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Neustar poised to lose major contract

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Federal Communications Commission staff has recommended that a $450 million contract Sterling-based company Neustar has held exclusively for 18 years be awarded to rival Ericsson.

The loss would be a major blow to Neustar because the contract accounts for nearly half of the company’s revenue. The recipient would be the government’s exclusive provider of “number portability,” the technology that enables cell phone users to keep their phone numbers in the event that they switch carriers or get a new phone.

On Wednesday, the Wireline Competition Bureau — the unit of the FCC that protects consumers’ access to affordable broadband services — circulated a draft order regarding the contract. The draft order will go before the full commission and, if adopted, the FCC would start contract negotiations with Telcordia, a subsidiary of Swedish telecom giant Ericsson that provides number portability services in India. Telcordia and Neustar have engaged in a lengthy public battle over the work, each lodging complaints about the other’s tactics to try to secure the contract.

The contract, slated to expire June 30, 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. The company has held the contract since 1997.

In a statement, Neustar said the decision “could have widespread and long-lasting negative consequences for consumers, competition, and national security.”

The company said the FCC staff is underestimating the breadth of Neustar’s responsibilities. Neustar has the only authoritative database for the call completion of 11 billion calls and text messages each day, and plays a critical role in disaster recovery and accurate 911 location, the company said in its statement. The transition to another provider could be costly and risky, and could disrupt service for consumers.

“The recommendation misunderstands the operating system and would harm public safety, law enforcement, fundamentally burden small carriers, and disrupt service for 12 million consumers – all in pursuit of theoretical savings for a few carriers, which Neustar believes will be dwarfed by the costs and risks of transition,” the company said.