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Number portability cometh
In less than a month, we'll be able to hold on to our cell-phone numbers when we change carriers.
October 27, 2003: 2:21 PM EST
By Eric Hellweg, CNN/Money Contributing Columnist

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SAN FRANCISCO (CNN/Money) - "8/14" has entered the IT executive lexicon as a synonym for industrywide cataclysm. That's the date of the blackout that left most of the eastern United States without power -- a date that brought the wireless business a lot of pain. Now I fully expect to start hearing references to "11/24," another date that promises nothing but bad news for the cellular industry.

Nov. 24 is the deadline for cellular carriers to offer number portability in the top 100 U.S. markets. In other words, starting on that day, consumers will be able to switch cell-phone providers without losing their assigned cell-phone numbers. The industry is facing an enormous shift. The Management Network Group predicts that 30 million "ports" will take place in the first year alone, with 4 million occurring just around holiday time. The question is, What will it mean for investors?

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I don't think number portability will be quite the catastrophe that some of the more Chicken Little-like observers claim it will be. Obviously, you don't want to put your money in a company that will be caught flat-footed by its inability to transfer numbers smoothly -- no small feat, it turns out -- or one that's bound to see its churn skyrocket above the current average of 2.5 percent per month. But I honestly don't think we'll see many flat feet among the six major carriers. After all, the more a provider stands to lose, the more prepared it's likely to be.

Should investors remain on the sidelines while the dust settles? Not necessarily. In the short term, the carriers will incur costs associated with building and maintaining the customer-information database, training employees, and increasing marketing efforts. But longer term, number portability could be a net win for the companies. As networks continue improving signal strength and coverage, the elimination of the number barrier could spur more people to abandon their landlines and use their cell phones as their primary phones -- which, of course, would bring about more usage revenue for the companies.

Here's a snapshot of what some carriers are doing to make the switch. A Verizon (VZ: Research, Estimates) spokesperson says the company has been training its employees and preparing its operations for number portability "for over a year." On Thursday, T-Mobile announced that it had struck partnerships with the other major carriers. It's the first carrier to do so. Nextel (NXTL: Research, Estimates) signed a similar agreement earlier this month, but only with Cingular and Sprint PCS (PCS: Research, Estimates). Cingular is still contesting the legality of the Federal Communications Commission mandate, and although a company spokesperson assured me that the company's disagreement with the FCC hasn't hindered its preparations for portability, the battle is cause for concern. AT&T Wireless (AWE: Research, Estimates) has begun offering its customers $50 gift certificates in a preemptive move to keep customers from straying. Cingular just announced that it is extending its weekend minutes to include Thursday nights. Cingular, Nextel, T-Mobile, and Verizon all have number-portability tutorials for consumers front and center on their websites.

Sprint PCS
Management Network Group Incorporated (The)
AT & T Corporation

While it's important that the companies agree to work with one another, their doing so is hardly enough to ensure that the process will run smoothly. "The wireless providers are working around the clock and working together in an unprecedented effort to pull this rabbit out of the hat, but it's not going to be flawless," says Jeff Kagan, an independent telecommunications analyst. "This is the biggest operational challenge the industry's ever faced." Consider this: If a consumer walks into an AT&T Wireless store and wants to switch from Verizon, the clerk must enter in all the customer's data exactly as it appears on the Verizon bill. If the clerk enters "Street" instead of "St.," for example, the system won't be able to route the request automatically and it will need to be done manually. This process could take several days if a backlog exists, forcing the user to carry around two phones until the change is made. The fact that the mandate is set for the start of the holiday season -- the busiest time of year for carriers -- won't make things any easier. "All the stars are aligned to make this the messiest it could be," Kagan says.

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