It took about 27 years for the demand for toll-free Telemedia links to deplete the inventory of roughly 9 million 800 numbers. Yet the numbers made available when a new toll-free service area code (SAC), "888," was introduced last year, will be devoured in less than one-tenth of that time.

Federal authorities sniff the scent of conspiracy. The FCC issued its Second Report and Order on Toll-Free services last April. The document has become infamous because it concludes that number depletion is largely the result of "warehousing" by so-called RespOrgs (i.e., companies who are "responsible" for making changes in the database of toll-free number assignments) or "hoarding" of precious numbers by toll-free end-users (who claim more numbers than they intend to use).

Industry participants, including the subscribers to toll-free services, their carriers, and RespOrgs (the bulk of whom are carriers) are not so sure that anti hoarding measures solve the underlying problems.

They have a tangible point. In spite of the introduction of draconian rules, 888 numbers are evaporating before our eyes, precipitating the introduction of "877" numbers in 1998.

When a new toll-free exchange is introduced, it launches discussions involving the second Great Unsolved Mystery. This one revolves around a dimple questions: "Do so-called "vanity" numbers deserve special treatment when a new SAC is launched?" the issue has been condensed into arguments surrounding "replication" and the right-of-first-refusal.

Advocates of replication believe that many toll-free subscribers have built equity in a specific number through advertising and marketing campaigns. They believe that these firms should be able to protect the equivalents of their existing numbers in a new area code. Thus 1-800-FLOWERS should have the right-of-first-refusal on 1-888-FLOWERS, and so on.

Opponents to replication and its variations see the protection of existing numbers as unnecessary. They also believe it institutionalizes number depletion by taking numbers out of the available inventory unnecessarily.

The FCC's Report and Order deferred rulemaking on the vanity number issue, and invited further comments from interested parties. During the ensuing four months, the rapid depletion of the 888 SAC, coupled with evidence of consumer confusion and misdials--which penalize both big and small users of toll-free numbers--has led to a new way to look a vanity numbers and the underlying issues, "Who owns them?"' "How do you define them?"; and, perhaps most importantly, "Can they be bought and sold?"

Spelling It Out

The issue of ownership of toll-free numbers has been contentions since the inception of competitive toll-free services. It reared its head most dramatically when 800 Numbers became "portable" on P-Day (May 1, 1993). Prior to P-Day, because 800 numbers were assigned in blocks of NXXs, end-users had to change 800 numbers if they wanted to switch carriers.

Also prior to P-Day, in the absence of control by end-users, there was very little controversy surrounding "ownership" of numbers. Portability granted whole new rights to 800 service subscribers. The numbers felt more like property. What's more, in spite of regulatory and legal prohibitions, both end-users and carriers periodically "brokered" toll-free numbers. Property or not, they were up for sale--often with very positive results.

For instance, Inc. Magazine recently carried the story of an entrepreneur named Ken Hawk, who saws the revenues from his automobile battery business sky-rocket, based on a simple change in his 800 number.

Hawk ran an electronic service that brought battery customers together with manufacturers. He told Inc. that he bought a new 800 number and the trademark 1-800-BATTERIES at a Comdex show in November 1995. Prior to the acquisition, his toll-free number was the less memorable 1-800-POWER-EX.

He changed the name of his company to "1 800 BATTERIES," and is finding that revenue growth is far outstripping his projections. 1996 revenues were $4.6 million, versus a projected $2.1 million based on past operations. Hawk credits the growth to an increase in referrals, "because it is easier to remember our name." He also notes that (as this article demonstrates) "it's impossible to write about us without mentioning our 800 number."

Finding an 800 service subscrigber who admits to purchaseing a number is uncommon. The early 1990s were an era of Prohibition and prlausible deniability. Brokering took place surreptitiously, and TNV always heard their-hand that numbers like 10800-COLLECT or 1-800-OPERATOR were obtained from third-parties on he open market. The leading 800 carriers were staunch supporters of the view that numbers are a public resource which cannot be subjected to "ownership," and that it is the role of the FCC to manage the allocation of the resource in a fair and equitable manner.

