Open Market-- Toll Free Agency (Part 1 or 2)

There’s a lot of confusion over toll free number transfers, property rights, and existence of an “open market” for the exchange of toll-free numbers.  The view expressed here comes out of our years of consulting, extensive commenting on FCC 95-155, and the acquisition of countless toll-free numbers and Internet domains, but is not to be interpreted as legal advice.

With the opening of our new Toll Free Market, this is the perfect time to survey where we are today and the legal intent that we believe is behind the “market” for toll free numbers. The FCC plays a vital role and is not feared by those of us who appreciate their role.

Just Right, Property Rights

Jay Carpenter advanced an economic property rights theory for toll-free numbers based a paper entitled, "Property Rights and Economic Theory" (Furubotn and Pejovich, 1972), that suggests there are four key elements in “ownership” of any asset:

  • The right to use it
  • The right to change its form and substance
  • The right to appropriate the returns from the “asset”
  • The right to transfer all rights in the “asset”

We believe there is little debate that toll free numbers qualify for the first three aspects of “ownership;” the right of use, the right to change its form and substance, and the right to appropriate returns from the “asset.” Clearly, we need to better secure our right of use through registration of toll free numbers.

Yet, as subscribers, we already enjoy the right to fully deploy our numbers in any way we wish and benefit from the income derived. The first three points are a done deal. It’s point four -- the right to transfer all rights in the “asset” -- that needs to be demystified and will largely be the subject of this paper and the next (Part 2: Open Market).

By “ownership,” we’re referring to control over an asset in the same sense as you have control over an Internet Domain.  Unlike real estate or physical property, domains have no title or taxable asset value, yet can be transferred freely. When you “buy” a domain you are buying the right of control, but only so long as you keep your registry fees current.

If you fail to pay the renewals, you’ll quickly discover that you don’t “own” anything, really. Within 30-60 days of non-payment, you’ve irretrievably lose all you ever had; the mere control over a unique record in a database for the year. There’s no foreclosure, no recovery, and no legal recourse.

In our view, the same control is available over toll free numbers today, as is the right to sell developed, toll-free numbers assets. The only restraint is in selling naked toll-free numbers; those with no added value.

Transfers and Spare Pool Interference

The confusion surrounding the transfer of toll free numbers goes back decades, but comes down to who has authority at the time. When a number is in use, the subscriber enjoys the right of control and use and their carriers and/or resporg are acting as agents.

Yet, when toll free numbers are disconnected for non-payment or abandoned, the FCC gains authority and -- absent reactivation by the rightful subscriber -- requires that they go spare and be reassigned according to its mandate of,  “first come, first serve” reallocation. In effect, the FCC requires that carriers act as public trustees.

This mandate requires that carriers not unilaterally reassign or retain toll free numbers for their own use when the rights of the disconnected subscriber have yet to be fully extinguished. Nor can bad actors legally intercept numbers before they go spare by seizing them through the Help Desk.

Numbers destine for the spare pool are like wards of the state; they are expected to go spare and then to a new home. The 95-155 edict that prohibits “brokering” for a fee is just another way of preventing spare pool interference.

In all cases, these bad acts interfere with the prime objective of the FCC -- fair and equitable allocation of our public addressing -- by depriving the public of a fair shot at toll free numbers that would, otherwise, go spare. In effect, absent reactivation by the rightful subscriber, during the days leading up to -- and the moments they become spare -- abandoned numbers are stictly a public resource.

Indeed,  it is the act of dropping them spare that reassigns toll free number rights to a new subscriber and, generally, bars the former subscriber from any right of return of the number. With that fact in mind, carriers are often compelled into “negotiations” to retrieve phone numbers that were inadvertently disconnected, aged, and spared, as the numbers cannot legally be taken back. It’s too late, and everyone in the trade understands that properly spared toll free numbers are irretrievable.

It is the act of dropping them spare that reassigns toll free number rights to a new subscriber

When it comes to spare numbers, it’s as though the entire weight of the U.S. Government has taken authority over these numbers and, in effect, it has.

Yet, no such government interference exists for working numbers. It is only in our minds that we have extended the FCC mandate to all numbers under any circumstance. This projection is simply not valid, yet has had a chilling effect on what would otherwise be active market for developed assets, i.e. toll free numbers with added value.

