II. Background

The traditional system for assigning numbers was a legacy from an era in which one incumbent telephone company provided all customers with local service in a given area code. Under the traditional system, a carrier wishing to serve only a few customers in an area was allocated telephone numbers in blocks of 10,000 for each rate center in that area. That system worked reasonably well as long as only one incumbent local exchange carrier required telephone numbers. Yet, with the opening of the local exchange market to competition, together with the growth in the competitive market for wireless and advanced technological telecommunications services, the traditional number assignment system could no longer keep up with the growing demand for numbers from multiple carriers serving the same customer base. The traditional system did not lend itself to efficient distribution of numbers in a competitive market where numbers are assigned to multiple carriers to serve customers in each rate center.

From 1947 to January 1997, the number of area codes in California increased gradually from 3 to 13. During the next three years, however, the number of area codes in California nearly doubled. By the end of 1999, California had 25 area codes statewide, and because of inefficient management of telephone numbers, the industry projected we would need 17 more area codes by the end of 2002. Today, because of aggressive and successful conservation efforts in California, we have not split a single area code since 1999.

The FCC has exclusive jurisdiction over numbering in the United States. Only by the FCC's delegation of authority to the states can the states implement number conservation policies. Recognizing the substantial social and economic burdens associated with constant area code changes, in April 1999 the Commission petitioned the FCC for the delegated authority to implement specific telephone number conservation measures in California in order to slow down unnecessary area code proliferation. The FCC granted the Commission's request in September 1999.¹ As a condition of that delegated authority, the FCC has required that the Commission must take steps to provide additional telephone numbers through an area code split or overlay if telephone numbers are in imminent danger of being exhausted.

A. History of Procedural Actions Taken to Split the 310 Area Code

The 310 Area Code, or Numbering Plan Area (NPA)² was created in 1992 to create more numbers in the geographic area previously covered by the 213 area code. The 310 area code was subsequently split in January 1997, forming a separate 562 area code, again to provide additional phone numbers based on industry projections of future demand. On February 18, 1998, industry representatives submitted to the Commission yet another proposal for splitting the 310 area code, again claiming telephone number exhaust³.

The industry first began customer notification of the impending exhaustion of numbers in the 310 area code in May 1997 in accordance with the 24-month customer notification required by Pub. Util. Code § 7930(a). A local jurisdiction meeting for city and county government representatives was held on August 27, 1997, to provide local jurisdictions with information concerning split and overlay options for the 310 area code.

Public meetings were required to occur within six months of the May 1997 customer notification, i.e., by November of 1997. Telecommunications carriers held four public meetings, one more than required under Pub. Util. Code § 7930 at the request of the Commission staff to insure adequate coverage of the geographic area served by the existing 310 area code.

On May 7, 1998, the Commission issued D.98-05-021, approving the creation of additional numbers by calling for the implementation of the first area code overlay ever used within California. In conformance with federal rules, the overlay plan also required the implementation of mandatory 1+10-digit dialing within the 310 area code and the newly created 424 area code.

On June 9, 1999, shortly after implementation of mandatory 1+10-digit dialing, Assemblyman Wally Knox, with other parties, petitioned to modify D.98-05-021, seeking to halt the opening of the overlay scheduled to occur on July 17, 1999, and to end mandatory 1+10-digit dialing. In D.99-06-091, issued on June 24, 1999, the Commission temporarily suspended mandatory 1+10-digit dialing in order to provide time to address the full merits of the Petition. In D.99-09-067, the Commission granted the Knox Petition, suspending the 310 area code overlay plan, eliminating mandatory 1+10-digit dialing, and instituting a program of telephone number conservation measures to extend the life of the 310 area code.

On August 2, 2000, the Cellular Carriers Association of California (CCAC) filed a motion asking the Commission to immediately create new numbers in the 310 area code.⁴ CCAC argued that in view of wireless carriers' forecasted need for triple the number of remaining 10,000-number blocks at that time, there was an unavoidable need for immediately creating a new area code.

In September 2000, in D.00-09-073, we took a preliminary step toward splitting the 310 area code and establishing a new 424 area code, by adopting a plan for a geographic split of the 310 area code should it become necessary as required under Federal Communications Commission (FCC) rules. The split plan adopted in D.00-09-073 provided for implementation of Alternative 1A, the geographic split plan previously proposed by the industry planning group as originally described in D.98-05-021. Under the adopted plan, the northern portion, including the majority of Inglewood, and all of Culver City, Marina Del Rey, Mar Vista, Santa Monica, Beverly Hills, West Los Angeles, Malibu and a small portion of the City of Hawthorne and Ventura County shall retain the 310 area code. The southern portion of the current 310 area code, including El Segundo, Hawthorne, Compton, Redondo, Lomita, and San Pedro shall be split off to form a new 424 area code.⁵ The boundary lines and rate centers covered by the new area code are depicted in Appendix A of this order.

