IN RECENT YEARS, THE high demand for local exchange codes from incumbent local exchange carriers and new competitors has mandated scores of new area codes across the United States, created through processes that generate a high degree of local controversy. Yet even after the new area codes are created, the demand for exchange codes for local calling areas continues unabated, leading in some cases to the exhaustion of exchange codes within brand new area codes in as little as two to three years -- a period much shorter than their expected life. Federal rules, which bar so-called "service-specific overlays" and mandate 10-digit dialing in conjunction with overlays, leave states to confront a dwindling supply of exchange codes, with choices that appear limited and unpalatable.
This situation has laid bare the flaws of the existing on-demand method of allocating exchange codes. It points to the possibility of an even more dire problem: the eventual exhaustion of usable area codes in North America. The time has come to consider a market-based method to allocate exchange codes. Such an approach could postpone, or in many cases obviate, the need to create still more area codes -- protecting customers from what is, at best, a frustrating nuisance and averting what could be, at worst, a serious crisis for North American telecommunications.
Until recently, the true costs of the on-demand method of allocating local exchange codes were not apparent, even as national policy encouraged competition in telecommunications. Now, dozens of CLECs -- competitive local exchange carriers -- are registered to do business in many states.