You can take it with you

Wireless phone companies lost the battle — and probably the war.

Consumers won a rare victory in a corporate friendly political environment.

Either way you look at it, the U.S. Court of Appeals for the District of Columbia Circuit ruled against wireless carriers in the ongoing “number portability” battle.

The federal court ruled that cell phone users should be able to keep their wireless phone numbers when changing providers. Wireless companies — through the industry’s trade group, the Cellular Telecommunications and Internet Association — have argued that the portability requirement was “costly and unnecessary.” Verizon Wireless joined CTIA in the suit.

Simply speaking, the court ruled that the complaint amounted to a case of too little, too late.

“We first find that petitioners’ challenge to the FCC’s authority to impose wireless number portability is time-barred,” the opinion read. “The FCC promulgated the number portability rules in July 1996, and the petition to review this case was not filed until August 2002. The petition for review is clearly untimely.”

According to the court, the time limit to challenge an FCC final order must be made within 60 days, a deadline the petitioning parties missed by a few years.

The appeals court opinion — penned by Circuit Judge Harry T. Edwards — also declared that the FCC decision was “permissible and reasonable.”

In summation, the court ruled that, “The simple truth is that having to change phone numbers presents a barrier to switching carriers, even if not a total barrier, since consumers cannot compare and choose between various service plans and options as efficiently.”

Edwards’ opinion cited the FCC original order, which insisted that consumers “will find themselves forced to stay with carriers with whom they may be dissatisfied because the cost of giving up their wireless phone number in order to move to another carrier is too high.”

Obviously, CTIA President and CEO Tom Wheeler took exception with the court’s decision.

“We are disappointed in the court’s decision,” Wheeler explained. “This decision increases the pressure on the FCC to do what they have yet to do — define the implementation of number portability. There are only 24 weeks between now and the portability deadline, but the basic ‘how tos’ have yet to be addressed. If there is to be number portability in November, the FCC must announce final rules by Labor Day or consumers will find chaos in the market.”

Senior analyst Charles Golvin, with Forrester Research, counters that wireless providers have hedged their bets against this lawsuit.

“I think that cellular providers will be ready to go in November,” Golvin said. “They’ve been preparing for this all along.”

Making its case — and losing

Verizon and CTIA argued that the requirement was too costly and simply not necessary.

According to industry statistics, there are nearly 147 million wireless subscribers in the United States. And roughly a third of those consumers switch providers every year — without enforcement of the portability rule.

The court responded that, “it was reasonable for the FCC to conclude that wireless consumers would switch carriers at even higher rates if they could keep their phone numbers.”

Industry experts counter that the initial cost of enacting portability will run $1 billion. After that, wireless providers expect to take another $500 million hit annually.

Wheeler added that this additional cost draws funds from other areas. Verizon officials echoed that sentiment in a press release responding to the court ruling.

“Requiring local number portability is bad public policy,” the statement read, “and the resources required to fulfill this new mandate will unnecessarily be redirected from our core business activities: expanding network quality and reach, improving customer service, and initiating new services and products.”

Wheeler also insisted that the FCC hasn’t made the details of the transaction clear yet.

“Before the portability requirement is effective, American consumers should expect that when they change wireless service providers and want to keep their phone numbers, the process is easy and automatic,” Wheeler said. “The FCC must immediately address many critical implementation issues to ensure a smooth and automatic process for customers choosing to change carriers.”

A little history

Way back in July of 1996, before cell phone ringers sounded more like Top 40 radio, the FCC issued an order requiring local and cell phone service providers to offer number portability.

The rule forced providers to allow customers to switch carriers without losing their phone numbers. With regard to wireless carriers, the ruling included only the country’s top 100 cities.

The FCC rule addressed an omission in the Telecommunications Act of 1996, which excluded wireless carriers from the portability requirement.

The FCC established a three-year timetable for compliance, with a June 30, 1999, deadline. After a series of extension requests and grants, the compliance deadline eventually slid back to late 2002.

In July of 2002, wireless providers received another 12-month extension — until Nov. 24, 2003.

As that date approached, CTIA and Verizon decided to stop stalling and sought to remove the rule — and the deadline — altogether.

What’s next?

So, where do the parties go from here?

After the court ruling, CTIA quickly petitioned the FCC to rule on nine different points that would lay out the responsibilities of both wireless and wireline carriers under number portability.

CTIA’s Wheeler added that his organization might take the issue straight to Congress — where the industry’s lobbying funds might have a little more influence.

“We’re pursuing legislative options,” Wheeler explained.

Wheeler’s comment appeared to bear fruit.

As for Verizon Wireless? The reaction was decidedly mixed.

In the company’s initial response to the ruling, Verizon indicated it, “has been working steadily for months implementing the technological and training work required to ensure that we meet whatever deadline for local number portability [that] is imposed.”