We recognized that any area code change will entail some level of disruption, particularly to those customers that are required to take the new area code. Alternative 1A was approved by the Commission, because it scored more highly in satisfying all of the designated criteria than any of the alternatives.⁶

On September 29, 2000, Senate Bill 1741 (Bowen) amended Pub. Util. Code § 7930. This bill provided specific direction to the Commission regarding creation of new area codes. Among other things, this section prohibits the Commission from approving new area code splits or overlays unless a telephone utilization study has been performed and all reasonable telephone number conservation has been implemented.

On December 19, 2002, CCAC sent a letter requesting that the Commission adopt and implement all-services overlays in both the 310 and 909 area codes. In its letter, CCAC reiterated its August 2002 claim that the 310 area code faces immediate need of area code relief. CCAC sent a second letter with the same request on February 6, 2003.

B. California's Innovative Number Conservation Measures Have Extended the Life of the 310 Area Code

Working with the North American Numbering Plan Administrator (known as NANPA),⁷ the Commission immediately took steps to implement its delegated authority to conserve telephone numbers in 2000. Beginning in March 2000, the Commission adopted various number reporting and conservation measures which collectively have slowed significantly the pace of area code splits in California.

In exercising its delegated authority from the FCC, the Commission has found that industry claims of impending telephone number exhaustion were based merely upon carriers' forecasts of future telephone number usage within each area code, not their respective historical or actual use of telephone numbers. In essence, marketing predictions, not actual number use, formed the basis of each carrier's forecast number requirements - and the national numbering policy. No independent analysis had been provided, however, concerning the reliability of such forecasts or carriers' actual utilization of telephone numbers. Accordingly, in D.99-09-067, the Commission ordered the staff to undertake a study of telephone number use in the 310 area code to ascertain how efficiently carriers were actually using the 10,000-number blocks already assigned to them. The Commission stated that a full accounting of telephone numbers actually in use in the 310 area code would be required before setting any further date for the opening of a new area code.

First, California now considers new area codes based on actual need for new numbers, not carriers' unaudited forecast demand. Beginning in March 2000, the Commission initiated the first-ever utilization study of actual number use in California, in the 310 area code - where we found three million unused telephone numbers in an area code that was allegedly entirely out of available telephone numbers. By the end of 2001, the Commission had completed a utilization study for each of the state's other 24 area codes. In every case, we found that each area code actually contained between 40-80% of the available numbers classified by the carriers as unused.

Second, under our delegated authority, new telephone numbers are allocated to carriers more efficiently. By far the most effective number conservation tool is number pooling. Number pooling allows telephone companies to receive numbers in smaller blocks than the traditional 10,000 numbers, enabling multiple providers to share a 10,000-number block and therefore use this limited resource much more efficiently. In March 2000, California began the state's first number "pool", in the 310 area code. Today, every area code in California has implemented number pooling, operated by a neutral third-party Pooling Administrator.⁸ Through distribution of numbers in smaller blocks of 1,000, we can better match the numbering needs of new, smaller companies without stranding the remaining numbers in the 10,000-number block.

The technology that enables the network to support the assignment of smaller blocks is referred to as Local Number Portability, or LNP. LNP was originally mandated in 1996 by the FCC as a means to enable customers to retain their telephone numbers when they switch telephone service to another local telephone company. This same technology is utilized for number pooling. The FCC required all wireline⁹ carriers to become LNP-capable by the end of 1998 in the top 100 Metropolitan Statistical Areas (MSAs) in the country.¹⁰ Without LNP, a customer is inhibited from changing carriers because he or she must change both the equipment and the telephone number.

Though LNP technology has existed for several years and the wireline carriers became LNP-capable by 1998, the FCC has subsequently granted cellular and PCS companies three separate extensions of time, until November 2003, to become LNP-capable.¹¹ The FCC further gave paging companies a permanent exemption from the LNP requirement. Until November 2002, only wireline carriers could participate in number pooling, and those carriers received telephone numbers solely through the number pool; wireless carriers received numbers in 10,000-number blocks through a Commission-administered monthly rationing system, or "lottery", and through emergency requests to the Commission. Now, although wireless carriers have not yet made local number portability available to their customers, they have implemented enough of the technology to enable their participation in number pooling beginning in November 2002. Currently, therefore, both wireline and wireless carriers in California receive numbers through the state's number pools. Only paging companies, which are still exempt from LNP requirements, now receive numbers through the monthly lottery system.

Third, in addition to more efficiently managing number distribution, California is also requiring companies to more efficiently manage the numbers they already have. These new requirements include requiring companies to return any 10,000-number block that the telephone company has held for more than six months without using it; requiring telephone companies to show they will be out of telephone numbers within six months before a carrier's request for additional numbers can be granted; and requiring telephone companies to show they have used at least 75% of the numbers they hold before they can request additional numbers (known as the "fill rate requirement"). Companies must assign numbers in thousand-block sequence (called "sequential numbering"), moving to the next thousand-block only after using 75% of their numbers.

