You wouldn’t fork over cash to someone who offered to sell you a bridge in Brooklyn. Yet many sophisticated companies routinely pay five-figure fees for toll-free “vanity” numbers (think 1-800-FLOWERS or 1-888-NEW-CARS). Before you cut the check for a toll-free number, understand that the seller has no greater rights to the number than it does to the bridge in Brooklyn.

For many years, the Federal Communications Commission (“FCC”) has barred the sale of toll-free numbers. Yet unscrupulous “number brokers” keep reserving desirable toll-free numbers, which they then sell for eye-popping prices to unwary end users. Enterprise customers are a favorite target because they have deep pockets and a strong interest in promoting their corporate names and brands.

Contrary to popular belief, no one “owns” phone numbers—not even if a company has used the same number for its customer service line for decades. Phone numbers are a public resource, and they are assigned to customers on a first-come, first-served basis. However, even if you don’t “own” a toll-free number, as long as you keep it in service and comply with the rules governing its use, you can reasonably expect to enjoy uninterrupted use of that number even if you migrate to another service provider.

Obtaining a new toll-free number requires going to a Responsible Organization, or “RespOrg,” a specially designated entity that has access to the database of available numbers. In most cases, your toll-free service provider serves as your RespOrg. Under the FCC’s rules, RespOrgs are supposed to reserve specific numbers only when there is a customer that is ready to begin using the number. In addition, specific toll-free numbers are supposed to be available on a first-come, first-served basis.

But this is not always how it works in practice. Number brokers, who may also have signed up to be RespOrgs, comb the toll-free number database and reserve desirable numbers even though there is no actual customer waiting to put the number into active service. This unlawful practice is known as “number warehousing.”

Once a broker has reserved specific numbers, it assigns the number to a nominal entity that does not intend to use it. This unlawful practice is called “number hoarding.” The broker then seeks out companies that might need the number and offers to “sell” it for a fee. Some number brokers even target particular industries, warehousing numbers that correspond to the names of yet-to-be released products that the number broker learns about through public regulatory filings.

Buying Numbers from Number Brokers

Many companies that are approached by number brokers do not know that the practice is illegal. Nor do they realize that they have the right to obtain any available toll-free number without having to pay a hefty “purchase” price.

What options do you have if presented with a solicitation for a toll-free number?

One undesirable and risky option is to pay the fee requested by the number broker, who then assigns the number for use. Customers seeking certain toll-free numbers commonly choose this option because, although it is unlawful to “sell” toll-free numbers, the FCC’s rules neither expressly prohibit their “purchase” nor impose formal liability on entities that make such purchases.

The problem with this approach is that it is risky because the agreement to buy a toll-free number is itself unlawful. If the number broker fails to assign the number to you, your agreement could be found to be unenforceable, leaving you unable either to obtain the number you paid for or to recover your money.

Even if the number broker assigns the number to you, your continued use of the number remains in jeopardy because the number was unlawfully assigned. Moreover, by purchasing toll-free numbers, your company will have helped to strengthen this shadowy industry. Finally, your organization would be spending money to buy something that should, under the FCC’s regulations, be free. That is a tough expenditure to justify.

Seeking Relief at the FCC

Alternatively, you could report the number broker to the FCC and ask the relevant decision makers to take back the toll-free number and reassign it to you. This approach poses significant challenges.

First, there are procedural hurdles. Although the FCC rules prohibit number brokering, they do not provide a remedy when brokers break the rules; they do not even set out a process for investigating and resolving claims of alleged number brokering. As an aggrieved end user, you therefore have the burden of persuading the FCC to start an enforcement action against the number broker. As a practical matter, this means you must provide virtually irrefutable evidence of unlawful activity. This can be difficult: many number brokers are not foolish enough to leave a clear trail of their wrongdoing.

