Crunching the Portability Numbers

To hear the Cellular Telecommunications & Internet Association tell it, wireless local number portability has taken its place among the great plagues that have afflicted mankind, ranking somewhere just behind polio, locusts and reality television. Over the past year the wireless industry has fought with a ferocity normally reserved for invading infidels against the FCC's mandate, which now takes effect on Nov. 24 thanks to a federal appeals court that in June declared an end to the hostilities.

Greg Smith, president and CEO of line information database (LIDB) storage vendor Accudata Technologies, doesn't understand what all the fuss is about. He says WLNP should be a snap to pull off, and for a lot less money than the industry thinks — if only the carriers would outsource the task to his company.

The CTIA has pegged the deployment costs of WLNP at $1 billion in the first year and $500 million in each succeeding year to keep switches and databases up to date. Though the numbers likely are inflated just a smidgen — as they always are in a negotiation — they're probably not too far off, according to industry analysts, who say it will cost $50 million to $100 million per carrier in the first year. If you take the high end and multiply that over six major national carriers and several smaller regional players, you come reasonably close to the $1 billion mark.

However, Smith said there's more to these numbers than deployment costs. “They have to be rolling in their churn costs. It's the only feasible way to come up with that number. The technical and administrative implementation of this is not in that order of magnitude.”

Smith spent 11 years on active duty in the U.S. Army and 11 more in the reserves before becoming an instructor at the U.S. Military Academy at West Point, N.Y., an institution both his father and son attended. He never saw combat: “That could be a good or bad thing depending on your career motivation,” he joked. “If you want to become a general, you have to duck a couple of bullets.” But he did become a Ranger — the meanest, toughest, best conditioned sons-a-bitches in the Army.

That training should come in handy as he goes about the difficult task of convincing wireless carriers to turn to Accudata for WLNP. The Allen, Texas-based company is one of 12 authorized centers for LIDB storage nationwide. (The Bell companies represent four of the others; most of the working telephone lines across North America are housed in LIDBs.) The data contains information crucial to the provisioning of wireline service, according to Smith, such as which services are being provisioned and credit information. Telecom service providers need this information to — among other things — display names on caller ID, route calls to non English-speaking operators and ensure accurate billing.

LIDB and LNP work hand-in-hand, said Smith. On the wireline side, all numbers that have been ported are added to an LNP database maintained and administered by clearinghouse solutions provider Neustar. “You don't have to input millions of numbers, just the ones that move, so the overall process isn't that difficult,” Smith said. “In all the years that landline portability has been available, the percentage of numbers that have been ported is 6% on the high end.”

To complete a call to a number that has been ported, a carrier would first access the LNP database to determine who owns the number. Then the carrier would dip into the LIDB to complete the call. “It's a two-step process,” Smith said. “It works very well, and it goes very fast.”

No uniform, standardized LNP or LIDB databases currently exist for the wireless sector, according to Smith, which will be a giant problem for carriers come November. Instead, the data is strewn about hundreds of databases, which are not always compatible. At this point, indications are that wireless carriers plan to develop their own LIDB- and LNP-style databases.

That would be a mistake, said Smith, who claimed his company could provide that capability on an outsourced basis for less than 10¢ on the dollar. “This is what we do for a living. We spend all our time worrying about 10-digit telephone numbers, storing them and transporting the information about them,” he said. “I'm not worrying about where I'm putting up my next tower. I'm not worrying about licenses. I'm not worrying about sending out accurate bills.”

Accudata has developed an IP SS7-based transport protocol that would allow it to connect to any database, execute a protocol conversion, and then sort and pull the relevant data into the appropriate LIDB or LNP database. Because Accudata built its wireline LIDB from the ground up, Smith believes that experience coupled with its technology makes it the perfect candidate to ride to the rescue of wireless carriers.

“They're going to have to create an organization in-house that spends their entire day and night worrying about portability issues,” Smith said. “But it's not necessary when you have a company like ours that already has the expertise.”

Unfortunately for Smith and Accudata, they're probably not going to get the chance, according to Dana Tardelli, research director of communications services for Aberdeen Group, who said that the wireless carriers have been quietly working toward LNP deployment even as they were fighting desperately to avoid having to execute the mandate. “Much of the work already has been done at this point. They're beyond the build-vs.-buy decision,” Tardelli said.

Also working against Accudata is that deployment costs, even if they do go as high as the CTIA's prediction, really won't be a big deal for carriers over the long haul. Some carriers already are tacking a WLNP surcharge onto customer bills, said analysts, who predicted they would continue to do so for the foreseeable future in order to cover deployment and upkeep costs. To date, only Verizon Wireless has said it won't tack on a surcharge. However, Verizon Wireless President and CEO Dennis Strigl said in June that the carrier would develop a “cost-recovery strategy” once it was able to pinpoint its ongoing WLNP costs.

In fact, wireless carriers' concerns over WLNP center on customer churn, not deployment, say many analysts. A study released last month by The Management Network Group said that 6% of wireless phone users — about 9 million — would switch carriers within the first 24 hours after FCC-mandated local number portability takes effect. Moreover, the study said 27% of the current 146 million wireless subscribers nationwide — about 39 million — would churn “as soon as they receive a better offer” and more than 50% of wireless customers who had experienced service quality problems in the past year would switch carriers.

“It's not going to be a question of if they'll churn, but when,” said Jeff Maszal, principal with TMNG, who led the research project. Maszal further predicted that the current industrywide annual churn rate of 30% could surge to 50% as a result of WLNP.

Couple that with customer acquisition costs that can range from $180 to $250, and wireless carriers have a big problem, said Roger Entner, program manager for wireless mobile at The Yankee Group. Currently, it takes 12 to 14 months to recover those costs; after WLNP takes effect, it's conceivable that many subscriber additions will leave for yet another carrier before payback can be attained.

“They're not going to get that money back without raising prices,” Entner said. And of course, that's not a viable option in a hyper-competitive market such as wireless.

There is one card that Accudata could still play: public safety. Once a number is ported, the previous carrier no longer is responsible for enhanced 911 information pertaining to that customer. The net result is that there is often a three- to six-month lag during which the succeeding carrier wouldn't be able to provision E-911 services to that customer, Tardelli said.

And the ease and speed of the overall transition is the whole point of outsourcing the LNP function to a company like Accudata, according to Smith. “We are experts in telephone numbers and lookup and delivery requirements,” he said. “Before they get too embroiled about building this house, they should talk to us.”