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Describing iConectiv merely as a number information provider would be an oversimplification. In North America alone, it operates three core registries: LERG (how phone calls are routed), the LNPA (how numbers are moved between networks), and USShortCodes.com (the provisioning and maintenance of US Common Short Codes—CSC). It is the exclusive source of this data, having secured the contract for the LNPA from the FCC and for CSC from the CTIA. This may be the most important database you’ve never heard of. Let’s use this sale to briefly explore the registry as a concept and understand why Koch Equity Development (KED) paid $1 billion for the acquisition.
Companies and topics discussed: iConectiv, LERG, LNPA, USShortCodes.com, FCC, CTIA, Koch Equity Development (KED), DNS, Service Oriented Architectures (SOA), Services Registry, Baby Bells, AT&T, Transaction Network Services (TNS), Neustar.
The Network and its Registry(s)
The concept of lookup databases or registries is foundational to networking. The more distributed the network, the greater the need for an authoritative source of routing data. Essentially, a registry is an authoritative, secure, and fast database. It manages the mediation and escalation of data disparities, such as when two networks claim ownership of the same number. The most effective registries are mandatory and enforce data sharing. An optional registry is seldom used, unless there is a significant incentive, like the threat of unemployment.
DNS, in fact, is a registry of domain names. Service Oriented Architectures (SOA) include a Services Registry, which acts as a repository for all SOA interfaces supported within an organization. However, the telecom sector is a conglomeration of interconnected, regulated, and privately managed platforms burdened with many legacy, ossified design decisions. It utilizes numerous registries for various purposes. iConectiv itself originated from BellCore, a service created to facilitate connectivity among the Baby Bells following the breakup of AT&T.
Registry as a Business
A registry operates much like a software business, with similar pricing and cost structures, where primary expenses include cloud hosting. Unlike the CPaaS sector, which relies on usage-based billing, companies like iConectiv typically charge recurring fees, one-time fees, and lookup fees.
To command a premium in valuation or pricing, a registry must be essential, either by protocol or mandate, and must have exclusive access to the data it provides. iConectiv meets both these criteria. It is not only mandatory but also holds exclusivity, thanks to the FCC and the CTIA in the US. Additionally, iConectiv is the primary number information provider in 10 other countries.
Finally
Number registries are being pushed to provide identity and fraud mitigation services. KED, while not a traditional ‘strategic’ investor, understands this. It owns Transaction Network Services (TNS) and in the past had a minority preferred equity stake in Neustar—an iConectiv competitor. The acquisition could be part of a roadmap to create a vertically integrated solution. Or, it could be part of KED’s focus on new platform acquisitions that boast an EBITDA greater than $250 million and strong cash flow, particularly those that have fallen ‘out of favor in the public markets.’ It seems iConectiv also checks all those boxes.