Federal regulators dim NeuStar deal

The Federal Communications Commission is trying to stop investment firm Warburg Pincus from gaining any more control over the board of directors of NeuStar, which dispenses about a third of the world's telephone numbers.

Warburg Pincus already owns 40 percent of NeuStar and has 40 percent control over the board of directors. It is not allowed any more seats on the board, according to a 1997 agreement NeuStar signed when it took over the duties as North American Numbering Plan administrator.

But the FCC said a review of a June 2001 stockholders agreement, the result of two cash infusions by a pair of venture capital firms, gave Warburg Pincus more control than was allowed. The agreement has yet to be ratified by shareholders.

Last week the FCC gave NeuStar 30 days to resolve the supposed problem. NeuStar also didn't tell the FCC anything about the moves, which violates the 1997 agreement, writes Dorothy T. Attwood, FCC chief of wireless competition bureau.

"We are very concerned that NeuStar sought to make the changes without first consulting with the bureau," she wrote. The company also apparently balked at even providing "information that was clearly necessary to conduct an inquiry."

A NeuStar spokeswoman said the FCC is using "inaccurate information" and wouldn't comment on whether the company intended to undo the changes within the next 30 days.

NeuStar attorney Ed Freitag did not return a call to his Washington, D.C., law office. A spokeswoman for Warburg Pincus declined to comment.

NeuStar took over the role as telephone-number administrator for North America in 1997. It is responsible for distributing the billions of telephone numbers assigned to North America and several island nations, including the West Indies. Because it is working under a government contract, it's supposed to report any ownership changes.

The regulations are meant to keep any investors from gaining too much control because NeuStar has a powerful position, given that telephone numbers are the lifeblood of the communications industry.

NeuStar can, for instance, tell a phone company it can't have any more telephone numbers until it uses up the ones already assigned. It can also decide that the 10,000 numbers in an area code have been exhausted and order carriers to spend cash installing new ones to serve the area.

The FCC did approve the investments made by two different investment firms that are part of Deutsche Bank. A Deutsche Bank spokesman declined comment.