As with many other businesses, trends in the prepaid industry frequently change. The savvy businessperson must be able to weed out the hype that will not stand the test of time from the useful business tools that will. To be able to decide which is real, and which is hype, requires accurate and complete information on the subject matter. The Carrier Identification Code (CIC) is one of these issues that faces the prepaid provider. While most of those in the prepaid industry have probably heard the term, few know the benefits and flexibility that can be derived by having a CIC. We are often asked by clients what a CIC can do for their business. The real question should probably be what can't be done more effectively by the prepaid provider using a CIC with the right business strategy. The CIC, however, is not for everyone in prepaid. There are some basic requirements that must be fulfilled before acquiring a CIC.

First, in order to acquire a CIC, you must be a licensed Inter-exchange (IXC) or competitive local exchange (CLEC) carrier. Simply being an authorized Federal 214 holder is not enough; an IXC or CLEC license is required. Second, to operate a CIC, you must have or maintain facilities capable of at least Feature Group D services from your local LEC. These facilities can be wholly owned or may be partitioned. Third, to utilize a CIC, you must have a business niche in prepaid that gives you exposure to larger markets within your state or at the national level. Therefore, facility-based providers who are licensed IXCs or CLECs and offer statewide or nationwide services have the best opportunity to utilize CIC strategies. If you meet all these criteria, there are a number of business strategies that can be deployed with the CIC to give new revenue sources to your business and make existing services more effective.

WHAT IS A CIC AND HOW DOES IT WORK?

Let's begin with the basic information first - what is a CIC? A Carrier Identification Code is a means by which end-user customers access long-distance services of competitive Inter-exchange carriers through equal access arrangements with the LEC. This is done through a four-digit code ordered through the Access Carrier Name Abbreviation (ACNA) and North American Numbering Plan Association (NANPA), and thereafter synchronized throughout all national LECs in the US. Logistically, here's how it works: when the end-user dials 1+ the call is automatically routed to the Tandem Office and analyzed by the LEC's automated system to determine what preferred long distance carrier the customer has chosen through its Primary Identification Code (PIC). After this identification process is completed, the call is routed to the Carrier side of the Tandem Office to identify the facilities of the long distance carrier through a pre-set Carrier Access Code. The call is then connected to that carrier for transport to the termination point. The preferred carrier's CIC may be bypassed by using Dial Around service. In Dial Around service, the customer accesses the CIC directly from any telephone by dialing the CIC code as a prefix in conjunction with the call. These Dial Around Codes are popularly known as 10-10 numbers, although the current list of CIC has exceeded the 10-10 prefix. In a nutshell, the CIC is an identifier for your designated facilities, which can be used by customers, LECs, or other carriers to direct dial or otherwise transport your calls or telephony traffic.

BASIC CIC STRATEGIES

There are three basic uses of a CIC in telecom business planning or strategy:

1. Direct 1+ services

2. Marketing the CIC for dial around purposes

3. Rapid deployment and continued provisioning of switches

Of the three, the most popular CIC strategy of the prepaid provider has been diversification into 1+ Services. Service providers that are tired of the traditional roller coaster of prepaid and have a network of scale may wish to diversify to capture other markets. They are also usually looking to work directly with enterprise customers; larger sized companies that are seen to be accounts that thought to be more stable. Start up strategies for 1+ Services usually are to start small, or at least limited to specific geographic areas, and then build out coverage over a period of time. Most prepaid providers who begin offering 1+ Services do not abandon their prepaid niche. Instead, the 1+ service is used as a counter-balance to cash short falls, losses in bad deals, or losses from carriers going bust.

In contrast, Dial Around seems to have lost some popularity with CIC holders over the last two years, but is still widely used by consumers. The reason for the loss of popularity by CIC holders is the cost of marketing. Unlike the 1+ Services, the customer voluntarily elects to use the service by dialing the CIC on a specific call -usually because of the rates. This means that the CIC number has to be actively promoted to the public, which can be a costly marketing effort. A number of Dial Around CIC strategies have combined markets and included the Dial Around number on posters and the faces of their prepaid cards to help reduce marketing costs. However, most strategies still involve marketing through mass media channels.

