Pop along to the Federal Communication Commission’s website,
and buried in the "Headlines" you’ll find something saying
"Verizon Wireless’ Petition for Partial Forbearance from the Commercial
Mobile Radio Services Number Portability Obligation and Telephone Number
Portability." Click on one of the links (it’s available in text,
format, but not in basic HTML) and you’ll find yourself in a 27-page
thicket of legalese. It’s not a petition at all, it’s the FCC’s response
to the petition, and it makes for incredibly depressing reading.
In a nutshell, the FCC has given Verizon (and every other wireless
company) an extra year before they need to introduce number portability
– the ability to change your cellphone provider without changing your
phone number. The decision is in no way atypical. A quick timeline might
be in order here:
- July 1996: The FCC tells the operators that they need to have local
number portability (LNP) by June 30, 1999 – three years away.
- September 1998: The FCC grants a nine-month extension, to March
- February 1999: The FCC grants another extension, this time all
the way out to November 24, 2002.
- July 2002: The FCC grants yet another extension, to November 2003.
So we’re now six years away from the original order, more than three
years past the original deadline for compliance, and we’re still 16
months away from the earliest that this is going to happen, assuming
that the FCC doesn’t come up with reasons to push it back yet further.
It must be really tough, this LNP, eh? Six years of work and the wireless
operators still can’t make it happen! Of course, that’s not the case
at all. The wireless operators could do it in a month or two if they
needed – in fact, they shamelessly admit that they haven’t even started
getting to work on this yet. Basically, all they’ve been doing for the
past six years is paying lobbyists to push the deadlines out, rather
than making the relatively modest technology and staff-training upgrades
needed to implement LNP. (Number portability has existed for wireline
telephony for years now, and Verizon has no problem implementing it
in that context.)
Verizon et al complain that LNP is far too expensive, although
even their own estimates only work out at 20 cents or so a month on
the average cellphone bill. Sprint, for example, estimates that LNP
would cost $26 million, compared to total capital expenditures last
year of $3.327 billion. Coincidentally, my monthly Sprint PCS phone
bill is roughly $33.27, so adding on LNP would bring that up to $33.53,
assuming that Sprint is being completely honest here and not exaggerating
the costs at all. That I can afford.
For LNP doesn’t just bring costs, it brings savings, too. One third
of America’s cellphone customers will "churn" in 2002 – will
switch from one provider to another. When they do so, and change their
phone numbers in the process, they not only need to send out those mass
emails we’re all so used to getting, but also need to get websites edited,
business cards and letterheads reprinted, and inevitably never receive
an unknown number of phone calls from people who didn’t get the message.
The cost of all of that is certainly more than the extra buck or two
that customers may or may not need to pay in annual phone charges.
(Astonishingly enough, the cellphone companies actually use the one-in-three
figure in an attempt to buttress their own argument. The fact that churning
is so common, they say, is proof positive that people don’t mind changing
their phone numbers, so there’s no point in spending money to let them
keep them. What they mean, of course, is that given the choice between
a customer spending $200 on new business cards and themselves spending
$2 on LNP, they’d choose the former any day.)
What the phone companies won’t tell you is that far from increasing
your phone bill, LNP is more than likely to decrease it. The cost of
switching providers at the moment is artificially high, due to the expense
and hassle involved in changing your phone number. If that goes down,
mobile companies will have a huge incentive to start poaching disaffected
cellphone users who can’t stand their present provider but who are presently
daunted by the obstacles to switching. A consulting company called Instat
that churn would increase by 25% to 50% in the year after LNP was introduced
– more than 20 million people who are presently unhappy but who feel
locked in to a bad relationship.
A good cellphone company would consider those 20 million customers
as an enormous opportunity: now that the wireless market is maturing,
they represent a tsunami of potential new subscribers. But evidently
none of the major national cellphone companies are nearly that confident:
they all feel that they have more to lose from LNP than they have to
gain. They’re probably right: whatever they might gain in new subscribers
they’d probably need to lose in terms of all the discounts and whatnot
needed to attract those new subscribers in the first place. But that
just goes to prove that cellphone bills will go down and not up – quite
the opposite of what the telcos claim in their petition.
A word about regulation, too, for the all-regulation-is-bad types out
there: LNP is almost an axiomatic case of a market inefficiency which
requires regulation. If all providers have LNP, then the market becomes
more liquid, consumers benefit, and the better cellphone companies find
it easier to outperform the less good ones. In other words, you have
something much closer to a classic free market. But left to its own
devices, the market will never get there: if any company institutes
LNP unilaterally, then it can be poached from, while remaining unable
to poach from its rivals. There’s a downside without any upside. In
order for everybody to benefit, a regulator has to mandate that all
companies implement LNP at the same time.
The FCC understands this, but is proving amazingly spineless in making
it happen. LNP might exist in November 2003, or it might not: no one
knows. The commission has managed to justify its latest decision by
saying that the wireless operators are already overtaxed by something
called pooling, and that it’s probably unfair to make them implement
pooling and LNP at the same time. It’s the sort of thing which makes
experts in the field guffaw. The whole point about having LNP and pooling
kick in on the same date was that they’re essentially two sides of the
same coin: they’re based on exactly the same technology. If you’ve got
LNP, you’ve got pooling.
And in fact most of the ruling does read like a brief for the consumer.
The FCC knows what the right thing to do is, and lays out the arguments
for LNP in compelling detail. It then, unfortunately, caves in at the
end. Once again, the lobbyists have won and the general public has lost
out. Some day, perhaps, you’ll be able to switch your land line number
to your new cellphone, and do away with your home phone entirely. (Imagine:
cellphones with 212 area codes!) It was meant to happen this November;
it’s worth hoping that it will now happen at the end of 2003. But I’m
not holding my breath.