Second, even if the FCC finds evidence of unlawful number brokering, its rules do not provide that a party who blows the whistle on a number broker automatically gets the ‘brokered’ number. The FCC rarely reassigns numbers from one subscriber to another; when it does, it is usually in cases involving public health and safety. In most other cases, the FCC will take the number from the number broker and return it to the pool of toll-free numbers, where it becomes available to anyone on a first-come, first-served basis. Whistleblowers who want the broker’s number must devise a way to be the first to claim the number from the pool, which requires time and effort. Even then, there is no guarantee that you will get the number.

Here are some steps that may improve your chances of getting the number in the event you resort to a complaint before the FCC.

First, build a record of the number broker’s offer to sell the toll-free number, including exchanges of e-mails or written contemporaneous notes from telephone solicitations, including the asking price and any other terms. Any ambiguities about what the number broker is offering, or whether the broker is even offering to sell a number (as opposed to provide services that include assignment of a desirable toll-free number), will undermine your case.

Second, if the FCC finds that you have been a victim of unlawful number brokering and decides to take the number away from the broker, the agency will probably return the number to the number pool. To maximize your chances of getting the number from the pool, you will need to work with your RespOrg well in advance of the number’s reappearance in the pool. The RespOrg will arrange to search the database regularly for the number so that when it does appear, the RespOrg can immediately reserve it. To facilitate this, many carriers run electronic “scripts” that periodically ping the toll-free number database for specific numbers and reserve them as soon as they become available.

Like overseas officials demanding “fees” to issue permits or licenses, number brokers’ unlawful practices put enterprise customers in a tough spot. The FCC does not exercise its jurisdiction in this area with much vigor, which leaves the organization approached by a broker (or interested in a number being hoarded by a broker) with no easy options. If you are interested in a particular number that someone has offered for sale, whatever your organization decides to do, make certain that you take steps to minimize your financial and legal risks while maximizing the likelihood that you get the number.

For more information, contact Andrew Brown at abrown@lb3law.com or (202) 857-2549.

Catch a Wave – The Surge in Wavelength Services

For IT professionals, waves today have nothing to do with surfing. Wavelength services are how work gets done. They connect corporate headquarters to data centers, back-up data centers to each other, and all of the above to disaster recovery locations. They let company employees surf the Net, hold voice and video conferences, transfer businesscritical data, and get back to business quickly after an outage. And they do so more efficiently and flexibly than is possible in a pure SONET/SDH/TDM world. This article answers a few basic questions about wavelength services.

What Are Wavelength Services?

Wavelength services are optical transport services delivered using wave division multiplexing (“WDM”). WDM involves placing a wave division multiplexer at the end of transmissions to combine different types of traffic and send them over different wavelengths of light and in different directions on a single fiber. Each wavelength in WDM operates as a separate virtual dedicated, point-to-point channel that can support a given signalling rate, thereby increasing the data transmission capacity for the fiber.

Why Should We Use Them?

Large corporations choose wavelength services over other data transmission services (e.g., SONET/SDH) for many reasons, but higher bandwidth and transmission of data in its native protocol are among the biggest drivers.

(a) Wavelength services support much higher signal rates than SONET/SDH/TDM.

Demand for bandwidth demands has grown exponentially over the last decade, due in large part to exploding use of the Internet, cloud computing and service-oriented architectures. Collaboration and multimedia applications, as well as video and voice (including IP telephony) via the Web, have also played a part. Some analysts expect bandwidth demand to grow a hundredfold by 2015.

Many large corporations have already outgrown (or are concerned that they will soon outgrow) SONET/SDH signalling capabilities, especially when connecting data centers and storage area networks, where high-bandwidth requirements – like 40 Gbps – are becoming the norm.

The highest OC signal rate currently available is OC-768, or just under 40 Gbps, with OC-192 providing just under 10 Gbps. And that’s where SONET/SDH is likely to stay. The next level of SONET/SDH is OC-3072, but little work is currently being done on this because multiplexing 10 Gbps and 40 Gbps wavelengths appears to be cheaper than buying new high-rate transceivers.

