I. CHAPTER ONE: OVERVIEW OF NUMBERING

A. INEFFICIENT USE AND INCREASING DEMAND FOR NEW NUMBERS IN CALIFORNIA IS CAUSING AREA CODE PROLIFERATION

California is currently experiencing an explosive demand for telephone numbers and area codes. The increased demand for numbers is due to many factors, including competition for local phone service, as well as the popularity of faxes, pagers, cell phones, internet services, etc. California's rapid business expansion in the 1990's and the growth in the state's population also contribute to the increased demand for telephone numbers. This increase in demand is complicated by a number allocation system dating from the 1940s that is inefficient in today's competitive marketplace.

Prior to 1997, one phone company⁶ provided local telephone service to all customers in a particular area and new area codes were opened as the population grew. The number of California area codes rose steadily from three in 1947 to 13 in 1992, and stayed at that level until January 1997. 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. The Telecommunications Act of 1996 sought to open competition for the local telephone service market and competitive local phone companies⁷ began to enter the marketplace, each requiring its own stock of numbers. The traditional system of number allocation was not designed to provide telephone numbers to more than one company.

In the past, when telecommunication companies needed telephone numbers to serve their customers, they received blocks of 10,000 numbers, i.e. prefixes. Because companies were assigned blocks of 10,000 numbers, they may have been assigned more numbers than they needed. For example, under this system, a company with only 500 customers would have received a 10,000 number block, the same quantity of numbers a company with 9,500 customers would receive. Thus, numbers are taken in these large blocks, creating an artificial demand for more numbers, which in turn fuels the need to open more area codes. The need to assign 10,000 numbers is a practice from the past when one telephone company provided service to all customers in its territory. Today, with over 200 telecommunications companies in the state needing numbers to serve customers, and with the limited quantity of numbers available in each area code, this process is no longer an efficient way to allocate numbers.

The rise in demand for numbers combined with the inefficient allocation system for numbers has forced the rapid opening of new area codes throughout the state. Since 1997, the number of area codes in California has nearly doubled to 25. Without the implementation of major conservation measures, the telecommunications industry had plans underway to add 22 more area codes by the end of 2003. With more and more companies needing numbers of their own, new area codes are not necessarily the best solution.

B. 530 HISTORY AND CPUC DECISIONS

The 530 area code was created in 1997 when it was split from 916. Today, the 530 area code serves Northeastern California, north of Sacramento to the Oregon border, and east of the Coast Range to the Nevada border. Portions of 530 are located within the Sacramento and Vallejo Metropolitan Statistical Areas (MSA). Portions of the 530 area code reside in a top 100 MSA and are available for pooling while rate centers not in the top 100 MSA's are not completely open to number pooling.

In May 1999, the North American Numbering Plan Administrator declared the 530 area code to be in jeopardy. The exhaust projection was for 4^th Quarter 2000. NANPA more recently projected 530 would run out of numbers in 1^st quarter 2005. After a series of public meetings, the NANPA submitted in April 2000 for CPUC consideration an exhaust relief plan containing two alternatives for introducing a new area code into the area presently covered by 530, in order to provide additional numbers for phone company use. The alternatives submitted included a 3-way geographic split and two-way geographic split followed by an overlay to the new code. The CPUC has not issued a decision for the 530 area code. The CPUC first wanted to provide an opportunity to determine the feasibility of extending existing number resources, the purpose of this report⁸.

1. Monthly Lottery Allocates Prefixes

For those area codes nearing number exhaust, the CPUC has instituted a lottery process to fairly allocate the remaining prefixes among phone companies when demand exceeds supply. The 530 lottery began in July 1999. Currently, the CPUC distributes four prefixes (two initial and two growth⁹) in the monthly 530 lottery. Each company submits applications for initial and growth prefixes to the NANPA Code Administrator. If more applications are received than can be satisfied in that month, the first applicants chosen by random drawing are assigned a prefix and the remaining applicants are placed on a priority list and receive prefixes in one of the following months' lotteries in the order they were drawn. Once every company requesting a prefix has received one, a new drawing is held and additional companies are eligible to receive prefixes. Fifty-one prefixes have been allocated in the 530 area code through this process between January 1, 2000 and December 31, 2000. With the CPUC working with companies to reclaim excess prefixes held by companies, forty-one prefixes have been returned and reclaimed during the same period, for a net distribution of eight prefixes. During the first eleven months of 2001, forty-one prefixes have been allocated through the lottery, and forty-seven have been returned to NANPA, for a net distribution of negative six prefixes. As of November 30, 2001 there were 199 prefixes available for assignment in the 530 area code.¹⁰

C. CPUC EFFORTS TO RESOLVE AREA CODE PROLIFERATION

Recognizing the substantial social and economic burdens associated with constant area code changes, the CPUC has taken steps to resolve the numbering crisis. Responding to widespread public outcry over the proliferation of new area codes, the CPUC suspended, beginning in December 1999, all plans for new area codes previously approved. In July 2000, the CPUC adopted number conservation measures, including establishing number pooling trials, fill rates, and sequential numbering.

