Free the Toll-Free Numbers

Toll-free number allocation remains one of the last vestiges of telecom’s monopoly era. Unlike Internet domain names, there is no organized way of requesting, registering, reserving, purchasing 800, 888, 877, 866, or the newly available 855 numbers, the five prefixes that currently designate toll-free service. If you’re lucky or creative enough, you can visit any number of sites (just Google “855 toll free code”) and the number you request might be available. If not, you’re SOL.

That’s because the toll-free number regulation regime is cumbersome, opaque and bureaucratic. And while the FCC technically prohibits the warehousing, hoarding, transfer and sale of toll-free numbers, enforcement is difficult and inconsistent.

The North American Numbering Council, a federal advisory committee that was created to advise the FCC on numbering issues will be meeting in Washington March 9. On the agenda will be discussion on whether to go forward with exploring market mechanisms that can be applied to toll-free number assignment.

It’s an idea worth pursuing. It is clear that some toll-free numbers have equity value, especially when they can bolster a brand identity or be easily remembered. 1-800-SOUTHWEST, 1-800-FLOWERS are two examples.

Yet right now, the toll-free numbering pool is a vast and unruly commons that recognizes no difference between a desirable mnemonic and a generic sequence of digits. Numbers are assigned on a first-come, first-served basis. End users can request a specific number, but they can get it only if it is available from the pool. Under the current rules, they cannot offer to buy the number from its current user. Nor can the user of 1-800-555-2665, which alphanumerically translates to both 1-800-555-BOOK and 1-800-555-COOK, put the number up for auction to see who will pay more, the bookstore or cooking school.

In fact, there is really no accurate way to determine the party to whom any toll-free number has been assigned. Unlike Internet domain names—or automobiles for that matter—there is no central registry linking a toll-free number with a specific end-user. With the Internet, the WHOIS database can at least tell you the organization or agent for the domain name in question. Any state department of motor vehicles can verify car ownership through VIN and license plate numbers. With a particular toll-free number, however, whoever is using it at the moment can lay claim to it. As Jay Carpenter, president of 1-800-American Free Trade Association (1-800-AFTA), a trade group pushing for adoption of market models in toll-free numbering, told me, it’s like basing car ownership on the basis of who had the keys.

Despite the FCC rule that prohibits sale or transfer of toll-free numbers, enforcement is woefully inconsistent. For one, toll-free numbers are routinely transferred when businesses are bought or sold. Take United Airlines, which last year was purchased by Continental Airlines but, as part of the deal, kept the United name. Despite the sale, the merged company is still using 1-800-UNITED-1 and other toll-free numbers. ITT sold Sheraton Hotels to Starwood Resorts in 1998, yet Sheraton’s famously melodic toll-free number, 800-325-3535, which this web site says dates from 1969, still gets you a reservation.

Carpenter said his research over the years has unearthed SEC filings where companies openly state that they have purchased specific toll-free numbers. He also believes a gray and black market for toll-free numbers has existed for some time.

Furthermore, while the FCC openly eschews the notion that some numbers may be more valuable that others, when it opened the 888 toll free prefix, it allowed owners of certain 800 numbers, such as 1-800-FLOWERS, to reserve the same numbers in the 888 codes. This decision seems to fly in the face of its first-come, first-served and no warehousing policies.

It’s time for the government to admit what everybody knows already–that there is considerable value locked up in toll-free numbers and that consumers, businesses, and even government programs can benefit if this value were unleashed.

Market mechanisms have already been applied with great success to spectrum allocation and domain name assignment. Market pricing would direct resources to the party who can make best and most effective use of it. Market signals would be established. Opaque transactions and arbitrage would be driven out. The rate of toll-free number depletion, now at about 100,000 a week according to 1-800-AFTA, would be slowed considerably. Meanwhile, what was once a cost center for the government would become a potential revenue stream. 1-800-AFTA suggests a supply-and-demand mechanism for toll-free number allocation could be channeled into the Universal Service Fund.

What’s more, it’s been done. Australia has created a market for toll-free numbers. 1300 Australia, in a joint venture with Telstra, purchases then leases or sells “smartnumbers,” a set of phone numbers to which regulators have assigned enhanced rights of use (EROU). They can be sold, leased or retained by the EROU holder for 3 years without service. Australia’s Telstra has created both a primary and secondary market for toll-free numbers. Ownership can be verified through registration. Transactions are brokered through trusted entities.

A market mechanism can be phased in, starting with the creating of an open database for toll-free number registration, an initiative that may not even require FCC action. Secondary market mechanisms can be developed, allowing transfer, sale and exchange of numbers. A primary market model can be drawn from the Australia example or the other models already noted. Certain use rights, such as those pertaining to existing trademarks and branding, could be protected from poaching and squatting.

Finally, there’s the opportunity for greater innovation if Internet and IP networking functionality can be integrated more seamlessly with telephone numbering. Unified communications—the efficient merger of phone, wireless, email and web access–which stands to have great benefits in public safety and commerce, would be easier and less expensive to implement. More information and models can be found in this white paper 1-800-AFTA prepared for the NANC.

The only reason the current system numbering system exists is legacy inertia. If starting from scratch, no one would design a toll-free regime like this today—the ICANN approach to domain names speaks to that. Geography and carrier mean little to number assignment anymore. It’s time to get past the mechanisms of yesteryear and free the toll-free numbers.