By contrast, wavelength services currently offer a variety of speeds up to 40 Gbps. In the U.S., Verizon has successfully run 100 Gbps on a single wavelength and expects to introduce commercial 100 Gbps service by the end of 2009. If and when large corporations need more than 100 Gbps connections, wavelength services offer hope as industry standards groups, equipment makers and others continue looking for ways to push more traffic through fiber.

(b) Wavelength services support transmissions in native data protocols.

Large corporations transmit data in numerous protocols, including SONET, SDH, Ethernet-based standards like 10BASE-T, 100BASE-TX, 1000BASE-T, 802.3 and 802.11, Fibre Channel, and, with the growth of the Internet, IP. In the past, telecommunications transport services didn’t allow large corporations to transmit data in its native protocol. Most high-bandwidth services were offered only via the SONET/SDH standard. This meant that TCP/IP or Ethernet data, to use two important examples, had to be encapsulated in SONET/SDH and aligned with a SONET/SDH channel. Doing so required extra equipment, increasing capital and maintenance costs.

Wavelength services require no such encapsulation. Telecom carriers offer wavelength services in the communications protocols and speeds required by large corporations – currently including 1 Gbps Ethernet, 1 Gbps SONET or SDH-framed 2.5 Gbps or higher, 10Gbps Ethernet LAN PHY, and 40 Gbps. The corporation can present, transmit and receive data in its native protocol (or, if the corporation chooses, another protocol such as SONET/SDH, Frame Relay or ATM). No conversion, encapsulation, or other manipulation of the data is required, so extra equipment and equipment cost is avoided.

(c) Transmission in non-encapsulated Ethernet yields even greater savings because less overhead decreases real costs.

In addition to the equipment costs imposed when a native transmission protocol is encapsulated in SONET/SDH, SONET/SDH imposes a hidden “bandwidth” tax in the form of the bandwidth required to encapsulate and manage data transmitted through it that originates and terminates using other protocols. Ethernet data sent over WDM incurs no such overhead. Every bit transmitted over a wavelength using an Ethernet standard represents real corporate data (to be fair, SONET/SDH transport provides OA&M capabilities not available with wavelength services. But not every transport application requires those capabilities.) Thus, even though the bits per second bandwidth capabilities of OC-192 and OC-768 and 10 Gig and 40 Gig wavelengths are close, the useful bit rate of a SONET signal is significantly lower than the rates achieved when transmitting Ethernet via a wavelength service. A corporation using Ethernet over wavelength gets more bang for its buck in the form of a lower cost per bit to transmit real data.

Conclusion

As enterprise customers seek ways to cut costs in these turbulent economic times, wavelength services have a lot to offer.

For more information, contact Deb Boehling at dboehling@lb3law.com or (202) 857-2546.

Carrier Surcharges Keep Rising

Effective October 1, 2008, Verizon boosted its Business Property Tax Surcharge to 3.0%, a 20% increase. The surcharge applies to the customer’s “total interstate and international charges (including usage and non-usage) after the application of applicable discounts and credits…” Verizon also hiked its Carrier Cost Recovery Charge (formerly the Federal Annual Regulatory Fee Charge) by 16%, to 2.52%. This surcharge applies to “telecommunications services subject to direct regulation by the Federal Communications Commission as well as to Interconnected VoIP service charges treated as interstate under FCC rules” and purports to “recover amounts incurred by [Verizon] for regulatory costs and for telecommunications services for the speech and hearing-impaired, local number portability and North American Numbering Plan administration.”

No, these charges are not taxes or surcharges imposed by regulators that are expected to flow through to customers. They are simply a way to increase prices without saying so, in a way that Verizon (and other carriers) hope few customers will notice or complain about.

Sprint to Turn Off Clearline?

It appears that Sprint may be planning to turn off Clearline private line service as of December 31, 2010, although customers will be able to use a substitute IP-based service instead, which is available now. If you are considering transitioning off of Clearline to Sprint’s IP-based private line substitute, bear in mind that you will need data delivery, latency, and jitter SLAs.

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