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The company has rolled out a new, more distinctive logo.

Illuminet capitalizes on changes from Telecommunication Act

CHRIS CLOUGH, THE OLYMPIAN

Originally published August 12, 2001

LACEY -- Illuminet Holdings Inc.'s roots date back to when pay phone calls cost a dime and the Baby Bells were merely a whisper in Ma Bell's earpiece.

As the telecommunication industry has evolved -- especially with the Telecommunication Act of 1996 -- so have the business models that lead to success.

The Telecommunication Act was drafted to help remove barriers to competition and a large part of that was allowing customers, not phone companies, to have ownership of their phone numbers.

The act flung the door wide open for Illuminet.

Five years later, nearly all calls in the United States pass through Illuminet's computer network at some point.

"Their business is what lets people make phone calls," said Steve Levenson, a New York-based research analyst with Gerard Klauer Mattison. "Illuminet enables telephone calls in a deregulated market."

Levenson said Illuminet generates revenue primarily from two angles: "connectivity and its Advance Intelligence Network."

The first is connecting calls.

The second is gleaning information incumbent with the calls into services such as caller ID and toll-free calls.

At the heart of Illuminet's business is Signaling System 7 (SS7), which carries signaling information to guide the call parallel to the system that carries call content.

Here's a simplified version of what Illuminet does using SS7:

Imagine a row of switchboards, each representing a different company -- one of the Baby Bell spin-offs or one of hundreds of independent carriers -- and the land lines and network they have constructed.

In simpler times, a phone call would come in on a circuit of one of the company's boards and would be switched to another hole -- or port -- on the board to connect the call.

Now, in our example, all the boards are interdependent. A call to a circuit on Board X must be matched with a port on Board Y, and without the delay of connections in the past.

Illuminet acts as a sort of go-between, electronically connecting calls to and from different companies to each other in a blink of an eye.

Illuminet gets a slice of the action with each connection.

And the connections keep coming, dipping into Illuminet's network 24 hours a day, seven days a week.

"We have a recurring revenue model," Illuminet president Terry Kremian said. "We get paid by the dip."

Kremian said that revenue from the dips accumulates at portions of a penny a connection. But there are enough dips to help Illuminet post $47.2 million in revenue for the fiscal quarter that ended June 30.

An underlying factor in why companies turn to Illuminet to connect calls is phone number portability. Defined by the industry as a circuit-switch telecom network that allows end-users to keep their phone numbers when changing providers, service type or location.

In essence, the customer, not the phone company, owns the phone number.

Illuminet provides local number portability, allowing customers or small businesses to change carriers without changing their phone numbers.

In our example, the holes -- or ports -- in each switch board represent individual phone numbers.

As customers change providers, those holes -- and all the information that comes with each number -- move from board to board.

In the days of the 10-cent pay call, phone companies owned the phone number. If a customer wanted to change companies, the number stayed with the company and the customer was forced to use a new number.

With portability, that's no longer the case.

Portability is of particular benefit to businesses that may want to move to a more affordable provider but don't want to give up the familiarity of the phone number.

When a customer does change providers, Illuminet helps move the numbers and associated information within the database from the former company to the new company, charging for the service.

In our example, Illuminet helps move the holes -- or ports -- on one switch board to a different board.

Illuminet's business goes beyond connections and portability.

An offshoot of the SS7 technology, which allows for quick connection and portability, is a wealth of information about with whom and where the call originates.

The data needed for calling card and toll-free calls and services such as caller ID are piggybacked in the information needed for the basic connection.

As the call is routed through Illuminet, the information is peeled off into services customers are willing to buy from their phone company.

And that's another dip into Illuminet's database and more revenue into its coffers.

The Olympian Copyright 2001

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