1. Number Pooling

The CPUC, with FCC approval, has implemented number pools in fourteen area codes, in order to boost the efficiency of phone number allocation. In addition, the CPUC has ordered pooling for two other area codes in February and March 2002. In March 2002, national number pooling begins. Three or four additional number pools will be implemented in California per quarter. Number-pooling is tentatively scheduled to begin in the 530 area code in Summer 2002. By Spring 2003, number pooling will be implemented in all of the area codes in California.

Number pooling allows telephone companies to receive numbers in smaller blocks than the traditional 10,000 numbers, enabling multiple providers to share a prefix, thereby utilizing this limited resource much more efficiently. The technology that enables the network to support the assignment of smaller blocks is referred to as Local Number Portability or LNP.¹¹ LNP was originally mandated by the FCC as a means to enable customers to retain their telephone numbers when they switch telephone service to another local provider. This same platform is utilized for number pooling. The FCC had required all wireline carriers to become LNP-capable by the end of 1998 in the top 100 Metropolitan Statistical Areas (MSAs) in the country. Thirteen of the top 100 MSAs are located in California; the 530 area code is partially located in two of them, the Sacramento and Vallejo Metropolitan Statistical Areas.¹²

Though LNP technology has existed for several years, the FCC later granted cellular and PCS companies an extension of time until November 2002 to become LNP-capable. The FCC gave paging companies a permanent exemption from the LNP requirement.¹³ Thus, at this time, only wireline carriers¹⁴ can participate in number pooling. In the area codes with number pooling, wireline carriers participate in pooling and wireless carriers participate in the lottery. In the remaining area codes in rationing, all phone companies participate in the lottery.

The CPUC has been aggressively setting up number pools. Once pooling is implemented in the 530 area code, all wireline companies with numbers in rate centers located in the top 100 MSA's in 530 will be required to donate 1,000-number blocks to the pooling administrator. While FCC rules only require companies to donate numbers to the number pool in rate centers located in the top 100 MSA's, many companies have implemented LNP capability throughout their service territories. These companies could also donate or receive thousand-blocks in all rate centers in an area code's number pool, rather than just in rate centers located within top 100 MSA's. Under the number-pooling program, all LNP-capable carriers receive numbers in blocks of 1,000 on an as-needed basis. There is no rationing process in a number pool and the blocks received can be put into service almost immediately upon receipt. All wireless carriers, as well as wireline carriers who decline to take part in pooling in the rate centers not located in a top 100 MSA, will continue to receive numbers in blocks of 10,000 through the monthly lottery allocation process.

2. Improved Number Inventory Management

While number pools will improve the efficiency of the distribution of numbers to companies, companies have not had strong incentives to efficiently manage the numbers already allocated to them. Thus the CPUC ordered companies to improve number inventory management with measures including rules on fill rates and sequential numbering.

In July 2000, the CPUC issued Decision 00-07-052, which extended number conservation measures adopted in the 310 area code to other area codes within California. These number conservation measures include the following:

· Companies are required to return to the NANPA any prefix held for more than six months without being used.

· "Imminent exhaust criteria" are established in all area codes with lotteries or pooling trials. In each rate center in which companies request additional numbers, they must provide to NANPA a form demonstrating they will be out of numbers within six months¹⁵.

· Companies must satisfy a minimum 75% fill rate requirement before being eligible to request a growth prefix in any area code in rationing and before being eligible to receive a thousand-block through the number pool. Companies must assign numbers in thousand block sequence, assigning numbers in the next block only once a 75% fill rate has been attained in the prior block.

TD anticipates these policies will potentially free more numbers for use in number pooling, to be allocated through the lottery, or to be otherwise used by companies. Indeed, these measures together with the effects of number pooling have already achieved some positive results. For example, since the CPUC extended the 75% fill rate and imminent exhaust rules to all area codes, including 530, CPUC staff has observed that the demand for growth prefixes in each month's lottery has declined dramatically. Further evidence of the effectiveness of the CPUC's number conservation policies is the recent increase in the number of excess prefixes in the 530 area code being returned to the NANPA by companies.

