Ofcom Changes
Responses to the September 2005 Consultation
Ofcom received 1308 responses to the September 2005 Consultation. The main arguments raised and Ofcom's responses to them are summarised below. The points raised are covered in more detail in the following sections.
Consumers
1207 responses were received from consumers. These revealed very strong support for the proposal to restore the link between 0870 and geographic call charges, principally so that 0870 calls would be included in call packages.
Consumers' views were divided on the subject of revenue sharing on the 08 range, with some regarding it as a form of deception and others being neutral on the subject or supporting the availability of revenue shares, provided the consumer was given good value for money. This diversity of opinion is consistent with the results of the market research undertaken by Ofcom in 2005, which were described in the September 2005 Consultation. In Ofcom's view, the proposed package of measures strikes a reasonable balance, as regulatory support for revenue sharing will be removed on the 0870 range, and probably in due course on 0845, but there will continue to be scope for revenue sharing, accompanied by an appropriate level of consumer protection, on other 08 number ranges.
Consumers were also divided in their views on call price pre-announcements, with some seeing them as a useful way of providing price transparency and others being opposed to their use. In particular, there was marked opposition to the proposed pre-announcement option for 0870 calls, consumers seeing this as a loophole that would allow CPs to continue charging more for 0870 calls than for geographic calls. Ofcom does not consider the pre-announcement option to be a 'loophole'. The main purpose of restoring the link to geographic call charges is to improve transparency, rather than to reduce the price of calls, although improved transparency could well lead to lower prices as a result of more effective competition. Ofcom remains of the view that free-to-caller pre-announcements would provide a reasonable degree of price transparency and that this option should be available to OCPs who wish to charge more for 0870 calls than for geographic calls.
There was a very strong desire among consumers for 08 call charges to be more straightforward and transparent. For many, this is linked to the desire for 0870 calls to be included in call packages, and to the view that 0870 calls should cost no more than geographic calls.
Consumers tended to agree that PRS regulation should be extended to cover 0871 calls, though many thought this could be achieved by requiring SPs to move their services from 0871 numbers to the 09 range. In effect, this would mean closing down the 0871 range. Ofcom does not consider that it would be proportionate to take this course of action, as it is not clear that there would be any significant benefits in terms of improved price transparency, and the associated costs of migration would be considerable.
A number of consumers felt that Ofcom should take the same action on 0845 as was proposed for 0870. Ofcom can see the arguments for restoring the geographic link and removing the 0845 range from the scope of the NTS Condition but believes that these measures would be premature. As around 85% of call minutes to 0845 numbers is still accounted for by dial-up internet services, all of which would have to move to other ranges if revenue sharing ceased, the benefits of restoring the geographic link would be limited and the associated migration costs would be relatively high. In Ofcom's view, this option should be reviewed again in two years’ time.
Some consumers felt that Ofcom's proposals did not go far enough in addressing their concerns about the use of NTS numbers by public bodies, arguing for example that such bodies should be required to use geographic numbers. Ofcom does not consider that it has sufficient grounds to justify preventing public bodies using revenue sharing NTS numbers. It does, however, believe that its proposal to open up the 03 range for services, which do not require a revenue share, could help to address consumer concerns, as this range could provide a suitable home for many public services. Ofcom is consulting separately on this proposal in the Numbering Review consultation.
Some consumers were concerned about call waiting times, and about having to pay twice for customer service e.g. they should not have to pay a higher call charge to complain about the shortcomings of a product or service they have already paid for. Whilst Ofcom has some sympathy with this view, it is not Ofcom's role to dictate how businesses in sectors of the economy unrelated to communications may charge their customers. However, Ofcom does have a role in seeking to ensure that there is an adequate level of price transparency, particularly in relation to revenue sharing calls, and an appropriate level of consumer protection. Many of the proposed measures are designed to achieve these objectives.
Consumers were generally very supportive of the proposal to extend PRS regulation to adult services currently provided on 08 numbers.
Communications providers, resellers and service providers
For the most part, CPs, resellers and SPs were very strongly opposed to the proposals set out in the September 2005 Consult ation, and particularly to the proposed restoration of the geographic link and the removal of 0870 calls from the scope of the NTS Condition.
For TCPs, the proposals for 0870 were seen as an over-reaction to the concerns of a minority of consumers, which would damage unnecessarily a very successful industry, and reduce the service levels provided to consumers. UKCTA, which represents many of the larger CPs (other than BT) argued that Ofcom should intervene to regulate the retail price of 0870 calls made from BT lines in order to stabilise termination payments. Ofcom rejected this proposal in the September 2005 Consultation, on the grounds that it would be inconsistent with Ofcom's commitment to use the least intrusive mechanism available for achieving its objectives.
