Telcordia Denies Need for Further LNPA Comment Period, as Neustar LNPA Revenue Increases
Neustar’s first quarter revenue increased 6 percent year over year from 2013, for a quarter total of nearly $230 million, the company said Wednesday. A substantial portion of that comes from its income as Local Number Portability Administrator, a position it’s desperately trying to hold onto in the face of a bidding process it has long claimed lacks fairness and transparency (CD April 26 p9). The North American Numbering Council had a closed meeting March 26 on selection of the next LNPA.
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NANC’s report to the FCC is “just another step in what has become a long and delay-filled process,” Neustar CEO Lisa Hook said in a Wednesday investor call. The FCC has a “responsibility to the American people” to assure the vendor selection process is fair, she said. Hook cited a letter from Chairman Tom Wheeler to Rep. Frank Wolfe, R-Va., indicating that as of April 11, the agency had not received a recommendation from NANC. Neustar is “confident that an objective appraisal of our qualifications” should place Neustar in a “strong position for renewal of the contact,” Hook said.
Neustar has asked the full commission to take responsibility for LNPA selection, rather than leave it up to the Wireline Bureau (CD April 16 p10). That request included putting up the North American Numbering Council recommendation for further public comment. Ericsson subsidiary Telcordia, which has also shown interest in the LNPA position, called the proposal “just one last-ditch effort at delay."
"Neustar knows that notice and comment now would add at least six months to the LNPA selection process, and keep the current contract alive through an extension, netting Neustar approximately $250 million windfall of additional revenue, a cost to the industry borne by the carriers and ultimately paid for by consumers,” Telcordia said in a letter to the commission posted Wednesday. “Notice and comment is not required now as a matter of law. This is not a rulemaking process. … In an informal adjudication such as this one, the Commission can proceed to a decision on the basis of the record it has compiled, including a report from the NANC with respect to its evaluation of competing proposals."
"Ericsson once again seems determined to conclude the LNPA vendor selection process with stakeholders muzzled and a minimum of transparency and understanding by those affected of the issues at stake,” a Neustar spokeswoman said in response to Telcordia’s letter.
Neustar stock has fallen from a year high of over $56 a share to its Wednesday close of just over $28. That’s “as people have gotten more concerned about the renewal,” a California hedge fund principal told us. The stock could fall a lot lower if Neustar loses its LNPA contract, he said. “I can see why Neustar is spending a lot of time and money fighting this.”
Of the $230 million revenue in Q1, slightly more than half came from Neustar’s LNPA revenue of $118.8 million. That’s an increase of 6 percent over the past year, driven by “an increase in the fixed fee established under our contracts to provide local number portability services,” the company said in a news release.
At the same time, Neustar is diversifying. It has a future growth strategy built on becoming an information services and analytics company, Hook said. “The NPAC business is becoming a smaller component of our overall revenue,” she said. Its information services are growing far faster than its NPAC revenue, she said. “We are now an information services company,” said Paul Lalljie, Neustar chief financial officer. Given the growth it’s seeing today, Neustar believes its non-NPAC business can grow at double-digit rates, he said.
Another round of bidding needs to be held to address what a transition to a new LNPA would look like, how much it would cost, and what the risk would be, Hook told investors. In contemplating a different LNPA, “we are concerned that they're not apples to apples, but perhaps apples to crabapples,” Hook said. “The transition needs to be priced out and understood with respect to each carrier in the industry.” However, Neustar’s business doesn’t depend upon data it gets from the NPAC, Hook said. “We're seeing accelerating growth” in non-NPAC business, Hook said. Company officials pointed to a marketing services growth of 21 percent, and a security services growth of 11 percent.
"There are a lot of rumors in the market” about what was in the NANC report, Hook said. “It has not been made public.” The FCC is expected to approve the LNPA vendor decision by May 6.