http://www.businessweek.com/articles/2013-04-04/if-vonage-gets-its-way-area-codes-could-be-up-for-grabs

Telecom

If Vonage Gets Its Way, Area Codes Could Be Up for Grabs


If Vonage Gets Its Way, Area Codes Could Be Up for Grabs

Photograph by Getty Images

In an iconic Seinfeld episode, Elaine schemed to get a dead neighbor’s 212 phone number so she wouldn’t be stuck with New York’s newer 646 area code. In the first Sex and the City movie, Carrie Bradshaw wailed, “I’m a 917 gal!” when her assistant replaced her old cell phone with a new one bearing a 347 number.

Diana Mitchell, a real estate agent at Citi Habitats, based in Manhattan, identifies with both characters. “I’m very dead set on a 917 or 212, because I’m not one of the new people,” she says. A 212 number shows clients “I’m not sitting in some borough somewhere,” she adds. “They think, and I immediately think, ‘office in Manhattan.’ ”

But area codes such as 212 and 917, 310 in Los Angeles, and 312 in Chicago might no longer be so exclusive if Vonage Holdings (VG) gets its way. The voice-over-Internet protocol (VoIP) provider has asked the Federal Communications Commission for direct access to the nation’s unused phone numbers, which would give it more freedom to assign numbers regardless of geography. On April 18 the agency will vote on whether to allow a trial run of Vonage’s proposal and to consider regulations that would let other VoIP providers do the same. It’s part of an effort by outgoing FCC Chairman Julius Genachowski to examine whether the agency’s rules are keeping pace with technological change.

Under the current system, states authorize traditional phone companies to dole out numbers tied to the geographical area they serve. VoIP providers have to lease numbers from these regional middlemen and use their infrastructure to route calls. New Jersey-based Vonage says it could save money if it were free to pick numbers by itself, the way cell phone companies do.

In some places, Vonage might be able to make more money as well. “There is a special category of social signifiers separating Manhattan-born people from late arrivals,” observes Tero Kuittinen, the New York-based head of sales and marketing for Alekstra, a market research company for the mobile phone industry. “I am convinced that people will be ready to pay at least $50, maybe $100, for a 212 number.”

Michael Shortley III, a vice president at Level 3 Communications (LVLT) in Broomfield, Colo., which leases numbers to Vonage and is protesting its proposal, says that customers might end up with inferior service because Web phone companies lack experience routing calls. State regulators aren’t keen on the proposal either, saying that people in cities with desirable area codes could get shut out of numbers traditionally tied to their own regions. “If a bunch of carriers come in and start exporting those numbers for a premium, then the area code exhausts” before it otherwise would have, says Brad Ramsay, general counsel of the National Association of Regulatory Utility Commissioners.

Kurt Rogers, Vonage’s attorney, says consumers have long found ways to keep their area codes regardless of their location. About 93 percent of U.S. households had a land line from a traditional provider in 2003. That’s dropped to 26 percent as mobile phones and wired Internet services have grabbed most of the market, according to USTelecom, a Washington trade association. People who switch cell phone companies can hold on to their numbers even if they move; so can consumers or businesses that go from a traditional land line provider to VoIP service.

Whatever the FCC decides may not faze a younger generation that has had cell phones longer than land lines. “I think the cachet is largely gone,” says Peter Rojas, a founder of technology websites gdgt and Engadget. “I have a 212 cell number, and it’s been a while since anyone was impressed with that.”

The bottom line: People might open their wallets for access to exclusive area codes if the FCC gives Vonage more freedom in assigning phone numbers.

Shields is a reporter for Bloomberg News in Washington.
Moritz is a reporter for Bloomberg News in New York.

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