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Cell Users May Keep Numbers, Court Says

June 07, 2003|James S. Granelli and P.J. Huffstutter | Times Staff Writers

Mobile phone users soon will be able to take their numbers with them when they change carriers because of a federal court decision Friday that was applauded as a victory for millions of wireless customers.

Flatly rejecting cellular industry arguments, the U.S. Court of Appeals for the District of Columbia Circuit ruled that a Federal Communications Commission order requiring so-called number portability by Nov. 24 is "permissible and reasonable."

Cell phone users and consumer advocates hailed the decision, saying it gives the public the ability to move more easily from a carrier with poor service or high rates to another cellular company.

A third of the nation's 140 million cell phone customers change carriers every year, and 12 million to 15 million more would do the same if they could keep their numbers, according to a study by the Yankee Group, a research firm.

"It means I can have my cell phone number for the rest of my life," said Katey Coffing, 33, a UCLA anthropology lecturer who is launching a counseling service. "If I want a different carrier, I can change, and I don't have to worry about what it's going to cost me to change my Web site, my business cards or my stationery.

"This could save me a lot of money in the long run."

But it's likely to cost the cell phone industry about $500 million to make the necessary technical changes. Worse for the carriers, though, is the estimated $2 billion to $3 billion annually they will incur in commissions, handset subsidies and service activation expenses, said Roger Entner of Yankee Group.

Entner estimated that number portability would raise the annual churn rate -- the percentage of customers who change carriers -- from 32.4% to 37.2%. He said it also would force carriers to spend more on attracting customers.

"They're like the airlines. You have really cheap service but you really don't like it because they're not fixing the holes in their system and you're not getting the service you expect." So customers move to another carrier, where they might face similar problems, he said.

Independent analyst Jeff Kagan of Atlanta said the increase in churn rates should last only a year or two and that most carriers would gain as much business as they lose.

"Number portability is going to be costly to the industry, but it's always been inevitable if the industry wants to achieve its main goal of having the user think of their wireless phone as their main phone," Kagan said. "It has less to do with competition and more to do with freedom and changing customer attitudes about wireless."

The FCC, which has delayed implementing its order twice in the last four years, and groups such as the Consumer Federation of America contend that the lack of number portability has been a barrier to competition.

"This is an industry that has now grown up. It's time for them to meet their responsibilities," said Mark Cooper, the consumer group's research director.

The industry has known since the Telecommunications Act of 1996 was passed that it would have to allow customers to take their numbers with them whenever they switched carriers, said John B. Muleta, chief of the FCC's wireless bureau. "They've tried every possible means to slow this down," he said.

There are still some technical and business issues, such as what to do with customers who fail to pay their last bill in switching carriers, that the FCC still must resolve, but "the idea is to make this as smooth as possible for the consumer by Nov. 24," Muleta said.

Wireless phone system companies argue that enabling number portability is costly and that the rules aren't clear.

"There will be a huge cost to wireless customers and the wireless industry for a benefit that relatively few will take advantage of," said Jeffrey Nelson, a spokesman for Verizon Wireless, which, with the Cellular Telephone and Internet Assn., brought the court challenge.

Both Verizon and the trade group said they planned no appeal to the 3-0 appellate panel ruling. Verizon will "continue to explore our legislative options," the company said.

Number portability also could spur more price competition in an industry that already has set the bar low on prices. While Verizon Wireless and T-Mobile USA Inc. are turning in solid financial results, Entner said, the rest of the industry is so-so at best. "It takes only one desperate player to create a disaster for everyone else," he said.

One measure carriers took in Australia when number portability was approved there was to stop offering free handsets, said Travis Larson, spokesman for the cellular industry trade group. That probably will happen here too, he said.

But for consumers like Brion Porter of Mill Valley, Calif., that may be a small price to pay. His cell phone is his lifeline.

The 29-year-old independent contractor is always on the road repairing fire extinguishers and sprinkler systems for customers of Liege Corp. in Huntington Beach. On weekends, he's a part-time manager of rock bands and must frequently talk with music groups and club managers.

His $85-a-month cell phone bill has skyrocketed to $400 a month, and he knows he can get a better pricing plan.

"I've been wanting to change plans to something more cost-efficient for a while," Porter said. "But I haven't so far because I know it's going to be a huge hassle to try to track everyone down and give them my new number."

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