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For A Good Number, Dial 1 888 Gouge Me


News: Analysis & Commentary: TELECOMMUNICATIONS

FOR A GOOD NUMBER, DIAL 1-888-GOUGE-ME

Freelance brokers hoard the best of a new toll-free exchange

The ransom note arrived at American Airlines Inc. in late January. "I am aware this may have value to you," the writer said. "Make me an offer." The hostage? 1-800-2-AIR-AIR, a catchy toll-free vanity number.

American made no offer. Instead, the letter now sits in a fat file at the Federal Communications Commission as the agency mulls new rules to crack down on an explosion of entrepreneurs who are hoarding and leasing toll-free numbers. The self-appointed middlemen "are holding numbers hostage, and they're out of our reach," says an FCC official.

"WILD WEST." This is what happens when clever entrepreneurs meet loophole-pocked regulation. Normally, customers can request specific toll-free numbers from their phone company, which seek them out from a reserve overseen by Bellcore. The number itself is free. In March, however, the supply of precious 800 numbers ran out. The FCC then made available toll-free numbers with an 888 exchange --but when companies applied for them, thousands found the best already had been taken.

Third-party brokers got there first, snagging 1-888-WE ARE GM, NIKON35, 8KONICA, 4MATTEL, MAC-WEEK, and many more of the 169,602 numbers reserved so far. Brokers who had been holding valuable 800 numbers suddenly came out of the woodwork, too. They offered their newfound booty to interested companies--but not for free. Typical agreements call for thousands of dollars up front, plus royalties.

Big money is on the line here: Some $135 billion in goods and services were traded on toll-free lines last year. So when 888 lines opened, "It was suddenly like the Wild West--brokers went crazy," says Colleen L. Boothby, a Washington attorney representing companies, including American Express and 1-800-FLOWERS, that are appealing to the FCC for rights to the 888 equivalents of their existing 800 numbers.

The FCC has iced 375,000 new numbers, pending a decision. Among those affected: Magellan Health Services, a drug rehab program that paid $70,000 for 1-800-CHARTER and now uses it in part as a suicide hotline. "People's lives will be in danger if we do not have 888-CHARTER," says spokesman Robert Mead. Bag Lady, a South Carolina manufacturer that sells $1 million of bags annually to dry cleaners over 800-BAGLADY, wanted the 888 version for faxes. But "some guy called and said he had it and that he'd sell it to us for thousands of dollars," says owner Nancy Jeffers.

The guy was a sales rep for a California company called 4VANITY. Company partner Mike Switzer and friends had spent a single Friday night devising thousands of potentially desirable 888 numbers, with the aid of a six-pack of beer and a $10 computer program that translates words into telephone numbers. "The second I could, I put in over 3,000 requests through Sprint," says Switzer. He was granted 600.

The FCC and phone companies say Switzer and countless other brokers are exploiting a loophole in a law that bars stockpiling and sales of toll-free numbers. Switzer isn't technically stockpiling, since callers to any of 4VANITY's numbers get a recorded sales pitch. And leasing the numbers is perfectly legal. So far, Switzer says, he's cut several dozen deals. "We've had some companies tell us this is foul play, blackmail, extortion," he says. "But my attitude is: You want the number? Come get it."

Phone companies say they can't stop the practice because, under a 1993 law, customers can take toll-free numbers with them if they switch carriers. "If we demand the numbers back, the broker will just take it to another carrier," says Leon M. Kestenbaum, vice-president of federal regulatory affairs at Sprint.

The FCC, though, is angling to change the rules. The agency is considering a new regulation that would bar anyone from possessing numbers they don't use. It would fine guilty brokers and offer bounties--and the 888 number in question--to companies that report illegal practices. "Deregulation was about competition, but it was also about lowering prices," the FCC official said. It was also about entrepreneurship--though this isn't exactly what the regulators had in mind.By I. Jeanne Dugan in New York


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