The Portable Number

By M.M. Buechner

Steve Baer, 48, is fed up with his cell-phone service. When the advertising executive moved to Atlanta six months ago, he considered switching from AT&T Wireless to a carrier with better coverage in the neighborhood where he lives. But there was one thing holding him back: he didn't want to give up his number.

Come Thanksgiving he won't have to. On June 6 a federal appeals court ruled that cell-phone subscribers should be allowed to hold on to their existing phone number when they switch providers, handing consumers a major victory in a seven-year battle between the wireless industry and federal regulators. There's a chance that Congress will extend the deadline for compliance, but industry experts agree that the so-called number-portability rule will probably take effect on Nov. 24.

When it does, the already hot competition among service providers is sure to intensify as each carrier scrambles to retain its customers and poach others. Yankee Group analyst Roger Entner estimates that once subscribers can keep their phone number, 12 million to 15 million more than usual will defect every year, costing the industry between $2 billion and $3 billion annually. (That doesn't include the estimated $1 billion the industry will have to spend to upgrade its networks to accommodate the change, but consumers will be picking up that tab; some providers are already collecting a small surcharge.) Even carriers that end up with a net gain in subscribers will lose money in handset subsidies, sales commissions and activation costs, Entner says.

But increased competition is always good for consumers, says Chris Murray, legislative counsel for the Consumers Union: "It makes the market more efficient and leads to better services and better prices." Today cell-phone customers often stick with an unsatisfactory service to avoid not just the costs and inconvenience of changing their number but also the expense of buying a new handset and canceling their existing contract.

The cellular industry warns that without further direction from the Federal Communications Commission, adding number portability could get messy. For one thing, there are a number of billing issues to work out (how to transfer accounts, how to handle arrears), an industry spokesperson says, and rural carriers will need a new way to identify roamers. Details, details. Steve Baer, for one, hopes everything gets worked out. In about five months, he wants to go shopping.