In the wake of the April Report and Order, concerned parties who ahve traditionally been on opposite sides of the ownership issue are finding som emiddle ground by taking a stark look at reality.

As ICB (formerly Interactive CallBrands, Inc.), a staunch advocate of toll-free subscribers' rights, points out in comments tohe FCC, "the Commission's entertainment oif the idea of 1-888 replication of 1-800 numbers is an acknowledgement, whether or not a conscious one, that a toll free subscriber may enjoy a legally protected private interest in a particular 1-800 number."

Judith Oppenheimer, President of ICB, also notes that the Commission's idea that numbers are all the same and could be allocated by lottery, would negate the possiblity of a 1 800 BATTER&. That number 1-800-228-3279 could just as easily have been a pager number, with no net effect on a retail business.

In comments to mthe Commission,m ICB elaborates on the theme that companies who have built value in their 800 Numbers deserve to have those numbvers protected when subsequent SACs are introduced. It gives half-hearted endorsement of replication and rights-of-first-refusal (that is the set-aside of identified numbers on a new SAC), but notes that it "should not be viewed as an ideal or permanent solution," admitting that keeping numbers out of inventory while trying to grow that inventory is likely to be counterproductive in the long-run.

UCB characterizes replication with right-of-first-refusal as a necessary evil becasue, "in the near term, at least, the immediate need for protection of existing users' rights outweighs the inherent inefficiency of replication.

ICB postulates that "the Commission certainly is not so naive as to believe that most, or even a significant number of the well-known toll free brands in use today are based on numbers assigned to their current holders based purely on the luck of the draw." It feels strongly that the April Report and Order, represents a Commission in denial.

Market savvy firms are constantly launching new campaigns built on toll-free numbers. When they do, they often obtain a memorable toll-free number to accompany their efforts. What would MCI's five-cent Sundays be without the number 1-800-SUNDAYS--a number which, we guarantee, did not come out of the inventory of available toll-free numbers.

Preaching to the Choir

For once, AT&T and ICB appear to be on the same side of this issue. John Cushman, Director of Toll-Free Services for AT&T supports ICB's view that specific toll-free numbers have an intrinsic value. As Cushman says, "I believe that the arguments ICB makes, relative to toll-free number value, are supported by the history of the toll-free industry, current RespOrg to RespOrg practices, and our customers' positions on vanity number protection.

Marketing literature from AT&T's 800 Services Group has recognized the value of "vanity numbers" for some time. In a press release on the 25th anniversary of toll-free 800 service, AT&T celebrated the fact that easy-to-remember 800 numbers create a "global storefront" for firms of all sizes, noting that "The advent of vanity' numbers such as 1-800 MET LIFE, 1-800-MATTRES and 1-800-4-CAVIAR have allowed businesses to create unique and easily recognized identities."

To support the growth of vanity-number-based toll-free commerce by its customers, AT&T may even go so far as to create an environment in which a "number seeker" can get in tough with one of its toll-free number customers who is customer of record for a desirable toll-free number.

"We are putting our heads in the sand if we believe that number brokering is not taking place in the marketplace today," AT&T's Cushman concludes.

Remember Domain!

"Remember The Main!" was the rallying cry behind the Spanish American War near the last turn of the century. Perhaps "Remember Domain!" will raise awareness of better ways to assign and manage toll-free numbers.

After asserting that replication with right-of-refusal is a near-term solution, ICB advocates "a system of partitioning or assigning domains" toll-free numbers as "an appropriate long term remedy." ICB further notes that the idea had already occurred to the FCC staff when it drafted the Report and Order.

At that time, the Commission noted that it "may wish to require a partitioning of toll free service, leaving business entities and the majority of vanity number holders to use the 800 code and assigning a specific toll free code to subscribers for personal and pager use."

ICB holds out management of domain names for Internet-based electronic mail and Web based activity as a model for number plan administration. Clearly there are some challenges in this regard.

