Contract to run “telephone number registry” is out for bid.
You may know Neustar as the registry for the .biz domain name, and the registry selected by many applicants for new top level domain names.
But that’s not its bread and butter. Its business was built off of a single contract to administer the North American Numbering Plan. The simplest way to describe this is a registry for phone numbers.
Much like a domain name registry, this system enables the routing of phone calls. All telecom companies in North America that offer public services have to tap into the system to route customer calls.
The margins on this contract are very high.
Sounds a lot like a domain registry, doesn’t it? More specifically, the whole thing – the contract and what it’s for – sounds an awful lot like Verisign’s contract to run .com.
In this article at TheStreet, you could just swap the word Verisign for Neustar, Domain for Phone, and Registrar for Telecom Company and it would read like an article about Verisign renewing its contract for .com.
Consider the backlash in the industry over Neustar’s “monopoly”:
One unidentified investor in large telecoms is so incensed by Neustar’s margins that it hired Latham & Watkins attorney Matthew Brill to lobby for lower prices. In a letter to North American Portability Management, which represents the telecoms, Brill argued that the contract should have margins that “conform to more appropriate expectations for this type of quasi-government contract.”
In response to the letter, a Neustar spokeswoman said: “This letter from an unnamed source outside of the process does not take into account the complexity of managing the critical infrastructure that the communications industry and consumers rely on…”
The parallels are striking.
We all remember what happened to Verisign at its last renewal. The government said the company couldn’t continue with its 7% mostly annual price hikes.
Now Neustar’s contract is up for renewal. But unlike with Verisign’s renewal last year, the U.S. government actually put the telecom contract out for bid this time.
Had the .com contract gone out for bid, I suspect the wholesale cost for a domain would have plummeted from about $8 to just $2-$3. This is the sort of pressure Neustar is facing. It may be part of the reason a decision on the contract was pushed back…much like what happened in Verisign’s case before it settled on less favorable terms than it wanted.
Although Neustar is more diversified than Verisign, the months ahead will certainly be nerve racking for company executives.