ICB Toll Free (800/888) News by: Judith Oppenheimer, Publisher, ICB Toll Free (800/888) News
Thursday February 19 1998 at 11:36:25 AM EST

1 800 IPO

"Many 800 number companies offer competitively priced products and services and are currently locked out of badly needed public capital because of the FCC's stance," says Richard Sapio, CEO of 1 800 MUTUALS, Inc.

New York, NY US - (ICB TOLL FREE NEWS) 1-800 CONTACTS, Inc. is a rapidly growing direct marketer of replacement contact lenses. Through its easy-to-remember, toll-free telephone number, "1-800 CONTACTS" (1-800-266-8228), the company sells the most popular brands of contact lenses, including those manufactured by Johnson & Johnson, CIBA Vision, Wesley Jessen/Barnes-Hind, Bausch & Lomb and CooperVision.

1 800 CONTACTS sells at competitive prices, and ships approximately 80% of its orders within 24 hours of receipt. Its net sales have grown rapidly, from approximately $3.6 million in 1996 to approximately $21.1 million in 1997 and its net income has grown from approximately $348,000 in 1996 to approximately $1.0 million in 1997. Products are marketed through a national advertising campaign, and compared to other direct marketers of replacement contact lenses, the company believes that its toll-free telephone number, 1-800 CONTACTS, affords it a significant competitive advantage in generating consumer awareness and repeat business.

Indeed, after the company first began using the 1-800 CONTACTS number in July 1995, net sales per advertising dollar increased by over 20%, and the company believes its marketing strategy, combined with the higher response rates attributable to the 1-800 CONTACTS telephone number, allows the company to acquire new customers at a lower average cost per customer.

So what. s the problem?

Under applicable rules and regulations of the FCC, there can be no assurance that the 1-800 CONTACTS Inc. will be able to retain the use of the 1-800 CONTACTS telephone number!

Which means that 1 800 CONTACTS, which filed its IPO on February 9, 1998, is placed in the absurd position of soliciting financial confidence, all the while denied regulatory reliance.

Clearly, the loss of the right to use the 1-800 CONTACTS number would have a material adverse effect on the company's business, financial condition and results of operations - their own prospectus says so. In addition, the company, having . obtained. the rights to 1-888 CONTACTS and the cellular and international equivalents for the 1-800 CONTACTS phone number, has no assurance that 1-800 CONTACTS Inc. will be able to retain the use of these numbers either.

How is this possible?

. 1-800-CONTACT's situation dramatizes the gulf between the regulatory framework and common practice,. says Daniel Miller, industry analyst and publisher of Telemedia News & Views.

. For practical purposes the company must behave as if it . owns. its telephone number. After all, it's also the name of the company. The Federal Communications Commission wants to avoid going down what it perceives as a slippery slope toward protecting the property rights for telephone numbers. What they've orchestrated is a dual custody situation, in which it is unclear where the . child. actually resides..

In fact, the 1 800 CONTACTS situation is an excellent example of what. s wrong with the FCC. s anti-brokering policy, according to Robert J. Keller, a Washington, D.C. telecommunications.

. The FCC's regulatory pronouncement that subscribers have no ownership interest in their numbers has significant business ramifications which the Commission is either unable or unwilling to see,. says Mr. Keller. . A toll free brand, and hence the corresponding toll free number, is the most valuable asset of many companies, regardless of what the FCC might otherwise wish. What would 1-800-FLOWERS be worth, for example, if it did not have that telephone number?.

1 800 FLOWERS. communications manager Ken Young would only say cryptically that . 800 FLOWERS is in discussions with people involved with this in Washington..

Mr. Keller warns that grave harm can be done even if the number is not lost. . When dealing in the very ticklish worlds of IPOs, credit agreements, and the like, the simple suggestion by the FCC that the company does not . own. its number and can not . sell. it has substantial and adverse impact. Hopefully the Commission will correct this on reconsideration."

Richard Sapio, CEO of 1 800 MUTUALS, Inc. couldn. t agree more. . Since many vanity numbers require enormous amounts of marketing dollars to maintain, it seems ludicrous that the shareholders of those companies have no . rights. to those assets. Something must be done about this,. says Mr. Sapio. . Many 800 number companies offer competitively priced products and services and are currently locked out of badly needed public capital because of the FCC's stance. If the public need is what they're concerned about, a free-market stance on the ownership and valuation of these phone numbers will do more for the public need than anything else..

Author/Correspondent's Profile: Judith Oppenheimer, Publisher, ICB Toll Free (800/888) News

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