It is only in our minds that we have extended the FCC mandate to all numbers under any circumstance.

Yet, this “first come, first serve” mandate does not bar subscribers from freely transferring toll free numbers among themselves. If it did, then the largest carriers would not engage in “corp swaps” on a daily basis, as it’s referred to MCI/Verizon terminology, or provide pre-printed forms to facilitate, “Transfer of Service,” as AT&T does.

If the mandate extended to active toll-free numbers, advertisers could not transfer their numbers to call centers to enjoy advanced features and bulk phone rates, then retrieve them into their own name once their campaign has run its course. The free transfer of toll-free numbers is legal today.

Nor does the FCC mandate bar subscribers from accepting compensation to relinquish their rights to a toll free number. The August 31, 2006 FCC decision regarding the seizure of 1-800-Red-Cross reads, “In making its decision, the Commission also relied on the representation of the American Red Cross that it would reimburse the current holder of the number for the reasonable costs of relinquishing the number” (see footnote #5).

“Reasonable costs” was an amount necessary for the effected subscriber to drop its counter suit and permit the FCC to engage in this indefensible act of eminent domain over these toll-free numbers, 800-Red-Cross and 888-Red-Cross, under the cover of the 9/11 attack.

While the settlement amount is confidential, the fact is that FCC acknowledged and agreed that subscriber was to be compensated --  indeed “relied” on this fact in making its decision. We’re not talking peanuts here, like the $35 domain renewal fee allowed in cybersquatting suit. This particular subscriber was deprived of on-going licensing revenues, so “the reasonable costs” was surely tens of thousands -- if not hundreds of thousands -- in compensation.

Finally, the mandate does not contravene agency, which allows consultants like Vanity International to be paid to act on behalf of others to research, negotiate and acquire toll free numbers and Internet domains-- just as though the clients were acting themselves. Agency is what allows resellers, call centers, carriers, and “RepsOrgs,“ to take action on behalf of their clients. We're called "Responsible organizations," but responsible to whom? The subscriber, of course.

In our view, their is a clear distinction between agency and brokering that depends on whom the acting party is working for. Those acquiring numbers to sell on ebay are serving self, in clear violation of the anti-brokering rules, as these numbers would have otherwise gone into the spare pool.

In contrast,  FCC has no authority over those acquiring numbers for others and getting paid for professional services -- as does Vanity International. If they did, we’d have to shut down the major carriers for “brokering!” Obviously,  carriers are acting for a fee --  just try to get them to act without committing to some kind of fees! Yet, the reason they are not "brokering," is because of their agency relationship to the client.

That's not to say that all agents are acting is good faith. It's well know that many Help Desk seizures are done on behalf of end users subscribers -- just not the rightful subscriber. When an agent hijacks a number, it's irrelevant that they are "getting numbers for end users," if they are breaking the law. In every hijacking, someone has to fraudulently attest they are the rightful subscriber when they have no authority to do so.

So, there are two worlds out there; one in which toll free numbers are a public resource. The other where subscribers have the right of control over their numbers; where transfers of working toll free numbers are necessary, frequent, convenient, and perfectly legal since portability gave subscribers the right to control their toll free numbers in 1993. So what’s the difference?

Why is illegal to sell toll free numbers but it’s okay to, “reimburse the current holder of the number for the reasonable costs of relinquishing the number?” We believe the answer is simple, but subtle. The FCC is charged with protecting a public resource; and those numbers in, and destined for, the spare pool are clearly a public resource.

Whenever anyone unilaterally interferes with numbers that would otherwise be available through the spare pool, it can be inferred that they are interfering with our public addressing resource. Yet, when a subscriber is reimbursed for releasing a number that was already allocated the FCC’s role is moot and, in effect, virtually all authority rests with the subscriber. 

It’s a subtle difference, but use this test; if the spare pool is truly unaffected, then an acquisition is likely to fall outside the scope of the FCC mandate (continued....).


Vanity International is a San Diego-based consultancy that specializes in toll free and Internet domain branding and acquisition for almost 20 years. Vanity International is taking requests for 855 numbers, but for FREE; with payment made upon success!