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This document is a statement modifying the PRS Condition to capture Internet Dialler Software and a consultation document on proposals clarifying that PRS over Mobile Services are regulated by Ofcom.

Summary

Proposals

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 One such example is in relation to the regulation of Premium Rate Services (‘PRS’). PRS offer consumers with some form of content, product or service via fixed and mobile telecoms lines, and is charged to users’ telephone bill. While the great majority of PRS are welcomed by consumers and generate considerable consumer benefits, these benefits can be obscured by problems involving the use of PRS to mislead or even defraud consumers.

1.3 The statutory provisions for regulation of PRS are set out at sections 120 to 124 of the Communication Act 2003 (‘the Act’). The regulatory arrangements for PRS follow a self- and co-regulatory approach with the primary role of consumer protection falling to ICSTIS. Ofcom’s involvement in the PRS regulatory regime is to provide statutory ‘backstop’ support to the work of ICSTIS. Ofcom enforces directions issued by ICSTIS through Ofcom’s condition regulating the provision, content, promotion and marketing of PRS (‘the PRS Condition’) under section 120 of the Act. The effect of the PRS Condition is to bind each and every person falling within the definition of ‘Communications Provider’ (‘CP’) therein, to comply with directions given in accordance with an Approved Code by the Enforcement Authority (i.e. ICSTIS) and if there is no Approved Code, the provisions of the order for the time being in force under section 122 of the Act.

1.4 In November 2005, Ofcom published a consultation document on proposals for modifications to the PRS Condition. This was for two reasons. First, there was growing evidence of consumer harm arising from ‘rogue’ diallers using ‘08’ numbers and, in particular, ‘087’ numbers. Ofcom was concerned that this may be the result of a possible migration of diallers from ‘09’ numbers in an attempt to circumvent regulation of ‘09’ PRS and, specifically, the requirement to seek permission from ICSTIS. Second, in discussions with stakeholders, Ofcom had received representations from the industry to the effect that Ofcom does not currently regulate PRS accessible over mobile telephones. Ofcom did not consider that PRS accessible via mobile telephones was outside of its backstop powers underpinning ICSTIS regulation and sought to clarify this by a proposed amendment to the PRS Condition.

1.5 Accordingly, Ofcom proposed to modify the PRS Condition in two ways.

1.6 First, Ofcom proposed to extend the definition of CPRS to include ‘internet dialler software’ (‘diallers’), irrespective of the call cost or number. Diallers are a form of software that switch the modem setting of the computer that the dialler programme is running on from one particular internet connection to another.

1.7 In proposing to extend the definition of CPRS to capture diallers, Ofcom set out that it did not want to unintentionally capture pay-as-you-go dial up and unmetered dial up internet services. These services provided by Internet Service Providers (‘ISPs’) provide narrowband access to the internet to end-users using a dial-up connection. Consequently, Ofcom proposed to exclude pay-as-you-go dial up and unmetered dial up internet services from the proposed definition of internet dialler software in the PRS Condition.

1.8 Second, Ofcom proposed to modify the definition of CPRS to avoid any doubt that PRS accessed over mobile telephones are regulated under Ofcom's back-stop powers.

1.9 Ofcom’s consultation document is available on the Ofcom website at http://www.ofcom.org.uk/consult/condocs/prsconditions/

1.10 Ofcom received a total of 27 responses. A list of the respondents who submitted non-confidential responses is attached at Annex 6. The responses themselves are available for viewing on the Ofcom website at: http://www.ofcom.org.uk/consult/condocs/prsconditions/responses/?a=87101

1.11 In light of comments received to Ofcom’s consultation document as well as comments received in relation to the Number Translation Service (NTS) framework consultation ,which set out various proposals relating to the NTS regime as it applies to ‘08’ numbers, Ofcom has decided to give effect to the proposed modification to extend the definition of CPRS to include diallers, irrespective of the call cost or number, by publication of a Notification of a modification to the PRS Condition under section 48(1) and 120(5) of the Act. The notification is published at Annex 4 to this document.

