Here’s an email with a question I got recently that I think other people may run into and should be addressed here:

Bill, could you please answer this question: is it legal for a person to stockpile lots of toll free numbers and re-sell them to the highest bidder? I’m talking about a man who has hundreds of numbers who then tries to sell them for a hundred thousand dollars or to lease them for thousands of dollars per month. Is this legal?

Thanks for the question, Grassroots. First of all, I’m not a lawyer. I avoid lawyers as much as possible. I can give you some general input about the industry but if you have need a real legal answer you need to talk to a real legal person, called an attorney.

There are regulations are against “hoarding and warehousing.” The regulations are designed to prevent the type of squatting and resale that you see with domain names. Basically the way I interpret that is that you can’t be in the business of buying and selling phone numbers which is kind of like saying that you can’t be a car dealer if it were the automotive industry. But that isn’t the same thing as saying you can’t ever sell your car. Just because I want to sell my car, which I got for legitimate business reasons, not for the purpose of reselling, that doesn’t make me a car dealer even if I get paid for it.

The people who say “its illegal to sell numbers” never quote any regulation because there is no regulation (or law). And almost always have ulterior motives too. They want you to have to “rent” a number from them because they know that the more you advertise THEIR number the more at their mercy you become.

This leads to the ways that number “brokers” (which I politely call Squatters, to avoid reminding them that what they are doing is illegal) get around the regulations. The most common loop hole they hide in is that they are “renting” or “leasing” their numbers. They usually do this in conjunction with regional routing so that they can theoretically rent numbers to multiple different people or at least keep one small part, even if it’s just Canada, or Alaska or something, for themselves. In reality many “shared use” companies have a small percent of their numbers active for a customer (hoarding?) and an even smaller percent with more than one customer (which isn’t really shared use then is it?).

Another way they get around the regulations is that they combine a toll free number with a domain name and then they are selling a marketing package, business concept or even an existing business. It’s hard to dispute that it’s legal to sell a business with a phone number since it would be impossible to say that you can’t include the business phone numbers when a business is sold. But like any loop hole, if you are doing something just to get around a law by a technicality, that doesn’t make it right or totally legit either.

It’s probably also helpful to point out that all of the regulations are aimed at the seller, not the buyer, because the buyers are big phone companies (can you think of a big phone company that doesn’t have a good vanity number – you don’t think they got them without paying someone do you?) or really big companies in almost every industry.

In reality however, if there’s nobody enforcing a regulation than it doesn’t matter very much how thin of an excuse they give. And that has certainly been the case for many years, but doesn’t mean the FCC won’t wake up and start enforcing that tomorrow. I believe there are pressures that may change in the future and my advice is always to pretend that everything you do is being watched. That’s because even if nobody’s paying any attention right now, they can always go back and look at the history of transfers, even years from now.

I believe the biggest conflicts and problems arise when the lines get blurred between phone companies and end users or owners. When vanity number businesses which claim to be the “owners” or end users become Resporgs or responsible organizations so they can get numbers directly from the pool, or when Resporgs start to act like “end users” it tends to create a conflict. They want to combine the rights of the end user with the power of a phone company but in the end, they almost always end up cheating the system, claiming it’s OK because of some technicality and ultimately hurting the consumer, which I think is the point to your question.

How do I fit into the equation? I admit that I don’t fit into the normal mold or models that most other companies follow. I’m essentially the only toll free number “search service.” I charge a small one time “search fee” to help end users find good numbers. I have spent hundreds of thousands of dollars to develop a unique system to find better numbers faster and easier than any other phone company. Regular phone companies don’t charge anything up front to get a number not because that doesn’t cost them anything, but because they make their money from the ongoing use. I don’t provide the ongoing service. That is fine, but it doesn’t give regular phone companies any incentive to help their customers get a good or better numbers, which is why regular phone companies tend to do a lousy job of helping customers.

That’s also why there’s such a need for our service. I don’t charge anything up front to do the search. Instead I just charge a small one time “search fee” only if we find a number that the end user wants. We activate the number faster than anyone else, give them better proof of ownership than anyone else, we give them free temporary service to get it started and then transfer the numbers to whatever company they want to use it with. It’s also important to point out that I do NOT blur the line combining phone company capabilities with end user rights.

I’m NOT “selling” numbers any more than your local phone company is selling you a local phone number simply because they charge a set up fee, even when no physical work is needed beyond flipping a switch in the phone company. I don’t charge for numbers based on their value. Even our premium numbers are a flat fee based on the category they are in, and the vast majority of my fees are for just $49 and we are never transferring a number that we “own” to someone else. We are merely activating a number for the “customer” or “end user” like any other phone company. Our fee is technically a “Search fee” because that’s what we spend 90% of our time and resources for. That’s also why people come to and use our site, to “search.”

Regular phone companies follow what I call a “hosting” business model because they are making their money from the ongoing service or use of the number. That makes sense because the ongoing service is much more expensive than my one time “search fee”. But as a marketer, I know that the number makes a greater difference to the bottom line success of your marketing than the difference from one phone company to another. Regular phone companies don’t understand that. And no regular phone company could afford to invest and develop the type of system that I have just for their customers. So it makes good business sense to separate the number searching from the ongoing use, at least for the customers you really want a better number.

Another interesting Forbes article from a while ago also talked about the big money in toll free numbers and how the FCC is standing in the way of that.

I think this answer went a little beyond the initial intent of the question but I just want be clear and up front about as much as possible even in an industry of people who tend to use the shadows to get away with things that aren’t exactly right. I’m not saying you can’t or shouldn’t get a number from whoever you want. I personally think that toll free numbers should probably be able to be bought and sold more openly. But my mission is just try to help as many people get good numbers as fairly and efficiently as possible.

-Bill

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