FCC Recommends Switch for Phone Number Portability Database -- Update

By Drew FitzGerald 

The Federal Communications Commission delivered a setback to Neustar Inc., recommending that a crucial telecommunications database contract the company has held for about two decades and accounts for about half of its revenue be transferred to a rival.

At issue is the task of keeping track of every phone number in use so that subscribers can take them with them when they switch carriers. The number-porting service is key to the smooth initiation and cancellation of phone service contracts and has become a linchpin for law enforcement agencies seeking to set up wiretaps or conduct surveillance.

On Wednesday, the FCC's wireline competition bureau recommended that the contract be awarded to Telcordia Technologies Inc., a subsidiary of Swedish telecom gear maker Ericsson AB. The full commission still needs to approve the draft order.

The FCC launched a new process for picking database administrators in 2011. An industry advisory council started reviewing bids in 2013 and last year recommended the commission back Telcordia for the job.

Neustar's number-porting activities last year brought in $475 million--or about half of its total revenue. The company fought an aggressive lobbying battle to hang on to the FCC contract but also has been working to diversify its lines of business. Neustar, which is based in Sterling, Va., also sells marketing and Web services, authenticating users to access digital content, for example.

Its shares were off 11% at $22.25 in 4 p.m. trading on Wednesday in New York. At the beginning of last year, the stock was trading at nearly $50 a share.

In a statement, Neustar said the commission underestimated the amount of responsibility a new database operator would need to take on beyond handling number transfers, including disaster recovery and 911 location services. The company also said the selection process was flawed and lacked an independent process for judging the cost of setting up a new system.

Write to Drew FitzGerald at [e-mail]

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