Portability rule creates static in cellular industry.

Come late October, Celluphone Inc. usually braces for the busy but profitable holiday shopping season.

Not this year. Commerce-based Celluphone sells Verizon Wireless and AT&T Wireless Services Inc. phones to independent retail shops in California, Texas and Illinois--and it's dreading an anticipated upswing in volume.

The reason is the Federal Communications Commission's wireless local number portability regulation, set to take effect Nov. 24, that will require wireless carriers to honor customer requests to retain their cell phone numbers when switching carriers.

One of the requirements of the new regulation is that the carriers honor any request to transfer service within two and a half hours. The carriers are still developing an automated system to deal with what could be hundreds of thousands of such requests. They have made steep investments but have yet to disclose details about how the requests will be processed.

In the absence of any system, transfers will be left to workers at call centers like Celluphone's.

And that has left the company in a bind.

Its business relies almost entirely on providing customer service support to retailers, mostly small, independent businesses that offer cellular phones and service as a sideline.

The retailers use Celluphone to run credit checks and activate accounts when they secure a customer. A heavy load of time-consuming number change requests could bog down the normal flow of activations and confuse the retail shop workers selling the services, further swamping Celluphone's call center.

"The staff is new, the procedures are new and the policy is new. We are concerned this will spill over and hurt our Christmas sales," said Mike Mohr, the company's chief executive. "The pent up demand will overwhelm these new systems the carriers have in place."

Cell phone sales are highest during the fourth quarter, and wireless carriers typically lose 30 percent of their customers when their service contract ends. Market research firm iGillottResearch Inc. projects that the new regulation will only increase that number, at a cost of $20 billion to the industry.

Mohr has responded to that prospect by shifting portions of Celluphone's call center staff to deal exclusively with portability issues and sending its salespeople out to retail customers in recent weeks to increase awareness of the regulation. Since cell phone users must specifically request the portability option, part of the pitch is instructing store owners to tell customers to wait until next year to request number portability.

"Our message is to wait until after the holiday season when the problems have been ironed out," Mohr said.

Mohr's father, Mitch, started Celluphone in 1983 as a cellular distributor for PacTel Mobile Access, which later became part of Verizon Wireless.

It grew with the popularity of cellular services and now has 3,500 retail customers nationwide, typically neighborhood stores such as video shops, hair salons and small independent shops. Mohr would not disclose revenues.

Celluphone's service-oriented moves mirror those made by carriers such as Verizon, which opened a 400-employee call center in Tennessee earlier this year to deal with the anticipated demand for number portability.

The carrier successfully lobbied the FCC last summer to delay WLNP's implementation by one year in order to prepare its customer service staff to deal with the change. It also felt more time was needed to iron out the process because certain competitors were dragging their feet.

"Our big concern was, if we port our customers to you, will you port to us or will you make it difficult for your customers to come to Verizon Wireless?" said Michael Bagley, director of public policy for the Western region at Verizon Wireless.

A customer's new wireless service carrier must contact both the old carrier and a national number database, managed by Virginia-based NeuStar Inc., an FCC-designated clearinghouse for landline carriers exchanging numbers since 1997. NeuStar's database acts as a router for all calls going to the new number and it has an automated system that almost instantly makes changes, said telecom carriers. It will also handle WLNP starting next month.

But getting the customer's current carrier to quickly release the number to the new carrier is the sticking point. Before releasing the number, the current carder must dive into a subscriber's billing records and make sure no fees are owed.

"We still have to work out the technical aspect. It's just a matter of training, technical issues, customer care and making sure our distributors know what to do," said Bagley.

Most landline telecom carriers take between one and two weeks to process number requests. Celluphone believes wireless carders will experience similar delays and sees consumers getting frustrated with the experience.

"There's likely to be widespread customer frustration over the process and it will end up being a customer service hassle," said Mohr.

Numbers Game

Federal Communications Commission's Wireless Local Number Portability regulation.

* Allows consumers to retain phone number when switching from one wireless carrier to another, or from a landline to a wireless carrier.

* Originally proposed by the FCC in 1996, it becomes effective on Nov. 24.

* Largest 100 cities in the U.S. affected immediately, carriers elsewhere have until May 2004.

* Regulation seen as encouraging competitiveness in the wireless industry.