By Drew FitzGerald
The Federal Communications Commission delivered a setback to
Neustar Inc., recommending that a crucial telecommunications
database contract the company has held for about two decades and
accounts for about half of its revenue be transferred to a
rival.
At issue is the task of keeping track of every phone number in
use so that subscribers can take them with them when they switch
carriers. The number-porting service is key to the smooth
initiation and cancellation of phone service contracts and has
become a linchpin for law enforcement agencies seeking to set up
wiretaps or conduct surveillance.
On Wednesday, the FCC's wireline competition bureau recommended
that the contract be awarded to Telcordia Technologies Inc., a
subsidiary of Swedish telecom gear maker Ericsson AB. The full
commission still needs to approve the draft order.
The FCC launched a new process for picking database
administrators in 2011. An industry advisory council started
reviewing bids in 2013 and last year recommended the commission
back Telcordia for the job.
Neustar's number-porting activities last year brought in $475
million--or about half of its total revenue. The company fought an
aggressive lobbying battle to hang on to the FCC contract but also
has been working to diversify its lines of business. Neustar, which
is based in Sterling, Va., also sells marketing and Web services,
authenticating users to access digital content, for example.
Its shares were off 11% at $22.25 in 4 p.m. trading on Wednesday
in New York. At the beginning of last year, the stock was trading
at nearly $50 a share.
In a statement, Neustar said the commission underestimated the
amount of responsibility a new database operator would need to take
on beyond handling number transfers, including disaster recovery
and 911 location services. The company also said the selection
process was flawed and lacked an independent process for judging
the cost of setting up a new system.
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com
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