Neustar fights to keep number portability contract away from Ericsson's Telcordia

Neustar, the telecommunications data service provider, is strongly protesting a recommendation that Ericsson's (NASDAQ: ERIC) Telcordia unit be named as the winner of a major telephone-numbers management contract. The contract, which Neustar has had with the U.S. government since 1997, makes up nearly half of Neustar's revenue.

At issue is which vendor is going to be the U.S. government's neutral and tested local number portability administrator (LNPA), which helps phone subscribers keep their numbers when switching carriers.

In April, the North American Numbering Council (NANC), a federal advisory committee, recommended that Telcordia's iconectiv unit win the contract. Neustar has been protesting ever since, arguing that Ericsson is not a neutral party since it has contracts with many U.S. telcos, including the major wireless carriers. Bloomberg noted that the LNPA contract accounted for 60 percent, 50 percent and 49 percent of Neustar's revenue in 2011, 2012 and 2013, respectively, according to an annual filing at the Securities and Exchange Commission.

In lengthy comments posted with the FCC, Neustar argued that Ericsson has a vested interest in the success of its U.S. carrier customers and that as a network vendor it cannot be viewed as neutral, and neither can SunGard, Ericsson's subcontractor for data center services, because it has connections to interconnected VoIP and telecom service providers. Neustar said Ericsson has not and could not put forward any way to protect Telcordia from influence.

Further, Neustar said the FCC needs to issue a notice of proposed rulemaking before ruling on the LNPA recommendation from NANC, and that doing so is required by law. Neustar said the FCC followed these procedures in 1997 when it first designated Neustar as the LNPA and incorporated the NANC's recommendations on neutrality, which bars telecommunication network equipment manufacturers like Ericsson and their affiliates from serving as an LNPA.

Neustar also took issue with the NANC's recommendation, calling it a "black box" with little to no evidence and analysis.

Reply comments on the matter at the FCC are due Aug. 8, but it's unclear what will happen beyond that.

Last week Neustar CEO Lisa Hook told investors that, regarding the contract, "we continue to believe that we presented the best value proposition to the industry, taking into account all relevant factors, including our demonstrated record of performance, the capabilities in our service and transition risk."

According to Seeking Alpha transcript, Hook said Neustar does not have any timeline for a final FCC decision, but that the FCC should propose a new rulemaking if it wants to change a provider for the contract.

Asked what the company would do if the FCC did not propose a new rulemaking, Hook said: "We would look at a number of legal actions, but it's our strong opinion that the law requires that rules only be changed through rulemaking."

Lining up in favor of Ericsson and Telcordia as the new LNPA are CTIA and the U.S. Telecom Association, whose members include AT&T (NYSE: T) and Verizon Communications (NYSE: VZ), both of which are Ericsson customers. The trade groups said in a filing to the FCC that the commission shouldn't reopen bidding and should "promptly" move to award the contract to Telcordia, according to Bloomberg.

Telcordia said it should "expeditiously" be awarded the contract, according to the company's filings to the FCC. "We are pleased that leading, broad-based industry associations such as USTA and CTIA have supported the openness, thoroughness and fairness" of the selection process, Joel Fisher, a spokesman for iconectiv, told Bloomberg.

For more:
- see this Bloomberg article 
- see this Washington Business Journal article
- see this Neustar filing (PDF)

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