1.12 In light of comments received on the proposal to remove any doubt that PRS over mobile telephones is regulated by Ofcom, Ofcom is today consulting further on a modification to the PRS Condition. Although there was broad support amongst the consultation responses for Ofcom to amend the PRS Condition to remove any doubt that PRS accessible over mobile telephones are regulated, there was some concern that the words that Ofcom proposed did not achieve the desired aim.

1.13 Ofcom had proposed that “calls to Mobile Services” be excluded from the PRS Condition. This was intended to ensure that calls to mobile services that were not genuine PRS but might have been caught by the price threshold in the PRS Condition were excluded from the scope of the PRS Condition. However, having carefully considered responses received, Ofcom is of the view that its proposed amendment might capture data services and that, consequently, reverse SMS services could be excluded from the scope of the PRS Condition and therefore from regulation. Ofcom does not consider that reverse SMS are outside of its backstop powers which underpin ICSTIS regulation.

1.14 Accordingly, Ofcom is today proposing a new modification to the PRS Condition to remove any doubt that that PRS accessible over mobile telephones are regulated. It is proposing to remove the ‘Mobile Services’ exclusion in its entirety. As set out in the consultation document, the intention behind the carve-out was to capture calls to mobiles that were not genuine PRS but may have been caught by the price threshold in the PRS Condition. However, a service must first fulfil the definition of PRS as defined in the Act to fall within the PRS Condition. Ofcom’s view is that ordinary calls to mobile telephones (that is what was intended to be excluded by the “Mobile Services” definition) are not PRS as defined in the Act. Ofcom’s view is that the exclusion is therefore unnecessary. Ofcom welcomes comments on this proposal.

1.15 Personal numbering services and radiopaging services are also currently excluded from the scope of the PRS Condition. The former are calls which allow an end-user to receive calls wherever he or she is; the latter involves the conveyances of signals from one piece of apparatus to another.

1.16 The rationale for the personal numbering services and radiopaging services exclusions was the same as for mobile services. In other words, there was a concern that the price threshold in the PRS Condition might capture these calls even though they were not genuine PRS. Accordingly, for the same reasons stated above, Ofcom considers that these exclusions are also unnecessary as they are not PRS as defined in the Act. Ofcom is therefore consulting today on their removal from the PRS Condition as well.

1.17 The proposed modifications to the PRS Condition are set out at Annex 5 to this document.

1.18 As set out in Ofcom’s consultation document, Ofcom has not considered the scope, purpose and effectiveness of PRS regulation but intends to review PRS regulation in the context of new services, and the need to reflect technological advances in a policy review of PRS to commence shortly in 2006. This review will consider the scope of PRS regulation, and how it should be applied to, or removed from, emerging commercial services coming out of the mobile, fixed telephony and broadcast sectors, as well as growth in broadband and Voice over Internet Protocol (‘VoIP’) billing as a possible new route to content.

1.19 In the meantime, Ofcom has concluded on the internet diallers amendment to the PRS Condition and is proposing further amendments in respect of the mobile services, personal numbering and radiopaging exclusions. Ofcom considers that it is necessary to undertake these matters before the review of scope has completed, given the evidence of the potential for harm to consumers in respect of the mobile services exclusion as set out in this document. In addition, as regards the mobile services, personal numbering and radiopaging exclusions proposals, Ofcom does not consider that it is extending policy but rather clarifying existing regulation.

1.20 In reaching its proposals and its 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 120(5) of the Act which apply to the setting, modification and revocation of a condition.

1.21 The modification to extend the definition of CPRS to include diallers, irrespective of the call cost or number, as set out in the Notification at Annex 4, will take effect one month from the publication of this Notification. This is to provide a reasonable period of implementation before the new obligations take force.

Consultation

1.22 Ofcom is inviting written views and comments by 5pm on Monday 10 July 2006, on the proposal to remove the mobile services, personal numbering services and radiopaging services exclusions from the PRS Condition. The Notification and proposed modifications to the PRS Condition are set out at Annex 5 to this document.

1.23 Details of how to respond on this issue can be found in Annex 1.

1.24 Ofcom will give careful consideration to all comments received during the consultation period, and in light of the comments received, may give effect to the proposals set out in this document, with or without modification, by publication of a Notification and explanatory statement. Ofcom expects to publish the Notification and Explanatory Statement later in the year.

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