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8/27/2003
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Pending FCC Rule Expected To Have Major Impact On Telecom Market

A rule that would allow customers to transfer numbers from wireline to wireless should result in more consolidation of services, Gartner says.

The Federal Communications Commission will require telephone companies to let customers transfer numbers from wireline to wireless services, pressuring companies further into consolidating more products into one offering to consumers and businesses, a market research firm said Wednesday.

The FCC will adopt a wireline-to-wireless local number portability mandate next year, Gartner predicted, having a major impact on the U.S. telecommunications market. The new rule will spark changes in marketing strategies, customer-calling patterns, product offerings and plans, and pricing and interconnection agreements between telephone companies, the research firm said.

For example, the number of customers dumping wireline for wireless, which has been "pretty low" to date, will increase nearly 10% once the FCC rule takes effect, Gartner analyst Ron Cowles said. "The wheels will start to turn" with the FCC action, Cowles said. "Carriers are going to have to start seeing the future of bundling. They're going to have to restructure themselves to fit this new world."

Some of those changes have already begun. Sprint announced Wednesday a new product bundle dubbed "Complete Sense" that combines local, long-distance, and wireless services. The offering follows similar bundles by larger rivals AT&T and MCI.

However, Sprint has an advantage over competitors because it owns its wireless business Sprint PCS, but it still has to rent local-telephone networks from regional Bells. Verizon Communications also owns its wireless and wireline services.

Cowles expects all the major telephone companies to eventually offer wireless, wireline, and data services, including voice over Internet protocol, which enables companies to use the Internet for voice communications. This consolidation will occur through acquisition, partnering, or internal development.

The FCC wireline-to-wireless number portability rule is a "facilitator for this market convergence," Cowles said. "There's a lot that still has to happen, but all of this is helping this (consolidation) along."

In time, telephone companies are expected to use full fiber-optic networks, taking digital communications directly to homes and businesses. For consumers, this will lead to a "digital household," where linked computer systems run appliances, entertainment centers, security systems, and devices not yet imagined.

"Let your imagination run, because all kinds of things will transpire out of this," Cowles said.

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