Will WNP Accelerate Wireline Attrition?

Posted: 8/2003

Will WNP Accelerate Wireline
Attrition?

By Josh Long

While carriers sweat the fall
deadline for wireless number portability (WNP), the question looms as to whether
it will accelerate the migration away from landline service.

An appeals court has upheld a
November deadline requiring the telecom industry to implement WNP, but carriers
have been left waiting for the FCC to tell them precisely how to comply with the
order.

The Cellular Telecommunications
& Internet Association has asked the regulator to clarify the rules before
Sept. 1, but it’s still going to be extremely difficult to comply with the
mandate by the Nov. 24 deadline, lawyers said.

Todd Daubert, a senior associate
with Kelley Drye & Warren, says it is critical the industry implement WNP
correctly, if it is going to do it at all.

The FCC, in part, must clarify how
wireline carriers and their wireless counterparts will collaborate to port
numbers, allowing consumers who nix their landline phone to keep their number as
they go all-wireless, or, though unlikely, vice versa. Wireless carriers, the
common thinking goes, stand to benefit more than the regional Bell operating
companies because a growing number of Americans are expected to 86 their wired
phones in the coming years and just use a wireless provider.

"Wireline carriers have no
incentive to make it easier for them to lose their customers," says an
attorney who asked not to be named due to client relationships.

Wireless carriers are not exactly
fond of number portability, either. Analysts say the requirement will cost
billions of dollars (2002 research from In-Stat/MDR estimated $1 billion to roll
it out and $500 million annually) and make it easier for consumers to leave
their provider in an industry already grappling with churn.

In June the U.S. Court of Appeals
for the District of Columbia struck down a challenge by Verizon Wireless Inc.
and the CTIA to remove the number portability requirement. Following the ruling
CTIA president Tom Wheeler said, "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."

There are a number of unresolved
issues affecting wired and wireless providers. For example, it is unclear
whether a person will be able to keep a telephone number if he axes his landline
phone and selects a wireless carrier that does not have its own block of numbers
in a town or city’s rate center (located in a phone-company central office)
where the customer’s current number is based. Many wireline carriers say they
will not port the number unless the wireless carrier already has its own
numbering resources in the same rate center, says Daubert. Wireless carriers,
unlike their wireline cousins, typically don’t have blocks of numbers assigned
in every rate center, the lawyer adds.

"Unless the FCC clarifies the
responsibilities of carriers to port numbers then many people will not be able
to port their numbers, or wireless carriers will be forced unnecessarily to
obtain many more numbers," says Daubert, "which would lead to more and
more area codes."

Another vexing question is whether
wireless carriers will be required to enter interconnection agreements with the
Bells only to stipulate the terms and conditions of the portability
arrangements, the attorney adds. Many wireline carriers, including SBC
Communications Inc., say wireless providers must enter interconnection
agreements, but wireless carriers want only a relatively simple contract, he
says.

Interconnection agreements would be
subject to approval by state regulators, likely further delaying the
availability of wireline-to-wireless number portability for "most
people," says Daubert.

There also is debate over how long
it should take a carrier to port a number. The FCC-approved standard for
wireline-to-wireline porting is four business days, according to the CTIA.
Wireless carriers are seeking a shorter time interval, and part of their
argument is that e911 services could be compromised during the transition
period. For example, an emergency operator might route a return call to the
wrong destination.

With these unresolved issues
looming, among others, it will be "incredibly difficult" if "not
impossible" to successfully implement wireless local number portability,
even if the FCC clarifies the rules by Sept. 1, Daubert says. What is more
important than meeting the Nov. 24 deadline, he says, is that the FCC and the
industry get it right.

The attorney, who spoke on
background, says it is more likely the FCC would grant a "slight
postponement" on its deadline to resolve these issues, but the lawyer would
be "surprised" if the regulator gave wireless carriers more time to
port numbers between each other.

When, and if, these issues are
resolved, it is unclear whether WNP will boost wireline attrition. John Barrett,
a research analyst with Parks Associates, says most Americans who cut their
landline phone are likely to have been using a cell phone for many years, and
the wireless number is more important. "I don’t see [that WNP] provides a
much greater incentive for people to disconnect their wireline phone," he
says.

In fact, Park Associates’ survey of
841 broadband subscribers showed only 3.6 percent have disconnected their
fixed-line telephone in favor of mobile service. Another 9 percent planned to do
so within the next 12 months.

Moreover, the firm says switching
from mobile carrier to mobile carrier will be nominal post-WNP. "There have
been claims that 25 to 30 percent of subscribers will switch operators as soon
as number portability is implemented," says Barrett. "That is simply
not realistic once you look at markets where [WNP] has already been
introduced." In the United Kingdom where there is a 68 percent penetration,
only 6 percent switched. In the United States, which has 50 percent penetration,
at most 2 to 3 percent of subscribers will take their number to another operator
within the first year, " Barrett says.

An August 2002 survey of 1,050
wireless users by In-Stat/MDR found 52 percent of respondents said number
portability would make them more likely to switch.