Numbering Nonsense

Abstract: Quintessence has argued in many articles against operational involvement of the Government in the provision of telecommunications services. The so-called telecommunications numbering system is just another area that the Government wants to control. Quintessence argues that, whatever way one looks at it, such control does not make sense.

A. The Situation

In Australia, telecommunications has been monopolized for many years by Telecom, now called Telstra. In February 1992, Austel (the Australian authority then supervizing telecommunications) called for submissions on the then new numbering plan. Quintessence responded with the article Freedom of Communication (in Optionality February 1992). In that article, Quintessence wondered why Austel did not support competition by promoting alternative systems, including numbering systems, to operate next to each other in order for the market to decide which technical and logistic designs are the most viable ones. The current Australian Communications Authority is in many ways the successor of Austel and has recently issued proposals for a new Numbering Plan.

Since 1st July 1997, telecommunications in Australia is supposed to be deregulated. Many companies now provide telecommunications services in competition with Telstra. But newcomers rightly complain that the de facto monopoly of Telstra in local connections gives Telstra unfair advantages. Major issues in this regard are interconnection between carriers, and the availability and portability of numbers. Number portability means, in short, that when customers change to another phone company, they can keep the same telephone number.

The current strategy of the Government seems to be for the Government to continue to own the numbering system and dictate conditions of use to carriers. Such dictates would cover number portability and penalties for carriers that take too long to act on preferences expressed by customers. Furthermore, they argue, related services such as directory assistance services and the provision of telephone directories should be strictly controlled by the Government.

B. Quintessence's Recommendations

Quintessence argues that the above strategy can only create artificial competition with a high level of government intervention. Instead, Quintessence suggests that Telstra be split up into a number of parts in such a way that these parts will be separate companies that will compete with one another in each area. The Government is the (majority) owner of Telstra, so there is little to stop the Government from doing this. Alternatively, the Australian Competition and Consumer Council (ACCC) could put Telstra on notice. The ACCC has the power to issue a Competition Notice that would put the onus of remedying the (uncompetitive) situation with Telstra.

By comparison, the use of control of the numbering system as a way to establish more competition, is a poor alternative. Such control of the numbering system makes the Government become seriously involved in the operations of phone companies. Instead of taking distance and let the market decide, such control leads to price caps, legal disputes and all kinds of interventionist measures.

Furthermore, can the Government really control the numbering system? The system used by Telstra is actually part of a global system administrated by the International Telecommunications Union (ITU). The ITU was set up in 1865 in Paris and has since controlled telecommunications as a cartel that prohibited outsiders from involvement in telecommunications. As international opposition against this cartel is growing, it makes even more sense to look for alternatives.

Next to this ITU numbering system there are other systems, such as the Internet, over which the Australian Government has even less control. Importantly, such numbering systems are not tangible objects, they are essentially standardized protocols. But technically anyone can set up a database and identify items by numbers, characters or other ways. Many businesses operate Local Area Networks, Intranets and other internal communication systems. To forbid such practices would clearly breach fundamental freedoms that are implied and taken for granted in a democratic system. Until now, when operators of such databases wanted to connect such systems beyond their local area, they had virtually no choice but to use Telstra lines on Telstra's conditions, including the use of the numbering system used by Telstra. But as such telecommunications monopolies are more and more rejected all over the world, many are looking for alternatives. And increasingly, companies are looking at the Internet Protocol as an alternative for the signalling between telephone exchanges. It seems inevitable that the current numbering system will no longer be the only one used in telecommunications in future. Quintessence predicts that there will be more and more choice in future regarding the systems used to identify parties that one wants to communicate with, while it will be increasingly irrelevant to distinguish between voice, data and other types of communications.

Currently, the dominant way to make a call is by dialling numbers. But this is an old-fashioned method that dates back to the use of mechanical telephone exchanges. For computerised exchanges, it makes little difference whether numbers are used, or the alphabet or other characters or symbols. In fact, telephone exchanges predominantly use a binary system. This binary system uses many digits, making it hard for the average user to remember such sequences. But even the use of numbers is becoming increasingly awkward as the number of subscribers increases. Many people look back with nostalgia to the times when phone numbers were only six digits long. The now commonly used eight-digit sequence is much harder to remember, on top of that one also needs area codes. The current numbering system has increased the geographic size of area codes, but this results in confusion about the charges for calls. Many people do not know whether they have to pay for a local call when dialling a number, or whether the call will be charged as a long distance call. A geographically-based numbering system regularly requires a dramatic overhaul to accommodate local growth. Geographically-based numbering systems are also becoming increasingly out of step with trends such as globalization. As a result, users need to search more and more for numbers, for area codes and for international codes, and for the related cost per call, increasing the load on directory assistance (see Appendix A) and other customer service services. By comparison, alphabetical systems use more digits, resulting in many cases in short, easy to remember sequences.

Whatever way one looks at it, continued involvement of the Government in telecommunications seriously endangers the establishment of more competition. Central control by the Government over the so-called numbering system is a huge barrier on the road to more competition in telecommunications. Given the importance of telecommunications, such control puts at risk the establishment of more competition in society at large. Such control stifles competition, innovation, technical progress and is also inefficient from an economic perspective. Such control is pure patronage that is philosophically and ideologically bankrupt.

Appendix A: Directory Service

The Australian Competition and Consumer Council (ACCC) has recently spent a lot of time on the question whether Telstra's charges for directory assistance are reasonable and by what amount Telstra should reduce local line rental, if Telstra were to increase fees for directory assistance. Quintessence argues that such issues are of secondary importance compared to the competition issue. The ACCC should be concerned about Telstra's involvement in any service, given Telstra's dominance in the market. More basically, the ACCC should object against the public service model for directory assistance on the grounds that this contributes to monopolization. As Telstra is transforming from a government department into a commercial enterprise, it becomes increasingly inappropriate for Telstra to provide directory assistance service as if this were a public service.

Some argue that directory assistance should be provided as a public service, owned and controlled by the Government, but perhaps partly delivered by commercial enterprises. Of course, if (parts of) such services are to be sourced out, this should be done on a competitive basis (e.g. by tender). The problem is that the service, as it is presently provided, only costs money. Therefore, some argue, such services should be subsidized by the Government and commercial service providers should be paid on the basis of performance. The fees such service providers charge users of such services could be one of the criteria taken into account in regular performance evaluations.

If fees charged for such a service can be set by the service provider, then it could be provided as a viable commercial service. The Government could still subsidize the service, if fees become to high. As an alternative to subsidizing service providers, the Government may decide to provide funding directly to (disadvantaged) users of the service and allow service providers to charge fully commercial fees. In fact, the Government already does assist such disadvantaged persons. The Department of Social Security already provides telephone subsidies and this could be increased to cater for extra cost of directory services.

Whatever position one takes on this latter issue, it is a political question that is somewhat remote from phone numbers. Nevertheless, from a competition policy point of view, it makes sense for such services to be provided on a competitive basis by multiple operators. In fact, Telstra has long argued that directory assistance should be provided as a commercial service.

In the light of all this, the discussion about telephone numbers becomes a farce. The real issue is that steps should be taken to prevent that Telstra abuses its dominant position by overcharging customers and putting up barriers against competition.

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