IV. Discussion

In D.99-09-067, we stated that the public interest demanded an accounting of what telephone numbers are actually in use before we set a date to split the 310 area code. Since the completion of the March 2000 study, we have undertaken a rigorous scrutiny of existing number utilization, and instituted the numerous telephone number conservation measures discussed above to ensure more efficient utilization of telephone numbers. These actions have spared customers in the 310 area code the risk and inconvenience of being prematurely forced to undergo an area code change.

We remain cognizant of our obligation to provide for adequate telephone numbers in each area code so that the public may have a competitive choice in selecting a local carrier. At the same time, we are acutely aware of our responsibility to California businesses and consumers to ensure that California's telephone number inventory is efficiently managed to the extent we can under FCC rules, and our statutory duty under state law to implement all possible number conservation measures before imposing the burden of an area code split. Toward that end, we believe it is important to scrutinize carefully carriers' claims of impending number exhaust, to analyze the remaining numbers in the 310 area code in the context of the rate that carriers are withdrawing and returning numbers from the number pool, and to evaluate our options for managing the remaining numbers in the 310 area code.

A. Forecast Versus Actual Demand for Telephone Numbers

The decision whether or not to split or overlay an existing area code is based on an analysis of whether adequate telephone numbers exist to meet the projected demand. Currently, six (6) unassigned NXX codes remain available in the 310 area code in the lottery reserve, and three (3) NXX codes remain available in the pool set-aside reserves for replenishing the 310 area code number pool. In other words, there are nine (9) whole prefixes (NXX codes) or 90 one-thousand number blocks unused and available in 310. This is one additional full code more than existed when this Commission last decided not to split the 310 area code in October 2003. Even though carriers, at the time of the decision, had claimed that the then remaining 8 NXX codes were needed immediately to meet their 6-month inventories, that purported need did not materialize and there has actually been a net increase of NXX codes to the 310 reserves since that time.

Comparisons of carriers' actual need for thousand blocks versus forecasted demand since the inception of the 310 number pool indicate that carriers have consistently over-estimated their actual need for number blocks by several orders of magnitude. For example, for the year 2000, carriers forecasted 883 one-thousand number blocks would be needed to meet demand. However, only 161 one-thousand number blocks were actually used by carriers participating in the 310 area code number pool, less than 20% of forecasted demand. Likewise, in 2001, carriers forecasted that 581 one-thousand number blocks would be required from the 310 area code number pool to meet demand. By contrast, only 20 blocks were actually assigned during the same period. Thus, only 3.4% of the forecasted block demand was actually needed during 2001. For 2002, carriers forecasted a need for 626 blocks, but actually took only 227 blocks. The relative increase in carrier "withdrawals" from the number pool in 2002 over 2001 was due to the effects of wireless carriers entering the number pool and leaving the lottery system from which they had previously obtained numbers. In 2003, carriers projected they would need 821 one-thousand blocks yet only requested 413 one-thousand blocks. Many carriers that obtained number blocks in 310 in 2003 obtained those numbers for their inventories and not to assign to customers immediately.

B. Carriers Continue to Retain Excess Numbers in the Inventories

Numbering Resource Utilization/Forecast (NRUF)¹⁹ data for carriers' actual telephone number assignments demonstrates that carriers needed only 363 blocks²⁰ of numbers for their six-month inventory needs to meet all customer demand in the 310 area code. Yet at the end of 2003, they retained in their 310 inventories 556 one-thousand number blocks less than 25% used (or contaminated) plus nearly 5,500 one-thousand number blocks that were greater than 25% contaminated and were therefore not required by the FCC to be returned to the 310 number pool.

In light of the consistent pattern of carriers' significant over-forecasting of demand, carriers have held significantly more numbers in their inventories than they than need to meet their actual customer demand throughout the 310 area code.

Telephone Numbers in Carrier Inventories Compared to Carrier Needs*

Carrier	Available Telephone Numbers in Inventory21	Inventory Blocks Less than 25% Contaminated (in 1,000 blocks)	Inventory Blocks More than 25% Contaminated (in 1,000 blocks)	Blocks needed to meet Carrier 6-Month Customer Demand (in 1,000 blocks)
TOTAL	1,764,686	556	5,459	363

* December 31, 2003 NANPA NRUF data - aggregated to protect confidential carrier use data of individual carriers

The above table, comparing carrier inventory to actual need, clearly demonstrates how carriers' forecasts far exceed their actual need. The history of over-forecasting as outlined above illustrates the need to create more realistic criteria for carrier six-month inventories based upon actual need.

