Ofcom targets competition and consumer safeguards for 0845 and 0870 numbers

22 October 2004

Ofcom today announced a series of proposals on Number Translation Services (NTS). The proposals focus on 0845 and 0870 numbers which offer consumers and businesses access to a range of services including dial up Pay-As-You-Go (PAYG) internet access, rail enquiries, tele-voting, and telephone banking.

Ofcom is consulting on measures which aim to provide certainty for businesses offering these services and clarity for consumers calling 0845 and 0870 numbers.
The key proposals are:

• Removal of links between BT 0845 / 0870 tariffs and BT local / national call rates;

• New BT price ceilings: 0845 (4 pence per minute) and 0870 (8 pence per minute);

• New guidance to prevent misleading advertising of 0845 and 0870 services;

• Guidance for government departments using 0845 and 0870 numbers;

• Extended role for ICSTIS to cover some or all 0845 and 0870 services.

Ofcom is already conducting a separate review of premium rate services regulation for the DTI. This will examine the options for strengthening the powers of the existing premium rate regulator, ICSTIS.

In parallel with today's proposals, Ofcom is also consulting on its Market Review of NTS termination in the UK.
NTS termination describes the delivery of a call by a telecommunications carrier from the consumer's home network to the organisation using the NTS number.

Ofcom is seeking views on its initial findings that:

• NTS termination is a discrete market in which BT has Significant Market Power;

• BT should therefore be required to provide NTS call termination on fair and reasonable terms and conditions, and be subject to;

• a non-discrimination condition, requiring BT to provide the same service terms and prices to competing providers as are available to BT itself.

BACKGROUND

Ofcom's proposals aim to address two separate areas of concern about
NTS:

• The impact of BT Retail price changes and discount packages on the business model for 0845 dial up internet services. These services represent about half of all NTS calls and serve a significant proportion of UK internet consumers.

• Consumer concerns about the cost of calling voice services offered on 0845 and 0870 numbers. These services are often advertised as local or national rate calls respectively, but these descriptions have become a source of confusion as competitive services and tariffs have supplanted a single set of BT prices.

DIAL UP INTERNET

Internet Service Providers (ISPs) offer consumers a wide range of dial up Pay-As-You-Go (PAYG) internet services using the 0845 number range. These services provide low cost dial-up internet use for relatively light users of the internet.

ISPs are supplied by BT Retail itself and by alternative
telecommunications providers, who use the difference between BT Wholesale's cost-based charges for originating and billing a call, and the retail charge for a BT local call to create a margin for the ISP.

However reductions to BT's retail prices for local calls and the introduction of discount packages have created uncertainty about the margin between wholesale and retail charges and raised questions about the advantages of using 0845 to supply ISPs.

Ofcom's proposed solution removes the link between 0845 numbers and BT's normal local call rates; freeing both BT Retail and the alternative carriers to price their deals competitively to ISPs.

To ensure consumer protection, Ofcom has proposed price ceilings on BT for 0845 at 4 pence per minute; and for 0870 at 8 pence per minute. Within the price ceilings in the 0845 number range telecommunications carriers will be able to offer a range of bulk price deals to ISPs.

The ISPs will in turn be able to compete for customers on price as well as service features. This will sustain competitive pay-as-you-go dial-up internet services without the need for disruptive and costly number migrations.

0845 AND 0870 VOICE CALLS

Ofcom is aware of concerns about some aspects of 0845 and 0870 voice services. These include:

• 0845 and 0870 services are often advertised as local rate and national rate calls respectively. However increasing competition for fixed-line telephone calls has resulted in a broad range of prices and discount call packages for local and national calls to geographic numbers. This means the cost of calling an 0845 number can be higher than the cost of a local geographic call, and the cost of calling an 0870 number can be higher than the cost of a national geographic call.

• Few businesses offer 0845 or 0870 numbers alongside alternative geographic contact numbers. But discounted call packages mean that if consumers want to contact organisations close to their homes, they would often be better off making calls to geographic numbers rather than 0845 or 0870 numbers.

• Businesses like call centres, that use 0845 and 0870 numbers, may be able to obtain some revenues for receiving inbound calls from the telephone companies providing their service. Consumers have become concerned that this revenue may provide an incentive for some companies
to prolong calls.

Ofcom is consulting on ways to address these consumer concerns, including:

• Removing links between BT 0845 / 0870 tariffs and BT local / national call rates. Ofcom believes that the proposed BT price ceilings for 0845 (4 pence per minute) and 0870 (8 pence per minute), will encourage the market as a whole to move to a pricing model that is clearer for consumers.

• Ofcom will work with the Advertising Standards Authority (ASA) and the Committee of Advertising Practice (CAP) on the production of new guidance to prevent misleading advertising of 0845 and 0870 services. The ASA will take responsibility for broadcast advertising regulation on 1 November 2004, creating a one-stop shop for advertising standards.

• Ofcom will contribute to the Central Office of Information's guidance for government department contact centres setting out best practice on the use of 0845 and 0870 numbers.

• An extended role for the existing premium rate regulator ICSTIS, to cover some or all of the services provided on 0845 and 0870 numbers.

The closing date for responses to the consultation is 7 January 2005.
The closing date for responses to the consultation on Ofcom's Market Review of NTS termination is also 7 January 2005. Both consultation documents are available at: www.ofcom.org.uk

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