Telepocalypse

Supernumary

According to Voxilla, Vonage are charging $4.99 a month for a London phone number, and Lingo are charging $9.95 a month.

So how much is a telephone number worth, given they’re not fully tradeable commodities?

Let’s make some assumptions and create a model:

(i) the median retail price of a number is $7.50 a month (i.e. $90 a year)
(ii) the “raw material” cost of a phone number to the value chain as a whole is zero. (Vonage et al may be paying others for the privilege of allocation and resale of numbers, but there isn’t an number mine in deepest Africa being excavated at great expense for more precious integers. They came along for free somewhere between the Big Bang and Fermat.) There’s no cost of inventory.
(iii) the SG&A expenses are 10% of revenue
(iv) the mean tenure of a customer is 2 years. This is very conservative; people move home on average every 7 years.
(v) each business has a minimum rate of return of 15% per annum on investments.

Remember, we’re only after order of magnitude here, so there’s no need to be pedantic about the numbers. We get $180 in revenue and gross profit, less $18 in expenses, making a net profit of $162 spread over 2 years. How much would you pay for a financial instrument that required you to pay out $18 on day 0 and then gave you $7.50 a month for two years?

To avoid any fiddly net present value calculations (I’m a mathematician by training, thus extremely lazy) just say this is like someone promising to give you $162 one year from now, risk-free. At the corporate rate of return a phone number asset is worth roughly $162 less 15% = $137.70. That means you would be willing to hand over around $140 to obtain that revenue stream.

Compared to a $10/year domain name, phone numbers are very expensive. If you though Verisign was a rip-off, you’re only dealing with the amateur side of the address space sport.

Whilst we’re on the economics of phone numbers, it is worth noting that not all numbers are equally valuable. Obviously, there are sequential, alliterative or lucky numbers (123-4567, 777-0000, 888-8888) that are sometimes sold for a premium. Then there are desirable area codes, such as Manhattan’s 212 prefix, or 0207 in central London. Pedants writing in to say that the London prefix is really 020 with will be ignored. Then there are desirable and undesirable country codes. Not many multinational businesses are gagging to get hold of Nigerian numbers, I suspect.

Given the increasingly easy ability to have virtual numbers in any geography, I wonder if area and country codes will become mini brands in an of themselves. In part the brand will reflect the geographical origin of the code, but may increasingly have a life of its own. The limits by convention on number length might render 212 as a sign of yuppie urban aspirations. A French number might say more about your political outlook than your place of residence. Could some libertarian-leaning billionaire buy out the remaining address space of New Hampshire numbers and offer them in conjunction political party memberships?

This may sounds like loony ramblings today, but in a decade from now geographical pricing for calls may have collapsed and vanity and community may be the drivers of how you number yourself. Unless of course, we’re all on Skype instead…

UPDATE: Before you all get too excited about the end of telephone numbers, bear in mind you almost certainly can’t type my wife’s Lithuanian name on your keyboard. How would you feel if your keyboard was shorn of a few letters? You had to drop the vowels from your name? Now how keen are you on non-numeric identifiers? Ah, the joys of English alphabetic imperialism.