The Commission staff's report to the FCC in June 2004 on the impact of the contamination threshold waiver²² on the 310 area code clearly delineates how important inventory guidelines are to extending the life of an area code. Staff applied conservative exhaust methods for inventory guidelines scenarios based upon actual historical use of numbers in conjunction with the increased 25% contamination threshold and found these conservation measures would extend the life of the 310 area code by an additional 21 months or until the end of 2006. The staff report confirms the value of setting inventory guidelines in extending the life of an area code. Carriers otherwise take numbers from the pool in excess of what they really need, creating the illusion of imminent area code exhaust.

On July 16, 2004, an Assigned Commissioner Ruling (ACR) discussed creating inventory guidelines for carriers to more accurately determine their six-month inventories. With comments from carriers and interested parties, six-month inventory guidelines will be developed within the next couple of months. Setting of inventory guidelines is also necessary to support and increase the effectiveness of other conservation measures already in place. Implementing inventory guidelines is consistent with our responsibility under PU Code 7930 to implement all reasonable conservation measures before implementing an area code split.

C. Carriers Have Substantial Available Numbers in the 310 Area Code

The Commission's March 2000 Utilization Report on the 310 area code based on 1999 carrier data found nearly 3 million unused, available telephone numbers in 310 carrier inventories. Nearly five years later, more than two million telephone numbers are still unused and available to customers in the 310 area code.

Available Numbers in the 310 Area Code

Location of Available Numbers in 310	Quantity of Telephone Numbers
All Carrier Inventories	1.76 million numbers*
310 Number Pool (as of July 31, 2004)	476 one-thousand blocks**
NXX Codes (10,000 number blocks of reserved prefixes)	90 ten-thousand blocks___

* NANPA,. 12/31/03 NRUF Report
** NeuStar, Pooling Administrator Website, 310 Pool Tracking Report

_ NANPA Website, Central Office Code Assignment Activity Report

1. The 310 Number Pool

In September 2003, there were only 328 one-thousand number blocks in the 310 number pool, but by the end of July 2004, after the implementation of both the FCC's contamination threshold waiver and LNP order, the 310 pool contained 476 one-thousand number blocks. The increase in available numbers in the pool resulted from carriers returning unused numbers pursuant to the FCC's contamination waiver order. Even after ten months of normal carrier activity of assigning telephone numbers to customers, the most current NRUF report shows that since last September there has been a 148 one-thousand block increase into the 310 number pool, for an average net take-up rate of -9.5 (that is, a net average return of 9.5 one-thousand blocks into the 310 number pool each month). Compared with the period August 2002 through March 2003, before the contamination waiver and LNP took effect, the 310 number pool experienced an average net take-up (or decrease) of 35 blocks per month. As long as the 310 number pool continues to be replenished with more numbers than are taken out of the pool, it is reasonable to conclude that the 310 area code will not exhaust for years to come.

Pub. Util. Code § 7930 states that a utilization study must be completed before implementing an area code split or overlay. This Commission voted not to split the 310 area code in October 2003 in part based upon the previous 2000 utilization report. Recognizing that several conservation measures have been implemented since that initial study was performed, and considering that the Report is nearly five years old, the current utilization study is dated. A new utilization study must be undertaken pursuant to § 7930's requirements before an area code split is implemented in the 310 area code.

2. Rate Center Exhaust is Not Imminent

Telephone numbers may only be given out to customers by rate center (the 310 area codes has 16 rate centers). Rate centers are replenished from the number pool in blocks of one-thousand when more numbers are needed to meet customer demand in a particular rate center. Inherent in the pooling system of distribution, telephone numbers flow in and out of rate centers as they are needed or returned. Therefore, the number of available blocks in a rate center will fluctuate as blocks are taken or returned. While rate centers may appear to be out of blocks of numbers one month, the following month they may see an influx of blocks of telephone numbers. Any given point in time is merely a snapshot of availability, rate center-by-rate center. Consequently, just because a rate center may appear to have a low supply of number blocks in a given month, this does not signify area code exhaust. A rate center must be evaluated by how many of its blocks are already assigned to carrier inventories, what the average customer demand is for that rate center, whether there are eligible blocks that can be returned, and whether it is time to open an NXX code to replenish the rate center.

When a rate center is completely out of numbers and cannot be replenished from the pool, several options for obtaining additional numbers for that rate center exist. For instance, as a last resort, a new NXX code may be opened to replenish the rate center. However, an NXX code should be opened only after all less than 25% used blocks in carriers' inventories have been returned to the number pool and requesting carriers have demonstrated a need for numbers from that particular rate center. If it is necessary to open an NXX code, needed numbers in increments of 1,000 blocks are assigned to a carrier's inventory while the balance of unneeded blocks from the NXX code are assigned to the number pool for that rate center. In order to prevent premature exhaust of an area code that still has millions of unused telephone numbers, blocks of numbers must be managed more efficiently at the rate center level.

a) Carriers Must First Look to Their Own Inventories to Meet Rate Center Needs

Carriers have an abundance of blocks in their 310 inventories that are more than 25% used which are already associated with a particular rate center and currently cannot be returned to the 310 number pool. Accordingly, carriers should first look to their own inventories to support their rate center needs. To make the point, the tables below illustrate that carriers have an abundance of inventory in rate centers to meet their needs, even in those rate centers that have the current lowest supplies of blocks.

