, even when my wireless contract was up in years past I couldn't switch carriers. I was afraid of losing work. It took long enough for the phone number I have now to get around...

Fallon · 11-21-2003, 08:17 AM

Quote:

Originally posted by SuperMidget
I am probably going to be the lone wolf on this, but I have to say I don't like this. Sure it's great for consmers but the tech's get screwed.

This is gonna be a nightmare for telco employees. (I used to be one until I was switched over to the CATV side. Granted I was only a permanent/temporary employee. Family business don't ask, it was complicated.) The reprogramming of the switches alone will cause quite a bit of time to be lost. I am not happy about this one bit. Granted it has always been possible but never very practical.

For local exchanges if this happens often, you will see rates increase due to the increased man hours in switching numbers.

You aren't the lone wolf. I work at a telephone company who doesn't totally screw the customer. We've got companies from Cali to Maine(not verizon either) and this will be devestating, because we aren't in the cell phone market. Our parent company owns U.S. Cellular but that won't help us because each company is basically independant. We've already been hammered by cell phones, and according to an article I read on my works intranet(sorry can't link to it) the fcc wants ALL numbers to be portable throughout the country. Prefixes wouldn't matter anymore and such. I agree that Cell phone numbers should be portable, because you can't say this prefix is generally in this or that state.
But if you have landlines from New Hampshire getting put in Cali, that's really gonna screw with peoples head.
I don't really think this is going to help anyone because costs are going to raise all over the telecomm spectrum to pay for this "portability" and to make up for lost profits. You'll also see no more local companies because you'll get some cell phone company to move into an area, lower cell service in that area, kill the landline company, then raise the price.
No sir, I don't think this is good at all.

Downtownat10 · 11-25-2003, 12:46 PM

Here's my take on the whole subject...

I think it is a great thing that people can now take their numbers with them. Originally, I was pleased with it the first time I heard about it. At the time, I was under the impression that it only dealt with Wireless numbers, and that wired numbers stayed the same. This, to me, was beautiful, because I have a number of friends who got locked into a year of two year contract with a certain company, and had terrible service, but when the contract ran up, they were tied down to that number. When people have been calling you for two years on one number, it is difficult to get them to change overnight. So I wholly supported that from the beginning.

When I learned that it dealt with switching wireline phones to wireless, I was a bit shocked. I understand that in a lot of ways the local carriers don't compete with cellular prices. Also, you cannot beat the convenience of having a cel phone. So yes, it does give wireless providers an unfair advantage.

But then I really started to think about it.

Local carriers have consistently kept consumers nuts in a vise for decades. If a large carrier such as SBC runs your local area, in the past you were stuck with SBC. They could essentially price-gouge their customers, but nobody would understand the gouging, since there was no other competition. Local carriers had the monopoly. The only good thing, in my opinion, that ever came from the Telecommunications act of 1996 was that the FCC required companies to open their networks to competition. However, these companies can still price their line-lease rates to third party companies based on local demand. Meaning, of course, that if SBC owns a five mile plot, and charges the customer $20/month for service, they could charge a third company $15/month per line to come in and offer service for one mile of that plot. Essentially, even though they have been forced to open their networks, they still control the price of service.

So, keeping that in mind, I think the local carriers have held on to the market long enough. With wireless companies now being able to take their numbers, the phone companies are going ot have to wise up and realize that the time for competition is upon them. Wireline carriers could easily offer unlimited long distance to their customers, but then they are left with only the monthly service charge coming in. It does not allow much room for market growth, considering the holiday calls would fail to net them any extra money. Many phone companies offer unlimited long distance for an extra fee, so it isn't as if the idea is impossible.

Besides, there are still going to be a huge number of people that must keep a wireline phone. Most small home office users have an extra line strictly for a fax. Although there are various ways of getting faxes via the internet, not all users either understand this or are willing to convert to this. Those lines will remain, because although it is possible to get faxes on mobile phones, it isn't commonplace. Also, if a customer has a DSL line through PacBell or BellSouth, are they not required to keep a phone line? I know locally that Bellsouth requires that you have your phone service through them in order to get DSL, so I have friends who won't be switching full-cellular just yet.

And, one item which is by no means irrelevant, are the people who have security systems installed at their homes. Most all alarm providers need to have a land line connection, with the exception of a few of the top-tier companies. While these customers have the option of lowering the service they receive from the phone company, that line still has to be there, and has to be connected at both ends.

So I applaud the new number portability. It is time that land carriers felt the pinch of holding onto their monopoly for too long.

Sho Nuff · 11-26-2003, 11:09 AM

Land line companies are becoming obsolete. Those are the breaks. Get in wireless or youll be extinct soon enough. I have Sprint, the worst wireless provider in all the land, and I cannot wait to take my number and jet in January. Finally the FCC does something right.

