Neustar view with Ericsson subsidiary, each accusing the other of gaining unfair advantage

February 16

For the first time in Neustar’s 18-year history, the Sterling-based company is at risk of losing a lucrative contract that accounts for nearly half of its business — a contract that allows you to keep your number when you buy a new phone or switch carriers.

Neustar has held the exclusive contract to provide the underlying technology — known as “number portability” — in the United States since 1997. Now, for the first time, the Virginia firm is facing competition from another company vying to win the $450 million contract.

Federal regulators have yet to award the contract, but Neustar and rival bidder Telcordia — a subsidiary of Swedish telecom giant Ericsson that provides number portability in India — are pulling out all stops to win, each accusing the other of gaining an unfair advantage in the bidding process.

Neustar is insinuating that a key deadline was extended for bids so Telcordia could put in an offer. To back this claim, Neustar’s lawyers have unearthed a Facebook status update from a Telcordia employee posted April 5, the day when bids were supposed to be in. The alleged employee complained about working nonstop in an ostensible attempt to meet an impending deadline, which was ultimately extended.

“I’m exhausted and still have to write the Executive Summary for this 85 page document,” the Facebook post says, according to a Feb. 12 document Neustar lawyers filed with the Federal Communications Commission. “Coffee is failing. Been here 66 straight hours now.”

Number portability is regulated by the FCC, which tasks two groups to help run the bidding process: North American Portability Management, an industry group made up of wireless and cable companies that makes recommendations to a federal advisory committee called the North American Numbering Council. The council advises the FCC on number-portability issues. The council oversees the industry group’s handling of the procurement.

On April 17, the industry group extended the original April 5 deadline to April 22. The reason for the extension was not publicly disclosed.

The contract in question, slated to expire in June 2015, is a critical part of Neustar’s business, and losing it would severely cut into its revenue. In 2013, the contract was valued at $450 million, nearly half of the company’s 2013 revenue of $902 million. Neustar, which has about 1,600 employees globally, including nearly 800 in the Washington area, was founded in 1996, primarily to provide number-portability services.

Telcordia, meanwhile, is accusing Neustar of using questionable tactics in its effort to hold onto the contract.

Telcordia’s claims are centered on a second bid that Neustar submitted in October, five weeks after the September deadline for final offers. On Oct. 21, Neustar submitted a revised, “more favorable” bid and asked the industry group to seek revised offers from other bidders as well. On Jan. 24, the FCC returned Neustar’s revised bid unopened and told the company it would not be considering the revision.

Telcordia alleges that Neustar may have received insider information that allowed the company to change its bid to be more competitive.

In a Feb. 6 letter to the FCC, Telcordia attorney John Nakahata said that Neustar “obtained confidential, non-public information about its competitive standing and price relative to other bidders.” Doing so would violate a 1996 federal court ruling that says that once bidders have submitted their final bid, the government cannot engage in discussion with the bidder unless it is to seek clarification.

The concerns have prompted the FCC to look into Telcordia’s claims. The head of the Wireline Competition Bureau — the unit of the FCC that protects consumers’ access to affordable broadband services — sent a letter to the council Feb. 11, asking the industry group and the council to “review and evaluate all claims of potential unfairness.”

“The claims by Ericsson are mudslinging,” Neustar spokesman John Buckley said.

In the latest twist, Neustar on Feb. 12 filed a petition with the FCC, asking the agency to intervene in the way the winner is chosen and to reopen bidding, even though it has been closed since September. Neustar says that the government’s process for picking the contractor is inadequate because, unlike previous times the FCC considered renewing the contract, smaller telecom providers and consumers were not given a chance to weigh in on how the contract would affect them.

Telcordia isn’t buying it.

“Neustar’s petition is an Olympian effort to change the rules and get a do-over after flubbing its last run,” Nakahata said. “The commission should recognize this petition for what it is — a meritless, last-ditch desperation ploy by a company that had an opportunity for input into every stage of the process.”

The FCC was originally expected to have all the information it needed to pick a vendor by Jan. 20. That has been delayed and a new date has not been determined.

Catherine Ho covers law and lobbying for Capital Business, which she joined in 2011. She was previously a reporter at the Daily Journal in Los Angeles, covering LA civil courts and labor and employment law.
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