3. CPUC Efforts at Federal Level

The FCC has exclusive jurisdiction over numbering in the United States. Therefore, the CPUC's number conservation policies (pooling, fill rates, and sequential numbering) are governed by the FCC's delegation of authority to the states. In recognition of the severity of the numbering crisis in California, the CPUC has aggressively petitioned the FCC for additional authority. As a result, the FCC has delegated authority to plan and implement area code changes, as well as authority to implement number conservation measures.

a. Authority Regarding Pooling

On April 26, 1999, the CPUC filed a petition with the FCC requesting authority to institute number pooling trials and other number conservation measures within the state to better manage this public resource. On September 15, 1999, the FCC granted that petition, allowing the CPUC to institute mandatory number pooling on a trial basis, deploying it sequentially in one MSA at a time. When the FCC granted the CPUC the authority to deploy various numbering resource optimization strategies, including the authority to institute thousand-block numbering pooling trials, it also clarified that California's authority will be superseded by future national measures adopted by the FCC.

On March 31, 2000, the FCC released the Numbering Resource Optimization Report and Order and Further Notice of Proposed Rulemaking (first NRO Order).¹⁶ The first NRO Order sets forth rules for defining numbers, forecasting, tracking and auditing companies' use of numbers, and for conservation measures associated with number usage, including but not limited to number pooling. The definitions of numbers and timelines for aging and reserved numbers that were adopted in that order have been incorporated into the utilization data contained herein.

With the release of the first NRO Order, the FCC adopted a number of administrative and technical measures that will allow it to monitor more closely the way numbering resources are used and to promote more efficient use of numbering resources. In particular, the FCC adopted a nationwide system for allocating numbers in blocks of one thousand, rather than ten thousand, wherever possible, and in October 2001established a tentative plan for national rollout of thousand-block number pooling starting in March 2002.

Because the FCC recognized that state thousand-block number pooling trials underway might not conform to the national standards set forth in the first NRO Order, the FCC gave state commissions until September 1, 2000 to conform their thousand-block number pooling trials to the national framework. One requirement imposed in California which differs from the national standards is the requirement that companies meet a 75% fill rate in each block before they may receive an additional block from the pooling administrator. The CPUC recognized the 75% fill rate as a critical factor in the success of the 310 pooling trial and petitioned for a waiver of compliance with the national rules. On August 31, 2000, the FCC issued an order granting the CPUC authority to continue to use its pooling rules until the FCC decides on the merits of the petition, or until December 31, 2000, whichever occurs sooner. This allows California to continue applying the 75% utilization rate in its number pooling efforts.

On December 29, 2000, the FCC issued its Second Report and Order on Number Resource Optimization. In the second NRO Order, the FCC also ruled on California's Petition for Waiver, concluding that we may continue to use our utilization thresholds subject to parameters set in this order (when FCC thresholds exceed California's, we must migrate to the more stringent utilization thresholds). The FCC also declined to adopt a transition period between the time that covered CMRS carriers must implement LNP and the time they must participate in any mandatory number pooling.

The first NRO Order further constrains the CPUC by concluding that the rollout of thousand-block number pooling should first occur in area codes that are located in the largest 100 MSAs. In its comments prior to the release of the first NRO Order, the CPUC had argued that California might be precluded from exploring whether number pooling could alleviate the crises for number resources in many parts of the state that are located outside the top 100 MSAs. The CPUC believes the FCC should delegate authority to the states to order deployment of LNP. This grant of authority to California would make pooling possible throughout the state. The 530 area code has two top 100 MSA's where rate centers are located. Sixteen of the rate centers in the 530 area code are located within MSA's that are listed in the top 100 MSA's. The remaining 115 rate centers are outside of the top 100 MSA's.

b. Authority Regarding Technology-Specific Area Codes

Currently, state commissions are constrained by the FCC from establishing an area code specifically for wireless telecommunications services. On April 26, 1999, the CPUC filed another petition with the FCC requesting authority to create service-specific or technology-specific area codes. In the 530 area code, wireless carriers hold 121 prefixes. If the CPUC were allowed to create a separate area code for those companies, these 121 prefixes in the 530 area code could be reassigned to other phone uses, thus prolonging the life of the existing area code. To date, the FCC has not acted on the CPUC's petition. In the Second Report and Order, the FCC asks for further comments on technology specific or non-geographic area codes.

4. Utilization Studies

Before requiring the residents and businesses of the 530 area code to undergo another area code change, the CPUC recognized the necessity of determining the number of telephone numbers that are in use and the number yet to be used. To that end, the CPUC instituted a utilization study of the 530 area code and required companies to provide usage data to the CPUC as of December 31, 2000. The TD contracted with NeuStar to collect the data; NeuStar submitted the aggregated data in its entirety to TD in April 2001. The definitions used in the utilization study are included in Appendix A-1.