Each of about 2 billion phone calls made each day in the United States—wireline, wireless, voice over Internet protocol, regardless of carrier—touch a company that until recently flew mostly below the radar.
NeuStar Inc. is the administrator of authoritative directories of U.S. phone numbers and the firm that tracks number porting and enables carriers to route their calls properly. Every wireless and wireline number that is assigned ultimately comes from NeuStar, which keeps constant track of multiple registries that are essential to the U.S. telecom industry.
“We are the number guys,” said Mark Smith, vice president of wireless for NeuStar. He noted that the telecom industry has gotten a great deal more complicated from the days when communications revolved around voice and the Ma Bell monopoly.
“Today, there are thousands of networks and hundreds of services,” said Smith. “Interoperability amongst these networks and amongst all of these services becomes a significant challenge.”
Making sure that carriers have the information they need to route a customer’s call from one network to any other U.S. network is NeuStar’s job, along with doling out 1,000-number blocks of telephone numbers and tracking how long it will take before area codes will be used up and need to be split or overlaid in order to bring in unused contact numbers.
“We are constantly, over the course of the day, updating this directory, so that as there are changes—grooming a network, upgrading a network or porting a number, or putting a brand new number in service—all that needs to be reflected in the directory,” said Smith.
The company also administers the registries of the .biz, .kids and.tw (Taiwan), along with common short codes for use by all wireless carriers.
In the late 1990s, NeuStar was a business unit of Lockheed Martin Corp., which eventually became an independent company in its own right. The firm was chosen to administer trials of numbering pooling plans that were supposed to help telephone numbers be assigned and used more efficiently and has evolved into a major communications clearinghouse.
NeuStar made an initial public offering almost exactly a year ago, and Smith says the company’s rapid growth since then reflects the growth in the telecommunications industry. NeuStar reported earnings of $242 million last year, and according to Smith, expects a growth rate of about 25 percent this year. The company had revenue of $76.2 million in the first quarter. Because the company needs to be seen as a neutral player in the telecom industry, communications companies are forbidden by law from owning more than 5 percent of the company.
With the telecom industry increasingly moving toward an IP-based infrastructure, a whole new set of registries is set to be crucial: telephone numbers will need to be translated into Internet addresses and as Smith put it, “Somebody’s got to arbitrate that.” With 3G networks and data services that need to be properly delivered, Smith said, an IP world gives each piece of information an identity—and users’ identities need to be both protected and able to be recognized.
Despite NeuStar’s deep involvement in domestic phone numbers, the company thus far has escaped the attention of Congress and hearings on the federal government’s domestic eavesdropping program. Smith explained that this is due to the fact that although NeuStar can tell who owns a particular number and which carrier serves that number, the company does not track and trace calls—that is left to the carriers.
In addition, he said, a small portion of NeuStar’s business actually involves helping telecom companies respond to criminal and civil subpoenas, and the personnel that do so are “lawyers and ex-FBI guys” who have experience with what’s legal and what isn’t—so the company has that expertise to draw on.
Data services offer NeuStar new opportunities. Smith said that he could see the company helping to educate companies on how to utilize common short codes to build on their brands—such as Starbucks being able to offer a short code that would allow a customer in one of its stores to get a coupon for coffee.
“Common short codes and certain applications that consumers would want … require a neutral and trusted entity,” said Smith.
CreditSuisse analyst Philip Winslow noted in a research report in May that NeuStar is helping maintain and deliver ESPN mobile content to a group of Asia-Pacific carriers through a Singapore subsidiary. Winslow said that wireless content partnerships represented “an incremental market opportunity for NeuStar to serve as a `hub’ between network service providers and mobile content providers.”
Competitors in that space include VeriSign and Motricity, Winslow noted.
“Given that NeuStar serves as a centralized clearinghouse for the exchange of number portability data, as well as cross-carrier information (e.g., customer account record exchange), to service providers in North America, we believe that NeuStar is well positioned to leverage these relationships to facilitate additional services, such as content delivery,” Winslow concluded.