11-20-2003, 07:43 PM	#3 (permalink)
nirol Crazy Location: South East US	Sorry, I seemed to have screwed up copying your text. Back to computer kindergarten for me! __________________ 'Tis better to remain silent and be thought a fool, than open one's mouth and remove all doubt. Samuel Johnson (1709 - 1784)

11-20-2003, 08:06 PM	#4 (permalink)
Kurant Junkie Location: Don't worry about it.	Personally, I don't think there is any debate. It's a phone number. Maybe I'm more of a "west-wing" kinda guy, but really, don't people have better things to worry about then if they "own" they're phone number or not? It's not a car, or a house. Or somthing you just bought from the store. It's a local utility, or wireless utility. If you more from Cali to Vermont, and Verizon is in both places, you should be able to keep the number, that's one thing. But worrying about if you OWN that number? I'm just really in shock people want to OWN phone numbers. Obviously the FCC did this out of ideas brought to the table. Personally, I think it's ridiculious. It's JUST a phone number. You can get another one! EDIT: spellin. Last edited by Kurant; 11-20-2003 at 08:11 PM..

11-25-2003, 12:46 PM	#8 (permalink)
Downtownat10 Crazy Location: A Fortified Compound, East Coast	Here's my take on the whole subject... I think it is a great thing that people can now take their numbers with them. Originally, I was pleased with it the first time I heard about it. At the time, I was under the impression that it only dealt with Wireless numbers, and that wired numbers stayed the same. This, to me, was beautiful, because I have a number of friends who got locked into a year of two year contract with a certain company, and had terrible service, but when the contract ran up, they were tied down to that number. When people have been calling you for two years on one number, it is difficult to get them to change overnight. So I wholly supported that from the beginning. When I learned that it dealt with switching wireline phones to wireless, I was a bit shocked. I understand that in a lot of ways the local carriers don't compete with cellular prices. Also, you cannot beat the convenience of having a cel phone. So yes, it does give wireless providers an unfair advantage. But then I really started to think about it. Local carriers have consistently kept consumers nuts in a vise for decades. If a large carrier such as SBC runs your local area, in the past you were stuck with SBC. They could essentially price-gouge their customers, but nobody would understand the gouging, since there was no other competition. Local carriers had the monopoly. The only good thing, in my opinion, that ever came from the Telecommunications act of 1996 was that the FCC required companies to open their networks to competition. However, these companies can still price their line-lease rates to third party companies based on local demand. Meaning, of course, that if SBC owns a five mile plot, and charges the customer $20/month for service, they could charge a third company $15/month per line to come in and offer service for one mile of that plot. Essentially, even though they have been forced to open their networks, they still control the price of service. So, keeping that in mind, I think the local carriers have held on to the market long enough. With wireless companies now being able to take their numbers, the phone companies are going ot have to wise up and realize that the time for competition is upon them. Wireline carriers could easily offer unlimited long distance to their customers, but then they are left with only the monthly service charge coming in. It does not allow much room for market growth, considering the holiday calls would fail to net them any extra money. Many phone companies offer unlimited long distance for an extra fee, so it isn't as if the idea is impossible. Besides, there are still going to be a huge number of people that must keep a wireline phone. Most small home office users have an extra line strictly for a fax. Although there are various ways of getting faxes via the internet, not all users either understand this or are willing to convert to this. Those lines will remain, because although it is possible to get faxes on mobile phones, it isn't commonplace. Also, if a customer has a DSL line through PacBell or BellSouth, are they not required to keep a phone line? I know locally that Bellsouth requires that you have your phone service through them in order to get DSL, so I have friends who won't be switching full-cellular just yet. And, one item which is by no means irrelevant, are the people who have security systems installed at their homes. Most all alarm providers need to have a land line connection, with the exception of a few of the top-tier companies. While these customers have the option of lowering the service they receive from the phone company, that line still has to be there, and has to be connected at both ends. So I applaud the new number portability. It is time that land carriers felt the pinch of holding onto their monopoly for too long. __________________ Heh. Oops. Sorry about that one...

11-26-2003, 11:09 AM	#9 (permalink)
Sho Nuff Addict Location: Harlem	Land line companies are becoming obsolete. Those are the breaks. Get in wireless or youll be extinct soon enough. I have Sprint, the worst wireless provider in all the land, and I cannot wait to take my number and jet in January. Finally the FCC does something right. __________________ I know Nietzsche doesnt rhyme with peachy, but you sound like a pretentious prick when you correct me.

11-20-2003, 08:06 PM	#5 (permalink)
SuperMidget Banned Location: Farm country, South Dakota	I am probably going to be the lone wolf on this, but I have to say I don't like this. Sure it's great for consmers but the tech's get screwed. This is gonna be a nightmare for telco employees. (I used to be one until I was switched over to the CATV side. Granted I was only a permanent/temporary employee. Family business don't ask, it was complicated.) The reprogramming of the switches alone will cause quite a bit of time to be lost. I am not happy about this one bit. Granted it has always been possible but never very practical. For local exchanges if this happens often, you will see rates increase due to the increased man hours in switching numbers.