And consumers? After seven years, nearly as many delays and a single lawsuit, cell phone users hoping to keep their phone numbers just might get their wish in time for the holidays.

And Forrester senior analyst Golvin insisted that the fight is over.

“I think we’ll see mobile number portability in time for the deadline,” he said. “And keep in mind, sharing is a two-way street. Providers aren’t just going to lose customers, but they’ll be able to use this as a way to grow their subscriber base, as well.”

Golvin’s prediction bore fruit when, after the dust settled, Verizon officials appeared to do an about-face and embrace the decision.

In fact, Verizon Wireless officials announced a couple of weeks later that the company would not charge customers a fee to keep their numbers when switching service providers. Company officials added that they will take another look at that policy in five months “to determine a strategy to recover costs lost on customers changing service.”

Company officials also said that they would not recover the monthly cost of 10 to 15 cents per customer to keep their phone number in advance of local number portability taking effect.

Verizon Wireless CEO Denny Strigl addressed a group of analysts about the pending change, as well.

“Our plan…is to treat porting customers the same way we treat any customer today. No change. Whether they are joining us with a number, or leaving us with their number after Nov. 24. No change from today,” Strigl said. “We intend to activate customers coming from other carriers in the same time frame we use today. No standing around the store for hours, or waiting days for your new phone to work.”

Even CTIA’s Wheeler seemed to sound more conciliatory after the ripples from the court ruling faded.

“While we continue to believe that number portability is not in consumers’ best interests, we will obey the law,” Wheeler said. “Whether consumers find implementation to be smooth or painful is in the control of the FCC and its willingness to decide these key implementation issues. We anxiously await Labor Day.”

A postscript

Internationally, wireless number portability is old news. Cell phone users in Britain, Australia and Hong Kong, among others, already boast the ability to maintain their phone numbers while switching carriers.

In fact, Britain, for example, has boasted portability for nearly five years.

So, what’s taken America so long to catch up with the rest of the world?

“The power of the wireless industry lobby,” Golvin explained.

CTIA insists portability questions remain

In reply comments filed with the FCC, CTIA identified 10 key implementation decisions:

1. Must local wireline providers port numbers with wireless carriers if the customer is not located in the same rate center as the wireless provider?

2. Must rural wireless providers port numbers with larger wireless providers if they do not share the same rate center?

3. Must local wireline providers port numbers with wireless providers if they do not have interconnection agreements?

4. Must rural wireline providers port numbers with wireless providers if they do not have direct interconnection?

5. Can local wireline providers delay porting numbers with wireless providers by as much as four business days?

6. Will customers be without E911 call back service for up to six days when porting from a local wireline to a wireless provider?

7. Must rural wireless providers support nationwide roaming?

8. How will wireless providers using Type 1 interconnection offered by the local wireline provider port or accept ported numbers, either from wireline or wireless carriers?

9. Can local wireline providers limit the ability of consumers to port numbers to wireless carries by differentiating between rating and routing points for local calls?

10. May wireless providers adopt requirements that could delay a customer’s ability to use number portability when switching to either wireless or wireline carriers?

FCC’s report on wireless industry? Mostly competitive, with chance of falling prices

In a bit of timing one might call uncanny, the Federal Communications Commission late last month announced the adoption of its Eighth Annual Report on the state of competition in the Commercial Mobile Radio Services industry.

The bottom line? According to the FCC, the industry “is competitive and, during 2002, experienced increased service availability, lower prices for consumers, and a greater diversity of service offerings.”

During 2002, according to the FCC’s report, the mobile telephone sector generated more than $76 billion in revenues, and the number of mobile telephone subscribers rose from 128.5 million to 141.8 million, resulting in a nationwide penetration rate of roughly 49 percent.

The report added that 270 million people, or 95 percent of the U.S. population, live in counties with three or more different mobile telephone operators, and more than 236 million people, or 83 percent of the U.S. population, live in counties with five or more operators competing to offer service.

CTIA President and CEO Tom Wheeler embraced the FCC’s findings, while also taking a shot at continued regulatory “meddling.”

“Year after year, the FCC’s competition report serves as a potent reminder that the competitive marketplace delivers the lowest prices, the most choices and the most innovative services to American consumers,” Wheeler said. “Yet, regulators, Congress and the states refuse to let competition work its magic — instead the industry faces meddling, mandates and more taxes and fees.”

Commissioner Michael Copps, while concurring with the FCC’s report, also raised questions regarding the study’s worth.

“The report contains insufficient data. Much of the limited data included are unverifiable and are derived from sources with a stake in the outcome of our determination,” Copps pointed out. “The limited data that we do have show that in urban areas wireless prices are dropping and carriers are expanding their networks. But half of the country is still served by three or fewer competitors. And one quarter of all US counties have two or fewer competitors.”