Ironically, domain name registration and management is managed by an organization called InterNIC, which is operated under contract by a division of Science Applications International Corporation (SAIC). If anyone is familiar with the vagaries of partitioning and domain name management, SAIC is the one.

ICB acknowledges that the domain name system is not perfect, and is currently addressing its own set of problems and pressures. Its beauty, from ICB's point of view is that "it is an established system that has worked well for quite some time" and that it was developed largely without the benefit of government intervention.

The most attractive aspect of the Internet's domain management system, however, is its openness. All Internet users can gain access to the InterNIC database and query it to learn of the availability or status of a given domain name. Internet users can also fill out their own forms in order to register their own domain names. On the Internet, they may not know if you're a dog, but they know for sure that you are not a RespOrg.

Users often choose to use their Internet Service Providers (ISPs) as agents for establishing their domains, but that is their choice. In general, it is something that can be done electronically and in full view of other members of the Internet community.

It must be remembered that the FCC's approach to regulating the toll-free industry is built around the idea of preserving the availability of numbers. Its concern over vanity numbers on subsequent SACs is part of an overall theme against holding numbers in reserve without a specific use or user.

It is becoming apparent that a bigger factor in depleting the inventory of numbers on any telephone exchange is the proliferation of communicating devices, coupled with the growth of personal communications services [with small letters], which rely on toll-free access.

Such numbers generate very little traffic when compared to high-volume inbound telemarketing or teleservicing centers. Yet they take numbers out of general circulation, all the same. Given the rate at which numbers are flying out of inventory, it seems as if data communications, paging, and other personal communications services can absorb as many numbers as regulators are willing to put into circulation. They will expand to take up as much room as is made available.

ICB sees partitioning as a way of protecting the rights of existing "800" SAC users of all sizes. Critics of "property rights" for 800 numbers had a habit of saying that the rules were much ado about a few, large marketing companies. Yet many of the comments filed with the FCC subsequent to the launch of the "888" SAC indicated that many small companies were the dolphins caught in the gill net of non-replicated numbers.

The Ad Hoc Telecommunications Users Committee, some of the largest users of 800 numbers sees "misdials of 800 number equivalents in the 888 toll-free code" as "frequent and frustrating" in spite of intense advertising programs.

Such misdials are a sword that cuts both ways. Let's say consumers dial an 800 number, even though they see an 888 number in a direct response promotion. In that case, the advertiser misses call (and a potential sale), while the company that receives the call ends up paying the freight.

Personal uses are tangibly different from old-guard Telemedia programs. For one thing, numbers are not embedded in marketing, advertising, or promotional campaigns. Given that the recipient pays for the inbound traffic, most of them are unpublished. Partitioning opens the opportunity for recipients to build mnemonic numbers based on their name, hobby, or company.

ICB's proposal is built on the fundamental philosophy that a significant number of telephone users regard 800 numbers as "more than an access code, it is a brand." Thus partitioning 800 provides a framework in which all carriers and their 800 service customers can return to promoting "toll-free" 800 services.

ICB also contends that partitioning toll-free access into domains protects existing toll-free services from encroachment "with a minimum of regulatory and administrative involvement by the Commission and DSMI," the subsidiary of Bellcore (like Network Solutions, part of SAIC), chartered to oversee management of the computer systems known as the 800 Service Management System (800 SMS).

ICB closes its argument by asserting that partitioning 800 Services into domains "is a much more efficient use of toll free numbers." By contrast a replication scheme takes numbers out of circulation. Under a domain or partitioning scheme, the only numbers taken out of service in a new code are those needed for service.

There is no question that domain names have been bought and sold. There are also a number of trademark and intellectual property suits swirling around InterNIC and its conduct. Yet the hallmark of the system the free availability of information and open access to database and registration processes.

The contrast with the present methodology for assignment of vanity 800 numbers is striking. ICB closes by requesting that the FCC look into incorporating "the publicly beneficial aspects of the Internet domain name system."

THIS IS AN EXCERPT: COPYRIGHT 1997 Opus Research