Carrier Resources for Inglewood Rate Center Compared with Carrier Need*

Available telephone numbers in Carrier Inventories	Number of less than 25% contaminated 1,000-blocks in Carrier Inventories	Number of greater than 25% contaminated 1,000-blocks in Carrier Inventories	Number of blocks needed for Customer Demand (6 month average)	Number of blocks currently in Rate Center
123,701	34	371	42	2

* December 31, 2003 NRUF Report, aggregated to protect confidential carrier use data of individual carriers.

Carrier Resources for Lomita Rate Center Compared with Carrier Need*

Available whole telephone numbers in Carrier Inventories	Number of less than 25% contaminated blocks in Carrier Inventories	Number of greater than 25% contaminated blocks in Carrier Inventories	Number of blocks Needed to meet Customer Demand (6 month average	Number of blocks currently in Rate Center
25,442	10	89	9	2

* December 31, 2003 NRUF Report, aggregated to protect confidential carrier use data of individual carriers.

Carrier Resources for San Pedro Rate Center Compared with Carrier Need*

Available whole telephone numbers in Carrier Inventories	Number of less than 25% contaminated blocks in Carrier Inventories	Number of greater than 25% contaminated blocks in Carrier Inventories	Number of blocks Needed to meet Customer Demand (6 month average	Number of blocks currently in Rate Center
60,210	17	234	24	0

* December 31, 2003 NRUF Report, aggregated to protect confidential carrier use data of individual carriers.

Carrier Resources for Torrance Rate Center Compared with Carrier Need*

Available whole telephone numbers in Carrier Inventories	Number of less than 25% contaminated blocks in Carrier Inventories	Number of greater than 25% contaminated blocks in Carrier Inventories	Number of blocks Needed to meet Customer Demand (6 month average	Number of blocks currently in Rate Center
73,272	33	225	32	3

* December 31, 2003 NRUF Report, aggregated to protect confidential carrier use data of individual carriers.

This data demonstrates that carriers have telephone numbers in their inventories well in excess of their respective customer demand for these rate centers. Though a rate center may have "0" blocks at a given point in time with the fluctuation of the pool as numbers flow in and out, blocks of excessive numbers in carrier inventories, which carriers need not return to the pool under current FCC rules, can still meet customer demand in these rate centers.

For example, in the San Pedro rate center, which currently has "0" blocks, carriers still retain tens of thousands of unused and available numbers. Cumulativelyin that rate center, carriers hold 235 blocks that are over 25% contaminated (or used) compared with only a cumulative 6-month customer demand of 24 blocks. Thus, carriers should first utilize numbers in their inventories that are greater than 25% contaminated and return all blocks less than 25% contaminated to replenish the number pool.

b) Wireless Carriers' Relationship to Rate Centers Should be Streamlined

Wireless carriers may not need to have a presence in every rate center to effectively serve their customers, and most do not have such a presence. Because wireless carriers do not have the same geographical constraints as wireline carriers, they have flexibility to assign and take telephone numbers from any rate center in a more flexible way. Given that the issue of area code exhaust is closely tied to the rate center model in the current area code configuration, staff should evaluate ways in which wireless carriers can more progressively serve customers from various rate centers. Therefore, staff is directed to examine and propose how wireless carriers can hold inventories in fewer rate centers and still be able to able to serve their customers located in any rate center. While we realize this may raise issues of inter-carrier compensation, this aspect will also be taken into consideration as staff explores this issue.

D. Continued Requirements for Effective Number Conservation

While it has only been a year since the contamination threshold waiver was granted by the FCC, eight months since the FCC's long-delayed implementation of Local Number Portability (LNP) between wireless carriers, and only three months since the FCC's implementation of LNP between wireline and wireless carriers, their positive effects on the 310 number pool are obvious. With its potential for decreasing demand for new telephone numbers, it is essential that the impact of LNP be studied before deciding to split the 310 area code.

There also remains a number of further conservation measures that should be considered before implementing area code relief.

1. Returning all Blocks of Numbers Under 25% Contaminated to the 310 Number Pool

In July 2004, an Assigned Commissioner Ruling (ACR) was published further implementing FCC Order 03-196 granting the waiver to increase the contamination threshold to 25% requiring that carriers return all blocks under 25% used. Current NRUF data indicates that carriers have blocks of numbers in their inventories well in excess of their actual need for numbers. Returning unused numbers from blocks less than 25% contaminated (or used) promotes more efficient use of numbers by returning numbers to the pool where they can be accessible to carriers that have a present need for additional numbers to assign to customers. Carriers that have not yet returned all blocks in their inventories less than 25% used (or contaminated) are directed to do so immediately or demonstrate that they need to keep these blocks to meet customer demand.