In support of its response, UKCTA commissioned an assessment of Ofcom's proposals by economic consultancy Indepen, which concluded that additional benefits could be achieved if the approach proposed by UKCTA was followed. Ofcom does not accept the findings of the Indepen report, principally because they depend critically on Ofcom regulating BT's prices for 0870 calls. As noted above, Ofcom does not believe this approach would be consistent with its regulatory principles.
For a number of OCPs, the proposal to extend the 0870 pricing convention in the Plan so that it applies to all CPs would amount to unjustifiable price regulation of non-dominant firms, and would be an unwarranted extension of regulation. Ofcom rejects this view. In Ofcom's opinion, the proposals are consistent with Ofcom's statutory duty to promote consumer interests, and with the role of the Plan in providing transparency to consumers regarding the services available on different number ranges.
In contrast to the other CPs, BT was broadly supportive of the proposals, and particularly of the proposal to restore the geographic link and remove 0870 calls from the scope of the NTS Condition. It was concerned that the delay in taking action on 0845 calls would create market uncertainty, which could be damaging to both the industry and consumers. Ofcom accepts that the uncertainty over the future of the 0845 is undesirable, but believes that it has given as clear an indication of its future plans as would be appropriate at the present time.
One respondent – Flextel – put forward a detailed proposal for a price labelling system, under which consumers could find out the price of any call in advance, by dialling a 3-digit prefix followed by the number they wish to call. Ofcom considers that this proposal has some merits, and may warrant further consideration as a means of improving price transparency for all types of call (not just NTS). In the context of NTS, however, Ofcom has considerable doubts about the extent to which consumers would actually use such a service, and does not believe that it would be a more effective way of providing transparency than the measures proposed in the September 2005 Consultation.
A number of resellers oppose the proposals because of the damaging effect they could have on their businesses, and on their customers. Ofcom recognises that its proposals will indeed have a very disruptive effect on a small number of businesses that depend heavily on revenues from the provision of inbound 0870 services. However, Ofcom remains of the view that, as it is the recipient of the call (the SP) who decides whether or not to purchase inbound call management services, it is not unreasonable that the same party should also be responsible for paying for the services they have opted to receive. Ofcom has also estimated that the scale of the impact on resellers is unlikely to be sufficient to alter the balance of costs and benefits that will flow from the implementation of the proposals – the benefits are still likely to outweigh the costs.
A number of SPs also refer to the disruption that Ofcom's proposals will cause, with several arguing that Ofcom has severely under-estimated the costs of number migration that will flow from its proposals for 0870. Ofcom has reviewed its migration costs estimates in the light of these responses, and made some amendments where they have been justified. However, the resulting estimates still support the changes proposed for the 0870 range.
Several resellers and SPs expressed their concern that the 0871 range was not an adequate alternative to 0870 for those who want to continue revenue sharing, partly because international access is more restricted and partly because they believed that consumers are more wary of calling 0871 numbers. There was concern that consumer confidence in 0871 numbers would decline still further if 0871 were labelled as a premium rate range. Ofcom recognises that international access is more limited for 0871 than 0870, but the impact of this is small as only a very small proportion of 0870 traffic originates overseas, and Ofcom has begun talks with some CPs about improving 0871 access. In order to avoid possible negative associations with PRS calls, Ofcom will ask ICSTIS to consider branding the regulation of 0871 separately from existing PRS regulation.
Other respondents
Responses were received from a variety of other organisations, including other regulatory bodies and several not-for-profit organisations. The views expressed varied widely and a number of the comments made have been referred to above.
The Ofcom Consumer Panel ('the Panel') believed that Ofcom should make improving pricing transparency the primary objective of its proposals. While supporting the proposal to restore the link between 0870 and geographic call charges, the Panel felt that Ofcom should go further, by requiring all OCPs to provide price pre-announcements for 08 calls, or restricting revenue sharing to the 09 range. The Ofcom Advisory Committee for England also felt that revenue sharing should be restricted to 09 numbers. Ofcom remains of the view that a general requirement to provide price pre-announcements would be disproportionate, and that the costs of confining revenue sharing to the 09 range, in terms of migration costs and reduced service availability, would outweigh the prospective benefits.
ICSTIS indicated its agreement in principle to the extension of its remit to include 0871 calls, subject to detailed consideration of the scope of the regulation, the operational implications and the funding arrangements.
The Telephone Helplines Association ('the THA') expressed concern over the effect of the proposals on helplines, many of which currently use 0845 and 0870 numbers and depend to some extent on the revenue shares they receive. Ofcom intends to give further consideration to the possibility of opening up a new revenue sharing number range, specifically for use by not-for-profit organisations as part of the Numbering Review.