Billing World Publisher's Letter Local Number Portability or If You Build It, Will They Come?

Next to the Internet, nothing will have a more profound effect on plain old telephone service (POTS) by the year 2000 other than local number portability (LNP).Meanwhile brace yourself because the mass media is going to attack the telecom industry by highlighting the negative effects LNP will have on consumers. Imagine the headlines "If You Built It, Will They Come?" or worse yet, "They Built It and Nobody Came!" LNP is about to become a PR disaster for the FCC. Not that it's their fault, because it was Congress who wrote the LNP requirement into the Telecom Act of 1996. But of course, Congress never takes responsibility for their actions, so, the LNP mess will likely be blamed on the FCC. Here are three looming LNP bungles and likely newspaper coverage headlines.

1. Telecom Act Backfires-Telephone Rates Increase!

To implement LNP, the industry kicked around some figures and stated the costs would be between $2.5 billion to $4 billion. The Telecom Act states that the carriers are to pay for it in a competitively neutral way as determined by the FCC. Countless hours can be spent thinking up cost recovery scenarios to satisfy all, only to in the end come up empty-handed. In all likelihood, by early next year a monthly charge of $1 or so will be added to consumer bills for a service that all but a few consumers requested or received. Note, the industry has spent approximately $4 billion on LNP or roughly $40 per household. The press will have a field day with the unexpected increases in phone bills due to the Telecom Act.

2. Carriers Delete Consumers From the Telephone Network!

With visions of the movie Men In Black where the intergalactic agents watch all records tracing their identity disappear from a computer screen right before their eyes, the press will report some poor consumer that had their telephone number ported from one carrier to another, in the process becoming unreachable by telephone. With the complexity of near simultaneous transfer of a consumer's telephone number from one carrier's location register to another, some CSR is going to hit the wrong key and one or many consumers are going to just disappear from the telephone network. Again, this kind of press coverage portrays the Telecom Act leading straight into disaster, and there's no good sound byte-ready explanation as to why.

3. Number Portability Costing $100,000 per Subscriber!

By the time LNP gets started and the press realizes that only several thousand subscribers actually keep their number when changing carriers, (and that the cost of porting numbers is in the billions), reporters will do the math, ($4billion/4000 subscribers =), and conclude that this whole idea of number portability was dumb. This series of events will occur for several reasons:

LNP Carriers Jockey for Position

There is a saying, "If it ain't broke don't fix it." But what if it's all broke! That pretty much sums up the current state of LNP and why the press will love this telecom fiasco. Here are the strategic problems facing each carrier segment regarding LNP.

RBOCs

The RBOCs have put a tremendous effort into making "the network" ready for LNP and virtually nothing to make the business processes work with the CLECs. Billions have been spent on SS7 infrastructure to accommodate number portability databases; comparing this to what is spent for CLEC service provisioning and you are talking pennies. Yes, hundreds of RBOC switches are ready to port numbers to CLECs today, but only a few hundred subscribers out of literally 10s of millions have been ported. Why? The CLECs view LNP as a worthless service feature, because while the RBOCs can port numbers, they eventually only do so if a request is sent via fax.

So what's going on with the RBOCs? There's one camp inside the Bells that just wants to stonewall; follow the FCC guidelines, but make it totally unworkable from a CLEC business-case perspective. In the meantime, RBOCs will try to get around the restrictions on circuit switched long distance by creating IP networks to enter the IXC business under the banner of advancing network technology. The other RBOC camp says, "If we don't get with the FCC flow we will be never get into long distance, and worse, the CLECs will finally figure out how to make money with LNP, while we are stuck at the starting gate".

IXCs

The big inter-exchange carriers are stonewalling as well. As long as they make the case to the FCC that the RBOCs have made it impossible for them to profit from LNP, due to the lack of electronic bonding in the service provisioning process, the RBOCs will be kept out of the long distance market.

CLECs

Today the CLECs make money on outgoing, not incoming, calls. For example, a T-1 to the customer premises connected to their long distance, VPN and/or Internet service. So who needs LNP?

Wireless Carriers

If there has ever been a game of telecom chicken between the FCC and carriers, this is it. The wireless industry has as much as told the FCC outright, "We need LNP like we need a hole in the head. LNP is a RBOC/IXC/CLEC issue and we want no part of it." Note, if a wireless carrier has to send a call to an ILEC to determine if the terminating customer is on an ILEC or CLEC switch, it can cost them 0.3 to 0.6 cents per database dip. At 60 billion calls per year, that's $180 million to $360 million a year in additional costs! It also create a problem for on-site wireless phone sales. Today consumers can walk into a wireless dealer and 15 minutes later be on the air. Under LNP, a consumer walks in and says they want to port their existing telephone number your wireless service. The consumer will not be able make calls on that new phone for days. Besides, allowing customers to port numbers means more wireless churn and who wants that. In reality, the wireless industry is going to have to blink and give in to the FCC's mandates on LNP.

Where's the LNP Killer Apps?