Furthermore, carriers must be cognizant of their accountability for numbers in their inventories that they assign to intermediate carriers and their responsibility for enabling intermediate carriers to return numbering resources back to the carrier from which they received them, in a timely and seamless manner. This type of return of numbering resources will make more thousand-blocks eligible to be donated to the number pools. It has come to our attention that several intermediate carriers possess (or maintain) large quantities of numbering resources that have attempted to return them to the carrier from which they received the numbering resources, but could not do so because of insufficient cooperation by the code or block holder. It would be irresponsible to open new NXX codes or to split the 310 area code when such blocks of numbers may be available to be returned to the number pool.

2. Setting Carrier Inventory Guidelines

As noted above, we will establish specific criteria for carrier six-month inventories. Considering the history of how carriers over-forecast their needs for six-month inventories in comparison to the telephone numbers that are actually assigned to customers, it is clear that setting inventory guidelines is imperative to the efficient management of telephone numbers. The Commission staff's report to the FCC in June 2004 on the impact of the contamination waiver on the 310 area code clearly demonstrates how important inventory guidelines are in extending the life of area codes. In particular, even under the conservative staff approach, the life of the 310 area code would be predicted to last an additional 21 months or until the end of 2006. Having clear inventory guidelines that are based on actual, historical use will promote greater efficiency of number management and allow optimal access to number resources for all carriers.

3. Conservation Measures should also be Applied to Paging Carriers

By FCC rules, paging carriers are not currently a part of the pooling distribution system for telephone numbers and therefore any excess paging carrier inventory is unable to be returned to the number pool and sits unusable in paging carrier inventories.23 Current NRUF data indicates that paging carriers have 750,000 unused and available 310 telephone numbers in their inventories. Given that paging carriers only use approximately 17% of the inventory they take and have no means of relinquishing unused blocks of numbers this demonstrates an ineffective use of numbering resources. With the pervasiveness of other wireless technology that is able to take telephone numbers from the number pool in blocks of one-thousand, other means must be explored to incorporate paging carriers into the number pooling system so that hundreds of thousands of telephone numbers do not remain stranded in paging carrier inventories. Unused telephone numbers in paging carrier inventories alone could likely extend the life of the 310 area code by several years. Staff should explore ways of working with the FCC to return unused pager numbers to the 310 pool.

4. Accessing Stranded Telephone Numbers

As discussed above, carriers have hundreds of thousands of telephone numbers that remain stranded in their inventories because blocks are over 25% contaminated thus making the blocks of numbers ineligible for return to the number pool. Nearly 5,500 one-thousand blocks across all carriers inventories (excluding paging carriers) are over 25% contaminated. This Commission should explore methods by which stranded numbers can be accessed, including:

_ sharing numbers through intermediate number distribution for which carriers already have a process;

_ Working with the FCC to expand Local Number Portability to allow carriers to receive numbers in even smaller "blocks" from an area code number pool, such as individual telephone number pooling (ITN) and unassigned number porting (UNP);

_ Working with the FCC to further increase the contamination threshold to allow greater numbers of blocks to be returned to the pool.

Accordingly, we direct staff to begin exploring ways in which further conservation measures may be pursued to access stranded numbers.

E. The Methodology of Forecasting Exhaust Should be Updated to Reflect the How Numbers are Actually Distributed in the 310

NANPA currently projects exhaust in the 310 area code based upon the traditional lottery system, which was the process used to give out numbers to carriers before the implementation of number pooling.²⁴ Now that all California area codes, including 310, use pooling to give out numbers, allowing numbers to be returned from carriers inventories and stored in a number pool, a new methodology to forecast area code exhaust should be applied to reflect the distribution system now in use throughout California.²⁵ Given that the 310 area code has had a positive inflow or increase of telephone numbers into its pool for the past year, and only one net NXX code has been opened since wireless pooling began, therefore it is not reasonable to take Commission action on an area code split based upon this outdated method of exhaust projection. Accordingly, we direct Commission staff to develop a more relevant methodology to determine are code exhaust in California based on the attributes of the number pooling process that the Commission can use and can provide to the FCC.

²² Federal Communications Commission (FCC) Order 03-196, adopted August 5, 2003 and released August 11, 2003. FCC Order 03-196 grants California a limited waiver to raise the authorized contamination threshold on an interim basis from 10% to 25% in the 310 and 909 area codes to define the type of thousand-number blocks that carriers are required to return and/or donate to the number pools.