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Summary

1.1 ‘Ofcom’ (the Office of Communications) exists to further the interests of citizens and consumers through a regulatory regime which, where appropriate, encourages competition. Effective competition delivers choice and lower prices to consumers as well as opportunities for new services and providers. However, consumers may need protection from inappropriate behaviour by certain providers that may undermine confidence in the market as well as causing consumer detriment.

1.2 This document invites comments on a Notification under section 121(7) of the Communications Act 2003 (‘the Act’) on Ofcom’s approval to a proposed emergency code amendment (‘the ECA’) to the Independent Committee for the Supervision of Standards of Telephone Information Services (‘ICSTIS’) Code of Practice (Tenth Edition) (‘the approved Code’).

1.3 The effect of the proposed amendment would be to impose requirements upon all Network Operators (‘NOs’) , as defined in the approved Code, not to make payments to Service Providers (‘SPs’), also as defined in the approved Code, for at least 30 days after calls have been made by consumers. The modification to the approved Code is set out in the Annex to the Schedule to the Notification, published at Annex 3 to this document.

1.4 The requirement to slow down the flow of money to SPs comes from Ofcom’s report to the Department of Trade and Industry (‘DTI’), The Regulation of Premium Rate Services, published in December 2004 (‘Ofcom’s report’). The review was triggered by growing concern over the problem of ‘rogue’ internet diallers and other such problem services, and the extent to which the current regulatory regime was able to deal effectively with problems of this kind. Ofcom’s report is available on the Ofcom website at: http://www.ofcom.org.uk/telecoms/ioi/nwbnd/prsindex/ntsprsdti/prs_review.pdf

1.5 During the course of the review, Ofcom identified a number of problems with the current regulation of premium rate services (‘PRS’), and our report made a number of detailed and incremental recommendations which, it was anticipated, would significantly reduce the scope for consumer detriment and restore consumer confidence in the PRS industry.

1.6 One such recommendation concerned the speed and frequency of out-payments from Terminating Communications Providers (‘TCPs’) to SPs, and the report noted concern about current commercial practices where monies were paid out quickly (typically weekly or twice-weekly), which merely facilitated the flow of monies to unscrupulous SPs. These arrangements make it very difficult for ICSTIS to identify a breach and take action against an SP before the money is paid out by the TCP to the SP.

1.7 ICSTIS issued a consultation document on 15 April 2004 seeking comments on the ECA to include a specific obligation on NOs not to make payments to their SPs for at least 30 days after calls have been made. ICSTIS received 20 responses to its consultation document and, in light of comments received, concluded that the proposed ECA, as set out in its consultation document, should be endorsed in its entirety. ICSTIS published a statement on 13 June 2005 setting out its conclusions. It submitted the statement to Ofcom on the same day in order for Ofcom to give approval to the ECA in accordance with section 121(6) and 121(7) of the Act. ICSTIS’ statement is available on the ICSTIS website at: http://www.icstis.org.uk/icstis2002/pdf/A%20Statement%20on%20the%20ECA%20Condoc%20-%20FINAL.pdf

1.8 Ofcom is now proposing to approve the ECA. In reaching its proposed conclusions set out in this document, Ofcom has considered, and acted in accordance with its principal duty in section 3, as well as the community requirements in section 4 of the Act. Ofcom has also considered the tests set out in sections 121(1) and 121(2) of the Act.

Consultation

1.9 Ofcom is inviting written views and comments by 5pm on Friday 11 July 2005 on the amendment to the approved Code, as amended, which is set out in the Annex to the Schedule to the Notification, published at Annex 3 to this document.

1.10 Details of how to respond can be found in section 5.

Effective date

1.11 Ofcom is proposing to endorse ICSTIS’ proposal that the ECA should take effect six weeks from the date of publication of Ofcom’s final Notification, should we issue such a notification approving the ECA following this consultation and due consideration of responses received.

The full document is available below

• Notification of approval of an emergency code amendment to the ICSTIS Code of Practice (Tenth Edition) [pdf]

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