Do We Need Area Codes?

by Elaine Schwartz    •    Aug 1, 2011    •    905 Views

What if the 3 digits that precede your phone number no longer related to a place?

Known as “number depletion,” phone companies use area codes because we are running out of numbers. But need the numbers have geographical significance? Calls outside your own area code no longer cost more. Most phone plans do not distinguish between local and long distance.

However, some businesses perceive value in an area code. Dial 415 and you know you are connecting to San Francisco, a technology center. Securing 212 for Manhattan is truly tough and maybe prestigious. Local businesses might want people to know they are nearby. Or, when you are no longer nearby, retaining your old area code might be helpful.

Developed by the original AT&T, area codes were used initially by operators during 1947. Densely populated areas were assigned lower numbers because they saved time on a rotary phone. For that reason New York City was 212. If your state had only one area code like Connecticut (203) and New Jersey (201), then “0” was the middle digit.

Looking even further back, you would find “exchange names.” From the 1930s until the 1970s, phone numbers started with the first 2 letters of words like Butterfield 8, Ivanhoe 3, Pennsylvania 6.

The Economic Lesson

From exchange names, to number depletion and geographically significant area codes, to perhaps a more up-to-date system. Sounds like Joseph Schumpeter’s creative destruction where innovation replaces the status quo as our communications infrastructure evolves.

An Economic Question: How have cell phones related to innovation?

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