COLUMN ONE : Telephone Line With a Hook : Phone firms had high hopes for new services, but one that discloses a caller’s number is pushing a hot button. With Caller ID, ‘Who’s calling?’ stirs a furor over privacy.

William Malone, a Maryland businessman, now sorts his friends into two categories: those who have a new telephone service known as Caller ID, and those who don’t. He absolutely refuses to place a phone call to those who do.

“I believe people who have Caller ID are nosy,” he said. “I just don’t think people need to know who’s calling and what their number is. When you have to give up your phone number in order to make a call, you know there’s nothing sacred anymore.”

Perhaps not since the introduction of the telephone 116 years ago--an event that made us at once both caller and receiver--has a piece of new communications technology so sharply divided and upended the interests of telephone users. Essentially an “electronic calling card,” Caller ID flashes a caller’s number on the specially equipped telephones of recipients, allowing them to know, before picking up the receiver, who’s on the other end.

To be sure, secretaries and answering machines have served as intermediaries, the gatekeepers of our telephones, for years. But Caller ID, which the nation’s phone companies have gradually introduced over the last four years, represents the first concerted attempt to build a call-screening device into the fabric of our everyday telephone technology and etiquette.

And it’s not going over well.

Since its introduction in New Jersey in 1988, opponents have steadily gathered momentum. California regulators, in approving the service last month, imposed the toughest restrictions in the nation. The guidelines are so stiff that one of the state’s three regional phone companies, General Telephone, already has decided not to offer the service. Pacific Bell, the state’s largest phone company, said Monday that it will petition the state to loosen the restrictions before it decides to offer the service. Contel officials are still studying the state guidelines to see if the company could make a profit on the service.

The central problem with Caller ID is that it pits two competing issues of privacy against each other: a person’s right to decide which calls to take and a caller’s right to guard the secrecy of a phone number.

Why would someone who is not a movie star, a millionaire or a politician want to protect a phone number? Databases of information on consumer shopping patterns and socioeconomic traits are increasingly being cross-referenced by phone numbers, and are widely accessible for as little as $200 to anyone with a personal computer, a trend that is making our phone numbers the single most desirable bit of demographic data that corporate America can gather on us.

“Everyone wants to know who’s calling them, but no one wants people to know whom they’re calling,” said Paul Saffo, a technology consultant at the Institute for the Future, a Silicon Valley think tank.

Social arbiter Judith Martin, the author of the syndicated newspaper column Miss Manners, said: “The basic problem with the telephone for the last 100 years is that it left the expectation that you have to be available to answer it. . . . It’s entirely appropriate for people who can’t afford a human one to have an electronic receptionist as a buffer against the rest of the world.”

But, added Martin, who carefully protects her own unlisted Washington phone number, “People also have the right not to give up their phone numbers in order to place their calls.”

To the technologists, Caller ID is a necessary electronic intermediary for the fast-approaching day that the telephone evolves into a ubiquitous personal appliance that can travel with us wherever we are on the planet. This device--which with a video display could allow us to see as well as hear one another--will allow us to reach out and touch someone throughout the world. And it will permit anyone who knows our phone number to reach us, anytime, anywhere.

“We’re moving into a new era where the telephone is becoming closer to you at all times,” said Robert Lucky, executive director of research at Bell Laboratories in New Jersey. “We’re moving into a new era of telephone etiquette and protocols. We have to redefine the rules for letting people into our electronic space.”

But to consumer rights advocates, and increasing numbers of regulators and legislators, the new rules devised by the telephone companies--Caller ID--trade one problem for another and force people to give up more privacy than they gain.

Those rules, opponents argue, restrict our longstanding practice--some say it’s a right--of making anonymous or unannounced phone calls, a habit we have grown accustomed to since the advent of operator-bypassing, or direct dialing, a century ago.

But perhaps more important, they argue, it paves the way for further telemarketing abuse and annoying solicitations by businesses that would like to capture our phone numbers and cross-reference them with the huge databases already catalogued by phone number.

Not surprisingly, opposition in California, where more than 40% of households have unlisted phone numbers, is among the staunchest in the nation. When the state Public Utilities Commission approved the service last month for California, it required the phone companies to allow customers, without extra charge, to block their numbers from registering on Caller ID devices.

“Phone numbers are now considered personal property. There’s a huge expectation of anonymity,” said A. Michael Noll, a professor at the Annenberg School of Communications at USC. “People don’t think the problem Caller ID solves--not knowing who’s on the other end of the phone--is big enough to warrant a solution that requires us to give up our phone number. People are resisting the phone companies trying to cram their view of the technological future down the consumers’ throats.”

This exploding debate does not bode well for the nation’s phone companies, which are in the midst of a massive overhaul of their communication networks. Over the last five years, local phone companies, led by the regional Bell operating companies, have spent billions installing new technology and developing whiz-bang services intended to make the phone an even more indispensable part of our lives. Naturally, they hope these services will generate billions of dollars in sales as well.

Caller ID is just the first of these.

Soon, phone companies say they will add Caller ID to their “call waiting” feature, allowing us to know the number of the incoming caller before we interrupt our ongoing conversation.

