Providers Spend Millions on LNP

Provider spending to support the FCC-mandated wireless Local Number Portability (LNP) ruling varies, but in no case is it chump change. Kirk Parsons, senior director of wireless services at J.D. Powers, estimates that per-carrier spending for LNP ranges from $200 million to $500 million. This includes network and software upgrades, new staff, new operation procedures, training for staff, negotiating agreements and testing with other carriers.

Verizon Wireless alone had spent $65 million on LNP prior to the November 24 deadline, part of which included the conversion of a strip mall in Tennessee to a brand new call center complete with between 900 and 1,000 employees dedicated just to handle LNP issues. Those customer service representatives can eventually be moved from dealing with just portability issues to handling other issues, but at least initially the representatives were dedicated solely to LNP.

At Nextel, implementing LNP came with a high price tag. Company spokesperson Karen Miller estimates that Nextel spent about $100 million just “to be ready to flip the switch.”

And, Sprint PCS spokesperson Jenny Walsh says, “It’s costing us hundreds of millions of dollars [to implement LNP].”

Faith Seiders, Cingular Wireless’ director of sales operations, says that Cingular had spent $60 million prior to 2003, about $150 million in 2003 and will likely spend $200 million in 2004. “There are two billing systems at Cingular, so both of our billing systems had to be upgraded,” she says.

Passing the Cost to the Consumers

When it comes to recovering their costs for LNP, wireless carriers vary greatly on what they are passing along to customers, but those who are charging a fee are not at all shy about it.

Wireless telecom is a very competitive industry, and the carriers are forced to recover their costs one way or the other, says AT&T Wireless spokesperson Rochelle Cohen. AT&T Wireless is currently charging $1.75 for E-911, number pooling and LNP—among the highest surcharge costs in the industry. Yet, AT&T Wireless is assessing the fee only on new customers or on existing customers when they change or upgrade their plan or when their current plan expires. “We’re not just going to tack it onto your bill without telling you,” an AT&T Wireless CSR says. The decision not to add the fee onto current customer bills could be self-serving. First, AT&T Wireless could essentially be curbing additional costs to the call centers customers might call to inquire about with the addition of an extra fee. And, the company might also seek to curtail any potential churn because of the added fee.

Over at Cingular, Seiders explains that the fee assessed to customers accounts for “as low as 25 cents as part of our cost recovery fee.” The actual amount charged to recover LNP costs depends on the market, and Seiders explains that it may actually be higher in some states than others. The highest amount the company charges for regulatory fees is 36 cents. She adds, “We still potentially will not recover all of our costs.” Cingular does not charge for number pooling but does charge for E-911.

The FCC recognizes and encourages the competitive nature of the wireless industry, and that is why the commission did not place a moratorium on the length of time a wireless carrier can charge customers to recover their costs to implement LNP. “We imagine that the market will allow carriers to differentiate,” says FCC spokesperson Chelsea Fallon. “The competition puts a check on how much they will be charging.”

When asked when it will cease charging for LNP, many operators don’t have the answer yet and are likely waiting it out to have a better idea of what their costs will be. “There are no plans in place for when it will end,” Miller says of Nextel.

Seiders says of Cingular, “We would not be collecting that fee if we do not continue to incur costs.”

“I don’t think there should be charges forever,” J.D. Powers’ Parsons says, but he adds about the fee, “I just don’t think that will leave. Once it’s in, it’s really tough to get it out.”

Qwest Wireless, T-Mobile and Verizon Wireless were not charging customers for LNP; however, Verizon Wireless’ Nelson said of his company, “We’re going to assess our ongoing costs and will likely begin in 2004 charging for the ongoing costs, but not recovering the embedded costs. … That’s on us. That’s our cost of doing business.” Prior to November 24, Nelson said, “We differentiated ourselves in the marketplace by not charging.”

The Unexpected Costs

AT&T Wireless recently ran into some significant problems related to LNP implementation. In early November, the provider was reportedly unable to activate new customers or upgrade existing TDMA customers to its GSM network due to a faulty software upgrade. According to reports, the new software included LNP support. Shortly after reports surfaced of these OSS and LNP problems, AT&T Wireless’ stock fell 7 cents to $6.95.

As evidenced by this recent example, providers do have to be serious when it comes to LNP investment. The churn factor and bad publicity alone could cause irreparable damage that no amount of money can fix.