The third CIC strategy is the use of the CIC for provisioning purposes. Since the CIC is recognized nationwide by the LECs, it facilitates ordering and provisioning of switches at different locations. The reasoning behind acquiring a CIC for this purpose is simple - time. When the provider is experiencing rapid or consistent growth, the time and cost of provisioning switches and networks can hinder business plans. While the CIC is not a total solution, it does remove some of the obstacles in ordering or removing provisioned lines.

It is also important to note that these CIC uses are not exclusive of one another. Many prepaid providers acquire a CIC in order to have all three options available in their business plans. They may offer 1+ Services and utilize the CIC for provisioning. Again, the basic uses of a CIC are not exclusive and should not be thought of that way in any business plan.

USING A CIC OF ANOTHER CARRIER

One CIC strategy that has gained popularity over the past two years among both switched-based and switchless providers has been utilizing the CIC of another carrier. This is commonly referred to as the "Pseudo CIC'. It is usually offered by IXCs, or CLECs to carriers who do not meet the minimum requirements of acquiring their own CIC. While this may be an effective way to begin developing a CIC service client base without a switch, the drawback is the Pseudo CIC is never really yours in the end because it is not transferable. It is the property and registration of the carrier holding the CIC and, in essence, you are renting the use of that CIC for transport only. Any regulatory restrictions of the underlying CIC holder - such as limited IXC licensing to select states - also applies to the provider utilizing the Pseudo CIC. Therefore, service offerings are limited to those of the underlying CIC holder. In addition, if a dispute develops with the underlying CIC holder that results in the loss of service, the use of the Pseudo CIC service may be lost along with your valuable customer base utilizing the Pseudo CIC. For those providers wishing to increase their service offerings temporarily, it is a good middle step into exploring these types of services before taking the final plunge. Likewise, providers that take the plunge and acquire a CIC may farm it out to switchless providers as another service offering, and income source, depending upon their technology and strategy.

DRAWBACKS AND TAKING THE PLUNGE

No business opportunity should be presented without addressing its drawbacks as well. In the case of the CIC, there are the issues of upfront costs when installing a CIC into the LEC. This may include deposits and the cost of local lines. Next, the provider must know how to input an ASR, or retain someone who can, to place orders into the Tandem Office for provisioning purposes. Should the purpose of the CIC be 1+ Services, investment into infrastructure will be necessary to manage postpaid services, like taxation and regulatory issues as the services are offered. This is the same for reconciling Dial Around profits and services. Again, these are ongoing business costs that must be scaled in relation to the service offering. If CIC services are offered in increments with growth in mind, these issues can be addressed over time, so they do not need to be funded initially. Should the services be implemented rapidly, more costs upfront may be incurred.

In the end, the CIC is a logistical tool of telecommunications, just like a switch, a trademarked brand, or a specialty route. Dependent upon your creativity in marketing, it can be cost effective and profitable, or a disaster. Perhaps the key to successful use of a CIC by a prepaid provider is best found in your own realistic assessment of your business objective. If your goal is to capture a temporary opportunity, a Pseudo CIC is your best fit. If diversification and counterbalancing other business is the goal, acquiring a CIC is a smart business move. Again, the decision to acquire a CIC must be taken seriously in conjunction with your ongoing business. This begins and ends with your own business strategy, size and market niche. A CIC can offer new opportunities to a prepaid provider, but before taking the plunge, be informed and choose wisely.

Good Luck and success in the Industry.

I would like to thank Regnum Consultant and CIC specialist Don Johnston for a contribution to this Article.

Edward A. Maldonado, Esq., a principal of the Regnum Group, is a telecommunications attorney based in Miami, FL who represents and advises communication companies both in the US and Latin America. He can be reached at emaldonado@regnumgroup.com.