Another feature under development would allow us to select certain phone numbers from which we are willing to accept calls and give them permission to ring. Other calls would be sent to an electronic message center. A variation of this would allow us to pick the calls we want to have access to our call forwarding service, a feature now widely available that can send incoming calls from one number to another. Both of these services are seen as potentially very attractive to cellular phone subscribers, who must pay up to 45 cents per minute every time they make, or take, a call.

Another new service dubbed “priority ringing” would allow us to designate certain phone numbers--for example, an elderly relative or a child away at college--that would ring with a slightly different sound than other calls. Finally, “call reject” would allow us to order that calls from pre-selected numbers--possibly an ex-spouse or annoying solicitors--be sent to a telephonic “garbage can” without ringing on our line.

The attraction of these screening services is obvious. And the phone companies know it. Since its inception in 1988, Caller ID has been promoted as a way of ending harassing and nuisance calls and tracing obscene callers.

“We used to get a lot of obscene calls, now we get virtually none,” said John Baker, an Atlanta businessman who signed up for Caller ID earlier this year.

In New Jersey alone, Caller ID service, a version of which is employed in the nation’s 911 emergency call system, has also been credited with saving the lives of six residents who were rescued because their phone numbers were displayed on the phones of friends and relatives whom they called for help. In one instance, authorities say a possible suicide was averted when a woman caller’s number was displayed on a Caller ID system.

“This service makes me feel safer in my home,” said Jane Clancy, a mother of four in Westfield, N.J., who has had Caller ID for the last two years. “Once, when I got a weird call, I called it back and talked to the parents of the teen-age pranksters. That was all there was to it.”

Privacy advocates contend that consumers have targeted Caller ID for their wrath because they are enraged by the access businesses already have to their phone numbers.

For years, the nation’s long distance companies have been allowed to offer Automated Number Identification--the big brother of Caller ID--to businesses with 800 and 900 telephone numbers. The service, which is not yet regulated by the Federal Communications Commission or any federal law, allows businesses with 800 and 900 numbers to capture the numbers of their incoming calls.

Many businesses cross-reference the numbers to databases supplied by other companies. Some businesses even sell the numbers of their incoming callers to telemarketing companies that target specific demographic groups for their services.

According to industry sources, the numbers of callers to 900 services offering X-rated chatter and “easy” credit services fetch the highest prices, but some companies are willing to pay for the names of people who participate in phone-in polls, contests and other 800 and 900 services.

“Caller ID is catching a delayed reaction to Automated Number Identification and the telemarketers,” said Audrie Krause, executive director of Toward Utility Rate Normalization, a consumer advocate group in San Francisco. “We’re seeing the tip of the iceberg of a consumer backlash against the invasion of our privacy that has already been going on.”

All of which may explain why Caller ID has yet to catch on in a big way.

In New Jersey, where it has been offered for the last four years, only about 7% of telephone customers take the service. The highest use of the service is said to be in Las Vegas, where an estimated 10% of phone customers are subscribers.

Although the percentage of customers who subscribe appears low, phone company officials say the numbers are comparable to early acceptance of other new phone services, including the push-button phone, which was rolled out to a wary nation of phone dialers nearly four decades ago.

But consumer advocates say the low usage of Caller ID shows that people who want to know who’s calling them are doing what they’ve done for years: screening their answering machine messages and picking up the phone if they choose.

“There is absolutely no reason to violate a caller’s privacy and trap his phone number if a $60 answering machine will do the same job of screening your calls,” argues John S. Lemke, the California administrative law judge who recommended earlier this year that the state Public Utilities Commission outlaw Caller ID. The commission did not accept that recommendation.

Consumer and privacy activists argue that phone companies are playing on the safety and security concerns of consumers, who make or receive an average of 10 calls per day at their homes, to introduce a service that ultimately will be of more benefit to businesses.

Mary Culnan, a Georgetown University business professor, argues that phone companies are promoting the issue of the privacy of the call recipient while not focusing on the privacy of the caller. “The phone companies want it both ways,” she said. “They’re changing the rules of the game. . . . This is not a residentially oriented service. Phone companies are trying to put that spin on it. But it’s a service that businesses will benefit the most from.”

Regulators in some states, including California, have responded to such concerns by allowing residents to block their numbers from appearing on the special Caller ID display equipment. In all but 12 of the 29 states where the service has been approved, customers can block their phone numbers on some or all calls.

In California, regulators gave consumers the right to permanently block their numbers from the Caller ID system, a choice the phone companies fear too many customers--remember, more than 40% of the state’s residential phone numbers are unlisted--will take.

The phone companies argue that without a critical mass of numbers available to the Caller ID program, subscribers won’t pay an estimated $65 for the special decoding device plus the additional $6.50 to $7.50 monthly service charge.

“If you buy a device and it registers that 70% of the calls you receive are from ‘private’ numbers, you don’t get much value,” complained Ron Smith, the Caller ID product manager for GTE. “The blocking system approved in California so devalues the service that there’s no point in offering it.”