Contents

Summary

The Determination

Explanatory Memorandum

Annex A: ICSTIS Code of Practice

  Summary

S.1 This document contains a determination relating to the provision of Controlled Premium Rate Services under sub-paragraph 22.5 of Condition 22 of all Public Telecommunications Operator ("PTO") licences and under sub-paragraph 26.5 of Condition 26 of the class licences to run branch systems to provide Telecommunications Services ("TSL") and to provide International Simple Voice Resale Services ("ISVR").

DETERMINATION RELATING TO THE PROVISION OF CONTROLLED PREMIUM RATE SERVICES UNDER SUB-PARAGRAPH 22.5 OF CONDITION 22 OF ALL PUBLIC TELECOMMUNICATIONS OPERATOR ("PTO") LICENCES AND UNDER SUB-PARAGRAPH 26.5 OF CONDITION 26 OF THE CLASS LICENCES TO RUN BRANCH SYSTEMS TO PROVIDE TELECOMMUNICATIONS SERVICES ("TSL") AND TO PROVIDE INTERNATIONAL SIMPLE VOICE RESALE SERVICES ("ISVR")

WHEREAS:

(A) the Secretary of State for Trade and Industry (the "Secretary of State") has granted under section 7 of the Telecommunications Act 1984 as amended by the Electronic Communications Act 2000 (the "Act") the following licences:

(ii) the Class Licence to run Branch Systems to provide Telecommunications Services granted on 8^th February 2002;

(iii) the Class Licence to run Branch Systems to provide International Simple Voice Resale Services granted on 8^th February 2002).

(B) Condition 22.1 of the PTO licences provides that the Licensee may only provide a Controlled Premium Rate Service in whole or in part by means of the Applicable Systems where the Relevant Condition is satisfied;

(C) Condition 22.2 of the PTO licences provides that the Licensee may only provide a telecommunication service to another person by means of the Applicable Systems by means of which that person (i.e. the service provider), to the knowledge of the Licensee, provides a Controlled Premium Rate Service where the Relevant Condition is satisfied;

(D) Condition 22.3 of the PTO licences provides that the Relevant Condition is that there is in effect, at the time the Controlled Premium Rate Service concerned is provided, a code of practice governing the provision of such a Service, which has been recognised by the Director General of Telecommunications (the "Director General") for the purposes of that Condition after certain specified consultation;

(E) Condition 22.4 of the PTO licences provides that a code of practice shall only be recognised for those purposes if the Director General is satisfied that:

i. its provisions are capable of properly regulating the provision of the Controlled Premium Rate Services to which it relates and, without prejudice to the generality of the foregoing, which provisions may include adequate provision for compensating those who suffer as a result of the provision of such Services or any description of such Services; and

ii. adequate arrangements have been made for the constitution of a body of persons to apply and administer the Code;

(F) pursuant to Condition 22.6 of the PTO licences, the Director General may recognise a code of practice in relation to any description of Controlled Premium Rate Services or to all Controlled Premium Rate Services;

(G) Condition 26 of Schedule 1 to the TSL and the ISVR licences makes provision in terms identical for the purposes of this determination to those made by Condition 22 of the PTO licences, as set out above;

(H) the Director General is satisfied that the provisions of a code of practice to be issued by the Independent Committee for the Supervision of Standards of Telephone Information Services ("ICSTIS"), which is annexed to this determination, are capable of properly regulating the provision of all Controlled Premium Rate Services and that adequate arrangements have been made for the constitution of a body of persons to apply and administer the Code (that body being ICSTIS);

(I) in making this determination, the Director General has taken into account representations and observations received as part of the consultation process, and the matters described in the Explanatory Memorandum to this Determination; and

NOW, THEREFORE, THE DIRECTOR GENERAL, PURSUANT TO CONDITION 22.5 OF THE PTO LICENCES AND CONDITION 26.5 OF THE TSL AND ISVR LICENCES, HEREBY DETERMINES THAT:

1. The code of practice to be issued by ICSTIS, which is annexed to this determination, is recognised for the purposes of Condition 22.3 of the PTO licences to govern the provision of all Controlled Premium Rate Services as defined in Condition 22.11(a) of the PTO Licences, and is also recognised for the purposes of Condition 26.3 of the TSL and ISVR licences to govern the provision of all Controlled Premium Rate Services as defined in Condition 26.11(a), with effect from 10.00am today, 8 February 2002.

DAVID EDMONDS

DIRECTOR GENERAL OF TELECOMMUNICATIONS

8 FEBRUARY 2002

EXPLANATORY MEMORANDUM

E1. The Director General of Telecommunications (the "Director General") has today modified the PTO licences in accordance with section 12 of the Telecommunications Act 1984 as amended by the Electronic Communications Act 2000 (the ‘Act’). The modifications have replaced the previous Condition 22 with a new Condition 22 entitled ‘Controlled Premium Rate Services’ and made minor drafting changes to Condition 23 entitled ‘Provision of Special Facilities Relating to Chatline and Message Services’.

E2. The Secretary of State for Trade and Industry (the "Secretary of State") has today revoked and re-granted the class licences to run branch systems to provide Telecommunications Services ("TSL") and International Simple Voice Resale Services ("ISVR"). The reason for doing so was to insert a new Condition 26 in identical terms to that of Condition 22 of the PTO licences and to make minor drafting changes to Condition 27 in identical terms to that of Condition 23 of the PTO licences.

E3. The new Condition 22 widens the definition of what type of premium rate services ("PRS") are caught by replacing the current definition of ‘Controlled Services’ with the definition of ‘Controlled Premium Rate Services’ ("CPRS"). In broad terms, only live PRS were caught by the former definition. As a result, there was no code of practice governing the provision of PRS other than live PRS (such as recorded PRS) that could be recognised by the Director General.

