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09|12|04

Ofcom recommends measures to improve Premium Rate regulation in the UK

Ofcom has today published its Review of regulation of premium rate services including recommendations for improving consumer protection.

The premium rate services regulator, ICSTIS, is responsible for creating a Code of Practice, which all premium rate service providers must follow, and for enforcing compliance with that Code.

Ofcom has statutory back-stop powers in relation to premium rate services. It is responsible for approving the Code of Practice and, under Section 120 of the Communications Act, for setting the conditions under which premium rate service providers can operate.

The Ofcom Review was undertaken as a result of a formal request from the Department of Trade and Industry (DTI). This followed discussions between DTI, Ofcom and ICSTIS relating to growing concerns about fraudulent and misleading use of premium rate services (typically numbers beginning 09), including 'rogue' internet diallers which re-route dial up internet connections onto premium rate numbers without customers' knowledge or consent.

The Premium Rate industry

Premium rate calls cost up to £1.50 per minute from the BT network and typical services include TV vote lines, competitions, adult services, chat lines, mobile phone ring tone downloads, and interactive TV games. The UK premium rate industry generated revenues estimated at £850 million in 2003.

The premium rate industry is complex, with many parties involved in the value chain.

Customers pay their telecoms provider for all their calls. The telecoms provider in turn pays other networks to connect the customer's calls, either to the individual or organisation they have dialled or to special services such as premium rate.

Companies offering premium rate services collect a share of revenue from their network providers who have in turn been paid by the telecoms provider who is charging the customer.

The ICSTIS Code of Practice applies to any company offering premium rate services in the UK. These companies are responsible for ensuring that the content and promotion of their premium rate services comply with the Code.

ICSTIS has a range of sanctions it can impose if it finds that the Code has been breached. The Code also includes general requirements for network providers to assist ICSTIS in its regulation of companies offering premium rate services.

Ofcom's recommendations

The Review's recommendations include:

• Customer refunds: Customers pay bills to their telecoms providers for calls including those to premium rate services. Telecoms providers pay the relevant network providers' charges for connecting the calls. Network providers should NOT share these call revenues with companies offering premium rate services for at least 30 days, to allow ICSTIS sufficient time to assess complaints and potential fraudulent activity. These call revenues should also be frozen during any additional ICSTIS investigation that is necessary, and if necessary for a further three months after an investigation is complete, to fund any customer refunds that ICSTIS concludes are appropriate.
• ICSTIS investigations: The ICSTIS Code should require network providers to support ICSTIS by providing detailed information on:
  • the identity of the companies offering premium rate services with which they do business and taking all reasonable steps to ensure that information is accurate;
  • call traffic and revenues where a complaint has been received.
• Fines: The DTI should consider increasing the maximum fine which can be imposed for a breach of the ICSTIS Code of Practice. Under Sections 121 and 123 of the Communications Act 2003, the current maximum is £100,000. The Code of Practice should also be amended to enable ICSTIS to fine network providers as well as service providers, where the network providers fail to meet their obligations.
• Customer service and consumer information: The ICSTIS Code should require companies offering premium rate services to have effective customer service and refund policies in place. Telecoms providers should be required to make practical information on premium rate services available to their customers, including information on call barring facilities for example. ICSTIS should consult on guidelines that target effective provision of consumer information on premium rate services.
• ICSTIS governance: ICSTIS should proceed with proposed changes to ensure appropriate accountability to industry stakeholders. These changes include the conversion of the existing ICSTIS Committee into a Board including members with industry expertise, and the establishment of an advisory committee of industry stakeholders.
• ICSTIS and Ofcom roles: The two organisations should agree a Memorandum of Understanding (MOU) which clarifies the roles of the two organisations in relation to premium rate services regulation, and ensures appropriate accountability to Ofcom.

Implementation

Ofcom, ICSTIS and DTI will form a steering committee to oversee implementation of the proposals. Some of the proposals are already in train, for example Ofcom is aware that a number of stakeholders are already considering improved traffic monitoring and information sharing arrangements. Other proposals will require formal public consultation during the course of 2005, including:

• ICSTIS public consultation on changes to the Code of Practice, including statutory three month consultation with European Commission and Member States required under EU Technical Standards Directive;
• Ofcom consultation on amendments to requirements under General Condition 14 and related guidance designed to improve consumer information offered by telecoms companies on premium rate services;

Ofcom Chief Executive Stephen Carter said: "There is a clear need for action here. These are necessary changes to ensure consumer confidence in the premium rate industry for the long term."

Ends.

NOTES FOR EDITORS AND CSEs

Ofcom is the independent regulator and competition authority for the UK communications industries, with responsibilities across television, radio, telecommunications and wireless communications services.

For further details please visit www.ofcom.org.uk.

CONTACT

Ofcom Media Office
mediaoffice@ofcom.org.uk
(+44) (0) 20 7981 3033

ICSTIS Press Office
Rob Dwight
rdwight@icstis.org.uk
(+44) (0) 20 7940 7408

DTI Press Office
Neil Burrows
Neil.Burrows@dti.gsi.gov.uk
(+44) (0) 20 7215 5960

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