Fourth, as an additional measure to extend the life of the 310 area code, the Commission filed a petition with the FCC on September 5, 2002,¹² seeking a waiver from the FCC's "contamination" or number use, threshold requirement. Specifically, the Commission requested that the FCC grant California the authority to increase the existing 10% "contamination" rate. Under FCC rules, carriers must donate to each area code's common number pool all thousand-blocks of telephone numbers that contain less than 10% "contaminated", or used, numbers. An increase level of allowable contamination or usage rates for poolable thousand-number blocks (from current 10% to 25%) increases the number of thousand-blocks that are available to all carriers through each area code's number pool. By increasing the number of available thousand-blocks in this manner, the life of the 909 area code can be extended.

The FCC acted upon this Petition by its Order adopted August 5, 2003 and released August 11, 2003. While the FCC declined to grant a statewide waiver of the 10% contamination rate, it did find good cause to justify raising the contamination level in the 310 and 909 area codes. The Commission directed carriers to comply with the new contamination rate in the 310 and 909 area codes by ruling date August 21, 2003.

The wireless carriers note in their comments the conclusions of a report provided by a North American Numbering Council ("NANC") working group that reviewed the California 25% contamination petition. Although this report contained two separate sets of recommendations, the wireless carriers have articulated only the section that reflects the industry's view. They rely on the section of the working group report that concluded that the costs of implementing the 25% contamination threshold would outweigh the benefits. This analysis of the benefits assumes that as each rate center in each area code runs out of blocks, the first rate center to exhaust means the area code is exhausted. It did not assume that the pool could be replenished with new 10,000-number blocks. We note that this working group report contained a second sets of analysis and conclusions, put forth by California, that examined every rate center in every area code in California and projected its life based on using up all existing available 10,000-number blocks in the area code. This analysis shows many area codes lasting years longer with a 25% contamination threshold.

These policies have resulted in more numbers being made available for number pooling, to be allocated through the monthly lottery for each area code, or to be otherwise used by other companies. Indeed, since the CPUC extended the 75% use requirement in all California area codes, the demand for 10,000-number blocks in each area code's monthly lottery has declined.

C. Utilization Study and Audit of 310 Telephone Numbers

On March 16, 2000, the Commission's Telecommunications Division (TD) issued its "Report on the 310 NPA" (Report) presenting findings on how efficiently telephone numbers remaining in the 310 area code were actually being utilized by carriers, in compliance with the directive of D.99-09-067. Parties were permitted to file responses to the Report. As reported by TD, approximately three million unused numbers existed in the 310 area code as of November 1999. The TD Report provided corroboration of our earlier caution in questioning whether prior carrier claims of number exhaustion were supportable. The number conservation measures that we have adopted, including requirements in D.99-11-027 for carriers to return unused codes, fill rate and sequential numbering rules in D.00-03-054, and thousand block number pooling for local number portability-capable carriers, help insure that the unused numbers in the 310 area code identified in the TD Report are allocated as efficiently as possible.

The TD Report also recognized that, even considering the large quantity of unused numbers in 310, there are various constraints on the ability of carriers to make use of these unassigned numbers in meeting current customer service needs. For example, under FCC rules, a certain quantity of unused numbers must remain reserved for carriers' inventory needs. Also, in certain cases, carriers may need numbers in a particular rate center.¹³ Even if there are unused numbers in other rate centers, a carrier may be unable to use those numbers to serve customers in a rate center where there is a shortage of 10,000-number blocks.¹⁴ Of the three million unused numbers as of March 16, 2000, 466,000 were identified in the Staff Report as belonging to wireless carriers.

While we approved Alternative 1A as the designated back-up plan in D.00-09-073, we deferred its implementation pending independent confirmation that carrier-reported utilization data underlying telephone number exhaust forecasts for the 310 area code were accurate and reliable. Considerable effort went into preparing the TD Report on number utilization in the 310 area code, but the results of the Report reflected only the representations of carriers. In order to rely on the findings underlying the TD Report, therefore, we required independent confirmation that representations made by carriers were valid and that properly conformed with the state and federal rules adopted for reporting purposes. Thus, we ordered TD staff to conduct an independent audit of the number utilization data underlying the TD Report on the 310 area code. The audit report findings were released on February 16, 2001.

Based on the published audit findings, TD reached three overall conclusions. First, carriers did not deliberately misreport telephone number utilization data for the March 2000 Report on the 310 area code. Second, the audit authenticates the utilization data that carriers submitted for the March Report, except for certain recommended adjustments as noted in the audit report. Third, the additional telephone number adjustments noted in the audit report are relatively small compared to the twelve 10,000-number blocks available for assignment as of the date of the audit report and the codes set aside for number pooling.

Since the publishing of the Audit Report, additional codes have been assigned through the lottery. Moreover, additional codes have been opened to provide inventory for the 310 area code number pool, and since the pool's inception carriers have donated or returned over three hundred 1,000-number blocks to the 310 area code pool. The TD audit report indicates that number pooling has been overwhelmingly successful in meeting the needs of pooling participants through better utilization of each area code's existing telephone numbers.