Court Hears Fight Over Numbers Used for Cellphones

[Dave Farber <dave () farber net>]

Court Hears Fight Over Numbers Used for Cellphones

April 16, 2003
By MATT RICHTEL with JOHN FILES




 

The wireless telephone industry appealed to a federal court
in Washington yesterday to block a government effort to
allow consumers to keep their cellphone numbers when they
switch mobile phone carriers.

The Federal Communications Commission, which has long
sought to encourage competition by letting cellphone users
move the same number from one wireless network to another,
is seeking to bring about so-called portability of numbers
by this November. But ever since it adopted the rule in
1996, the agency has delayed carrying it out because of
objections from the industry, which argues that it will
have to spend an extra $1 billion and that it is
unnecessary because the mobile phone business is already
highly competitive.

The issue is a hot button for many cellphone users and
consumer groups, who say that Americans should have the
same ability to keep their mobile phone numbers as they do
to retain their home phone numbers when they move locally.
They also point to several other countries, including
Britain, Spain and Australia, that have adopted portability
without doing serious damage to the industry.

"People are staying with a carrier because they've printed
up a lot of business cards or given their number out to a
lot of people," said Linda Sherry, editorial director of
Consumer Action, a nonprofit consumer advocacy group.

Even without portability, the wireless phone companies
already lose plenty of customers to other carriers
regularly. The Yankee Group, a market research firm, has
projected that 10 million to 15 million customers could
decide to switch carriers within a few months if the rule
were enforced. 

"This is good for consumers," but bad for wireless
carriers, said Roger Entner, an industry analyst with the
Yankee Group, a research firm.

Companies involved in the case said they expected a
decision in 45 to 60 days from the three-judge panel of the
United States Court of Appeals for the District of
Columbia. 

The wireless industry points to falling prices and
extensive consumer choice as evidence that the rule is not
needed. 

"It's time to look at this industry like any other
competitive industry - not as an outgrowth of the old
land-line model," said John Scott, deputy general counsel
for Verizon Wireless.

In court, the argument turned on several fine legal points,
including the industry's claim that the F.C.C. was
exceeding its mandate by trying to impose the rule.

"The FCC lacks the statutory authority to implement number
portability," said Andrew G. McBride, who argued on behalf
of Verizon Wireless and the Cellular Telecommunications &
Internet Association. "The order under review is arbitrary
and capricious under any standard."While some carriers
might have favored such a rule in years past, Mr. McBride
said allowing people to keep their cellphone numbers was no
longer "necessary" to preserve competition.

"The wireless industry is the most competitive
telecommunications market on the planet," Mr. McBride said.
"And what consumers say they value most in his market is
price and coverage."

The expenses associated with switching numbers, he said,
will make it harder for mobile phone carriers to provide
quality cellphone coverage and cheaper phones.

"It's very speculative to say this even offers consumer
benefits," Mr. McBride added.

John E. Ingle, who argued on behalf of the F.C.C., said the
agency was well within its rights to act because the proper
standard for rule-making was simply "useful or appropriate
for achievement of a particular end."

By their questions, the judges suggested that they were
skeptical about the industry's argument that the F.C.C. had
gone beyond its authority. Some said that Mr. McBride, the
lawyer for the industry, had proposed such a stringent test
that few existing regulations would survive if they were to
be held to the same standard.

"I can't think of anything that meets your test," Judge
Harry Edwards said.

Today's hearing was the latest effort of the industry to
delay the requirement. Last July, the F.C.C. agreed to
delay putting the rule into effect for another year,
setting November 2003 as the deadline. It was the third
time the agency had delayed action.

Mr. Entner, from the Yankee Group, said that the change
would be costly for the industry, and not just because of
the $50 million he expects it would cost each carrier to
upgrade their system to enable portability. "That amount is
pocket change," he said.

Mr. Entner said that the churn rate in the industry could
leap from about 2.8 percent per month today to about 6
percent. The bigger cost, Mr. Entner said, will be the
continuing expense of maintaining the wireless networks and
attracting new customers as others leave.

That expense, he said, entails logistics, paperwork, and
subsidizing the sale of new phones, among other things. And
while the cost of wireless service has already come down
considerably, some fear that making it more easy to switch
carriers would only put further pressure on service prices.


That could squeeze some of the weaker wireless companies in
the same way that many airlines have been pushed into
bankruptcy by the intense competition to lure passengers
from other air carriers.

"What they're really afraid of," Mr. Entner said of the
wireless companies, "is they will be paying to make it
easier for their own customers to leave."

http://www.nytimes.com/2003/04/16/technology/16CELL.html?ex=1051487918&ei=1&;
en=20c4b6ce3da289df



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