Subject: [NEXTEL-1] Cellular Carriers Offer FCC New 'Number Portability&apos; Plan

From: Marcel <[email-masked]>
Date: Thu, 10 Apr 2003 10:39:25 -0400

TELECOMMUNICATIONS

Cellular Carriers Offer FCC New 'Number Portability&apos; Plan

By JESSE DRUCKER
Staff Reporter of THE WALL STREET JOURNAL
For years, U.S. cellphone carriers have fought
efforts to cure one of the nagging complaints of their
customers: They can't keep their phone number if
they switch to another service provider.

But as a key court date in the dispute approaches
Tuesday, some of the nation's cellular companies
have adopted a tactic that puts them squarely at
odds with their land-line rivals. Now, these wireless
carriers say they would comply with Federal
Communications Commission rules mandating such
"number portability " -- if the FCC also forces
landline carriers to let customers switch their
traditional phone numbers to cellphones.

The new position, if upheld, pushed by the Cellular
Telecommunications & Internet Association, the
industry's trade group, could accelerate the trend of
people dropping their land-line service and going
completely wireless.

Industry observers say the stakes couldn't be higher
as the FCC pushes to require cellular-number
portability by Nov. 24. Although carriers are
reluctant to acknowledge it, portability could cause
a dramatic increase in "churn," the rate at which
customers ditch their cellular service for a
competitor. That would increase costs for the
already profit-challenged U.S. cellular industry and
could likely spark another round of price wars.

"It's basically the nightmare before Christmas" for
wireless carriers, said Roger Entner, an analyst with
Yankee Group, a Boston technology consulting firm.
He forecasts that increased churn brought on by
number portability will cost the industry $3 billion in
the fourth quarter this year and the first quarter next
year due to increased commissions, phone subsidies
and other sales-related expenditures.

He cites the experience of Hong Kong, where cellular-number portability was
implemented in 1999. There, monthly churn rose from 2.5%-3.5% of customers to
9%-10% in the quarter it was put in place, and a massive price war ensued. Churn
has settled back into its original range, but rises to 5% or 6% every year on
the anniversary of portability when many customer contracts expire. Portability
is also the rule in other countries, including Australia and the United Kingdom,
though churn hasn't increased as much in the U.K. because it can take weeks for
numbers to be transferred.
In the U.S., the push by cellular carriers to include land-line carriers in any
requirement is a signal that their interests may be increasingly diverging with
those of their parent companies. SBC Communications Inc., the big land-line
phone company that owns 60% of Cingular Wireless, the country's second-biggest
cellular carrier in terms of customers, is opposed to the move. On the other
hand, BellSouth Corp., which owns the other 40% of Cingular, says it could
implement such a move. Cingular Wireless, meanwhile, has declined to take a
public position.

"There is a very real difference of opinion between the wire-line and wireless
industries on this," says Michael Altschul, general counsel to the CTIA. "The
opportunity to take the wire-line phone and port it to wireless is an
opportunity that the wireless industry wants to have happen."

Bryan Tramont, senior legal adviser to FCC Chairman Michael Powell, says the
agency intends to rule on the wireless trade group's position before Nov. 24.
"Everyone agrees there is some obligation for some wire-line-to-wireless
porting," he says. "The question is, how much."

To be sure, the cellular industry is still fighting to prevent portability --
which has already been delayed three times -- from happening at all. At next
week's hearing, industry lawyers are scheduled to appear before the U.S. Court
of Appeals for the District of Columbia Circuit, where they will argue that the
FCC doesn't have the legal authority to force them to transfer numbers.

The cellular industry has long argued that implementing the technology to make
portability possible is costly. But industry experts say carriers have already
spent a significant portion of the money needed to make the changes. The real
reason behind carrier's vehement opposition -- and their new attempt to spread
the requirement to traditional carriers -- is the fear of losing customers.

Keeping down customer defections is vital: It generally takes nearly a year for
a carrier to earn its money back from the cost of acquiring a customer. The
average customer stays with a carrier for roughly three years, translating to
two years of operating profit. But if monthly churn rises from its current level
of 2.8% to, say, 6%, it means a carrier's profitable period could be reduced to
as little as four months before the subscriber moves on and the carrier has to
start the process all over.
Currently, land-line subscribers can switch their numbers to cellphones in only
very limited instances when their land-line carrier's "rate center" is in the
same location as their cellular carrier's.

Consumer groups want as much portability as possible to promote greater choice.
"We need wire-line-to-wireless portability , because wireless services are the
only real competition we're gong to have against the wire-line monopolies in the
near term," says Chris Murray, legislative counsel for Consumers Union.
Write to Jesse Drucker at [email-masked]
Updated April 10, 2003

http://online.wsj.com/article_email/0,,SB104993000328997700-search,00.html?collection=wsjie%2F30day&vql_string=portability%3Cin%3E%28article%2Dbody%29

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