Rim Semiconductor Company (fka RSMI)

[34Simmons]

Yet another reason for Rim to deliver!
Cell Customers Can Use Number From "Home Line"

By ANNE MARIE SQUEO, ALMAR LATOUR and JESSE DRUCKER
Staff Reporters of THE WALL STREET JOURNAL


Now, you can take it with you. Your home phone number, that is.

In a blow to local phone companies, the Federal Communications Commission plans to let consumers transfer their home phone numbers to alternative service providers -- including cellphone companies.

FCC Chairman Michael Powell and other commissioners are expected to reject arguments from local phone companies to limit what is known as "portability" of home phone numbers. Instead, they are expected to mandate that these "land-line" numbers be switched to any other carrier within the same geographic area at the customer's request, FCC officials said.

"At the end of the day, if there's no technical hurdle and the customer wants to port [their phone number] you should port," said Commissioner Kathleen Abernathy at a media briefing. "My own view is that we should allow it where geographic areas overlap and there's no technical obstacles."

Ms. Abernathy said the commission expects to release an order by next week that will go into effect Nov. 24, the same day rules go into effect that will allow customers to switch their wireless numbers to rival wireless carriers. Industry groups already are challenging the orders in court, though so far they've not gained much traction.

The nation's largest local phone companies -- Verizon Communications Inc., SBC Communications Inc., Qwest Communications International Inc. and BellSouth Corp. -- have been fighting the move, which threatens to accelerate the erosion of their core local telephone business. But their arguments were undercut in September when Verizon, seeing the handwriting on the wall, announced that its land-line customers would be able to switch their home numbers to their Verizon Wireless phones. (See article.)

For local phone companies, the order will spur a "cost spike and churn fest," said Scott Cleland of Precursor Group, a Washington telecom research firm. He estimates that traditional phone companies will be forced to invest hundreds of millions of dollars to upgrade their telecom equipment to enable the number transfers, while facing fierce pricing pressures from their wireless rivals. The new rule "gives consumers walk-away power" that allows them to "negotiate much better deals" with their phone-service providers, he said.

Customers, particularly people 18 to 24 years old, are increasingly switching to wireless phones for all their basic communication needs -- a trend that looks set to intensify if people can keep their land-line phone numbers in the process.

It's difficult to predict how many consumers will actually make the switch. But industry analysts say roughly five million land-line customers have hung up their local phone service in favor of a nationwide wireless calling plan over the past five years. According to Yankee Group, a technology consulting firm, about 4% of cellphone users don't have a land-line phone and 15% of all cellphone customers say they will jettison their wired phone in the next five years.

In addition, customers are abandoning second phone lines in favor of high-speed Internet connections while rivals such as AT&T Corp. and MCI offer cut-rate local and long-distance phone packages.

Mr. Powell has spoken strongly in recent weeks about the need for number portability. Last month, he called it "an absolute essential" and said phone carriers "ought to quit complaining about it and get ready to comply with it because they better be ready on the 24th." While wireless-number transfers can occur almost instantly, it likely will take about four days to switch a local phone number to a wireless phone. Companies that don't comply with the rules and the time frame will face penalties.

Local phone companies are hoping to stem the loss of land-line customers with their own wireless operations. Verizon controls Verizon Wireless, a joint venture with Vodafone Group PLC of Britain that is the largest wireless operator in the U.S. SBC and BellSouth share ownership of Cingular Wireless, the nation's second-largest cellular operator. Qwest owns a wireless operation in the states where it provides local service, which it is expanding by leasing wireless capacity from Sprint Corp.

But even if the Bells succeed in attracting the bulk of defecting land-line customers to their own wireless operations, they would still face a possible loss in revenue: Wireline customers on average spend more on their phone bill each month than wireless customers.

Write to Anne Marie Squeo at [e-mail], Almar Latour at [e-mail] and Jesse Drucker at [e-mail]

Updated November 6, 2003 9:44 a.m.