LNP will be a disaster unless there are public benefits, or more to the point, some carrier must find a way to make money with it or in essence discover the killer applications. The good news for CLECs, IXCs and wireless carriers is that there are pockets of gold to be found with LNP. The bad news for the ILECs is that they must get with the LNP game plan not to create new customers, but to keep their current ones. Here are my no brainer LNP winners.

1.Geographic Portability.

Many people are going to love the fact they don't have to change telephone numbers when they move. Consider the following, each year one out of every four consumers moves and changes their local number, and a number of users will be willing to pay for the long distance portion of incoming calls, (a la toll free, 800), just to avoid changing their number. Also, wireless calling party pays is on the horizon, and you could apply the applications to geographic local portability as well and more. CLECs, IXCs and wireless carriers will be able to offer geographic number portability because they can handle the long distance connection in the near term and the ILECs cannot.

2. 800 Replacement.

If it wasn't bad enough that the Internet is gobbling up 800 or Toll Free service revenues for customer service applications, along comes local number portability. Nine out of 10 times a number that looks local and priced accordingly (toll free) is going to have a higher market value than an 800, 888, 877 etc. Add the new generation of vanity toll free 800 numbers. i.e., (800 FLOWERS) and replace them with 7-digit, look-alike local numbers in each NPA or area code, and you have a local access winner. One number that looks local (FLOWERS) and can be dialed like a local number plus delivering caller ID where the call is terminated and moreover, process the call nationally, like 800 numbers are today, this application will eat into toll free revenue not to mention the number pool. For example, a company could snatch up every local number "FLOWERS" in every NPA for a total of 800 numbers. If "FLOWERS is dialed in N.Y.; the call will be processes in Va., but a N.Y. flower shop (literally) will deliver flowers. Of course, sales commissions are paid to the LNP flowers processors.

3. 50/50 Percent Split for Disaster Avoidance.

Picture this: A CLEC sales rep knocks on the door of large customer and says, "I've got a deal you can't refuse. Give us 50 percent of your local business and leave 50 percent with your ILEC. If our switch goes down, or local access lines are cut, you will still have 50 percent of facilities up and running with the ILEC, likewise if their switch goes you will still have 50 percent availability." How's that for avoiding a disaster! By the way, the customer could still keep its current local number, which could be processed by both switches. If the CLECs get enough of these large customers, the industry will have no choice but to require a relatively few lines of computer code to the local number portability database, or SCP (service control point), that alternates the termination of every other incoming call to the customer between ILEC and CLEC switch. Note, running on 50 percent of facilities doesn't mean 50 percent of capacity. Blocking two lanes of a four-lane highway doesn't have any adverse effect on non-rush hour traffic and it doesn't mean that only 50 percent of the cars get through during rush hour. There would just be some delays. Same with telecom traffic.

21st Century POTS.

There are other LNP opportunities associated with 800 service replacement, IP telephony, wireless IP, calling party pays and so on that will change POTS. In the end, after the press runs out of LNP disaster stories to report, the public will see the benefits of going through with LNP. But POTS will never be the same. Here are three changes for starters.

1.What happened to rate centers?

Combine geographic number portability with the endless fiber capacity increases and you create distance insensitive pricing. The distinctions and pricing differences between local and long distance will disappear. The network cost elements that will affect pricing will be the originating and terminating access point. As such, who needs rate centers (i.e. area dividing lines between local and intra-LATA toll)? For that matter who will need LATAs! It will take a few years, but postalized, i.e. distance insensitive POTS rates are soon to arrive.

2. Unlimited use telephony plus calling party pays.

There will only be one pricing scheme for telephony in the future due in part to the elimination of rate centers and emergence of IP telephony, i.e., (give away the voice to get the IP data business). Customers will pay a flat rate for unlimited calls anywhere in the United States, but will pay on a per call basis for terminating on wireless or international networks. Their phone will "beep" or give some other signal to notify the caller that the call has an incremental cost where the calling party pays extra.

In addition, there is a little regulatory problem that has to be resolved concerning the amount of the measured access charges long distance carriers must pay (currently 2.5 cents per minute per end). However, it eventually will be. Note: it's the only sensible way for regulators to address the impending IP telephony boom. To solve the IP telephony problem, all carriers will pay interconnect fees regardless of whether they are local, long distance or IP. Also, it will likely be a bill and keep settlement arrangement.

3. Billing vs. telephone numbers.

Eventually the industry will get LNP running to the point where it only takes a few seconds to switch carriers, keeping local numbers. Once this happens, the era of using telephone numbers for billing purposes is over. If the industry can introduce a second ten-digit number, (location routing number) to route calls to the user's carrier's switch, it can introduce a third-number database for billing that can also be used for IP, wireless and electronic commerce.

There're my predictions on LNP. The bad news? Consumers will be confused, but what else is new. The good news is billing, customer care and OSS will have to change, and as always when you look at the future, billing, customer care and OSS will be the only carrier differentiators creating winners and losers.