E4. The reason why the Director General made the above-mentioned modifications to the PTO licences was to strengthen the regulatory regime in the PRS industry, so that the provision of a potentially larger category of PRS (other than simply live PRS) could be governed by a code of practice recognised by the Director General. The Director General now therefore has more ‘backstop’ powers to require network operators to cut off such services that are not complying with the Code of Practice administered by the Independent Committee for the Supervision of Standard of Telephone Information Services ("ICSTIS") following it making such a request to the Director General, if the Director General considers it appropriate to make such a direction.

E5. The text of the modifications and their effects are set out in full in the Oftel Statement entitled ‘Regulation of Premium Rate Services: Licence Modification’, which was published on 24 July 2001. The document is available via Oftel’s website www.oftel.gov.uk).

E6. On 12 October 2001 the Director General gave notice that he proposed to make a determination under sub-paragraphs 22.5 and 26.5 of the PTO licences and the TSL and ISVR licences, respectively. The Director General allowed a period of 28 days in which to make representations, with no further period for comments on comments. The draft determination was published and a copy sent to all the licensees operating under the PTO licences.

REPRESENTATIONS RECEIVED DURING THE CONSULTATION PERIOD

E.7. The Director General received five representations during the consultation period, and these have been considered.

E.8 First, British Telecommunications plc ("BT") supported the recognition of the merged Code of Practice but indicated that that a minor drafting amendment was required to provide greater clarity. BT argued that paragraph 1.3.2 of the Code of Practice, which stated: "CPRS do not include services which cost less than a certain amount which is determined by the Director General" was not consistent with the relevant wording in paragraph 1.4.3(iii)(A) i.e. ‘is a charge rate which exceeds any amount determined by the Director General in a determination…’. BT believed that paragraph 1.3.2 should therefore be amended to read "CPRS do not include services which cost up to and including an amount determined…".

E.9 The Director General considers that the proposed changes would add greater clarity to the Code of Practice. The proposed amendment has therefore now been made to the Code of Practice, which is annexed to this Determination.

E.10. Second, representations were also received from Network for Online Commerce ("NOC"), the Premium Rate Association ("PRA"), Coulomb Ltd and Opera Telecom. These representations were of a more general nature, and did not comment on the capability of the new Code of Practice to properly regulate the provision of all CPRS. The representations made certain comments about the manner in which ICSTIS operates as a body. They further argued that there should be a review of, and further consultation regarding the PRS regulatory environment.

E.11. The Director General has given consideration to these representations and has not altered his view that the determination should be made. First, the representations make no comment about the capability of the Code of Practice to properly regulate the provision of CPRS, and the Director General has therefore been given no cause to doubt that the Code of Practice is capable of such proper regulation. Second, the Director General disagrees with the comments made about ICSTIS and its manner of operation. Last, the Director General does not accept that there should be a further review and consultation on the future regulation of the PRS industry and, in particular, notes that such a review and consultation has been ongoing formally and informally since 1999.

The Determination

E.12. ICSTIS supervises the promotion and content of PRS on behalf of the telephone companies through two codes of practice at present – a ‘General Code’ which is a voluntary arrangement and covers most PRS; and a ‘Live Code’ which covers live PRS and must be recognised by the Director General. This model of self-regulation has been historically successful, and a good example of effective industry regulation in action.

E.13. The Director General has now decided to make the Determination contained in this document under sub-paragraphs 22.5 and 26.5 of the PTO licences and the TSL and ISVR licences, respectively so that a new merged ICSTIS Code of Practice to replace the current separate codes is now recognised by the Director General. The new Code of Practice covers both live and non-live PRS.

E.14. The Director General notes that the new Code of Practice, annexed to this determination, is designed to set and maintain standards for PRS, inter alia:

1. provisions aimed at ensuring the legality, decency and honesty of PRS;
2. rules on promotional material, advertising and tariff transparency of PRS; and
3. provisions relating specifically to live services, and other services such as children’s services and sexual entertainment services.

E.15. The Director General notes in addition that the new Code of Practice now incorporates additional conditions and consumer safeguards which have been included to cover the re-introduction of Chatline Services. Previously, no code was recognised by the Director General for Chatline Services, since he revoked his recognition of one of ICSTIS’ previous codes on 6 April 1992 insofar as that governed the provision of Chatline Services. However, the Director General notes that ICSTIS has been working with representatives of the PRS industry to examine the possibility of re-introducing Chatline Services, and the additional conditions and safeguards comprise, inter alia:

1. tariff ceilings of 60 pence;
2. forced release measures with call spending limited to £30.00; and
3. robust compensation arrangements which have been set up to underpin the safeguards offered by the Service Provider Bonds.

E.16. In the light of this the Director General is satisfied that the provisions of ICSTIS’ new Code of Practice, which is annexed to this Determination, are capable of properly regulating the provision of all CPRS, including Chatline Services, and that adequate arrangements have been made for the constitution of a body of persons to apply and administer the Code (that body being ICSTIS).

E17. Accordingly, the Director General is now making the Determination contained in this document recognising the Code for the purposes of the proposed Condition 22.3 and 26.3.

E18. The ICSTIS Code of Practice annexed to this determination supersedes the ICSTIS Live Conversation Services Code of Practice, last recognised by the Director General on 19 January 1998, and effective from 9 March 1998, together with the ICSTIS Code of Practice Eighth Edition (March 1998, revised 15 February 1999).

E19. The new Code of Practice will come into effect on 25 March 2002. ICSTIS will shortly be issuing copies of its new Code to all service providers, network operators and other interested parties. The new Code will also be accessible on the ICSTIS website at www.ICSIS.org.uk from 18 February 2002.

ANNEX A – ICSTIS CODE OF PRACTICE

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