On Sept. 28, 2017, the Federal Communications Commission released a Notice of Proposed Rulemaking (NPRM) that seeks to permit the assignment of toll free numbers via alternative market-based approaches, including the auctioning of numbers. Furthermore, consistent with such a market-based approach, the Commission proposed the development of a secondary market allowing subscribers to reassign their toll free numbers to other subscribers for a negotiated fee. Finally, the Commission adopted proposals to modernize toll free number administration, including the revision or elimination of the current prohibitions on brokering, warehousing, and hoarding of toll free numbers.

Section 251(e)(1) of the Communications Act directs the FCC to make numbers available on an equitable basis. Currently the FCC’s rules permit toll free numbers to be acquired on a first-come, first-served basis from a pool of available numbers. In an effort to ensure the efficient and equitable distribution of toll free numbers, the FCC’s rules prohibit the brokering, hoarding, and warehousing of such numbers by Responsible Organizations (RespOrgs) – entities responsible for accessing the toll free Service Management System (SMS) to distribute toll free numbers to subscribers.

Distribution of Toll free Numbers

Through the NPRM, the FCC proposes the expansion toll free number assignment methodologies beyond assignment on a first-come, first-served basis to include other mechanisms such as auctions. The Commission’s proposal to adopt auctions as a toll free number distribution mechanism is a sharp break from prior policy – which deemed auctions as an inequitable means of distributing such numbers. However, now the Commission is proposing an auction methodology in hopes of creating greater efficiency and fairness in the distribution of toll free numbers.

In particular, the Commission proposes the adoption of a single round auction for the assignment of approximately 17,000 numbers in the newly created  833 number 833 number(i.e., toll free numbers starting with 833). Each 833 number would be distributed to the highest bidder who would pay the second-highest bid for the number. Bids would not be made public, and bidders would be required to bid on each  833 number individually. Moreover, subscribers seeking  833 numbers would be required to bid through their respective RespOrg – a requirement that the FCC deems consistent with the RespOrgs’s role as “market makers” for toll free numbers.

Creation of Secondary Toll Free Number Markets

Consistent with the market-based approach to toll free number distribution, the FCC also proposes the creation of a secondary toll free number marketplace in which numbers could be reassigned between subscribers for a negotiated fee. This, comes despite a longstanding FCC and legal precedent that established telephone numbers were a public resource. This means that the numbers could not be privately owned and sold. The Commission nevertheless proposes to permit the sale of toll free numbers between subscribers as a more equitable and efficient distribution method than returning unused numbers to a pool for reassignment on a first-come, first-served basis to other subscribers. The FCC points to the existence of an online black market for toll free numbers as evidence that market realities supported the adoption of a lawful, secondary marketplace. The reassignment of toll free numbers through a lawful marketplace would minimize the risks to subscribers in obtaining needed numbers through the black market.

Toll Free Number Administration

In an effort to move towards market regulation of toll free numbering resources, the FCC proposes eliminating the prohibitions on brokering, warehousing, and hoarding of toll free numbers by RespOrgs. The Commission questions whether such prohibitions were effective in minimizing number exhaust and ensuring equitable number distribution. As such, the FCC seeks comment on whether market forces would be more effective in achieving the mandates of Section 251(e)(1).

Furthermore, the FCC seeks comment on means to ensure that the allocation of toll free numbers remains in the public interest. The Commission seeks comment on the feasibility of setting aside numbers for public purposes such as health, safety, and education. The FCC also questions whether it should codify its authority to reassign a toll free number to another subscriber when there was a strong public interest in doing so (e.g., the reassignment of 800-RED-CROSS from a for-profit corporation to the American Red Cross to support Hurricane Katrina relief efforts).

Finally, the Commission proposes overhauling the current toll free SMS. Under the current system, the Toll Free Numbering Administrator (TFNA), Somos, Inc., provides RespOrgs with access to the SMS pursuant to the SMS Tariff, which sets forth the rates, regulations, and fees applicable to SMS services. Somos is also responsible for defining SMS features and functions. Specifically, the FCC asks about the need to adopt alternative toll free administrative measures than the SMS Tariff, and sought proposals on measures to increase Somos’s financial transparency.

At bottom, the FCC’s proposed changes to the administration and distribution of toll free numbers is exemplary of the agency’s current push for increased market regulation of the telecommunications industry. As such, the costs and benefits of the current toll free numbering system could be dramatically shifted between stakeholders as the result of the adoption of a new regulatory model.

Comments in the toll free numbering proceeding are due on or before Nov. 13, 2017, and reply comments are due on or before Dec. 12, 2017. Comments can be filed in WC Docket No. 17-192 and CC Docket No. 95-155.