Number Translation Services: A Way Forward Consultation

Response Deadline: 6th December 2005

Ofcom's Options Indepth

Below are Ofcom's options in more depth. To return to the summary options click here.

Ofcom has reviewed the policy issues considered in the October 2004 Consultation and has updated them to take account of the responses to the October 2004 Consultation and additional information gathered by
Ofcom since the October 2004 Consultation.

A. Revenue sharing on 08 numbers

A key feature of NTS is that it makes revenue sharing possible between the TCP and the SP. In this way it supports the use of NTS as a revenue sharing mechanism for various services that can be accessed via 08 and 09 numbers.

Some consumer respondents to the October 2004 Consultation felt that revenue sharing should be discontinued on 08 numbers and restricted to the 09 range where there is better consumer awareness that call charges are higher than for geographic calls and that SPs often receive a share of call charges. Other consumers who have contacted Ofcom about NTS also held this view. In addition, other respondents held views that indirectly questioned whether revenue sharing should continue on 08 numbers. These include:

• the view that calls to 084x and 087x numbers should be charged at the same rates as geographic calls. The underlying reason why calls to 084x, 087x and 09x numbers are often higher than geographic call charges is revenue sharing. If NTS calls were charged at geographic rates, call termination charges paid to TCPs would be substantially lower that at present, particularly for 087x and 09x numbers with the result that the revenue share available to SPs would also be much smaller and in some cases too small to fund the services provided;
• the view that SPs should be required to publish geographic numbers alongside their NTS numbers. This would allow callers to avoid NTS numbers and circumvent the revenue sharing provided by NTS;
• the view that only SPs that provide services perceived as value-added should be allowed to use NTS numbers;
• the view that increasing use of 08 numbers will drive up call prices for consumers; and
• the view that revenue sharing allows SPs to exploit consumers either by charging them high prices for calls, by artificially extending calls or by more blatantly unscrupulous methods such as rogue internet diallers.

In addition, quantitative research undertaken by Ofcom indicated that almost half of consumers believe that revenue sharing should not be allowed.

The current regulatory arrangements were introduced specifically to facilitate revenue sharing and it is one of the main reasons that NTS numbers are widely used. However, Ofcom considers it important that consumers’ concerns about revenue sharing are considered.

A secondary policy issue about revenue sharing arises if Ofcom considers that it would be appropriate to re-establish the linkage between 0845/0870 call charges and geographic call charges (see policy issue B below). If this is the case there is a question about whether or not that move should be accompanied by the withdrawal of the regulatory support for revenue sharing for those number ranges by removing them from the scope of the NTS Condition. Once calls are charged at geographic rates, it could be argued that the geographic interconnect model should apply, and those calls removed from the scope of the NTS Condition. Although this would not amount to a ban on revenue sharing, in practical terms it would almost certainly put an end to revenue sharing on those ranges because of the reduced retail price for those calls.

B. Retail pricing of 0845 and 0870 calls

Since the introduction of the NTS regime in 1996, the retail prices of 0845 and 0870 calls for BT customers have been linked to BT’s standard retail call charges, net of applicable discounts, for local and national geographic call charges respectively. Many consumers are aware of the association between 0845 and 0870 ranges and local and national rate charges, which has been reinforced by advertisements for the services provided on those numbers.

However, the link has broken down because very few consumers now pay the standard rates for geographic calls. Most of BT’s residential consumers, for example, are now on the BT Together Option 1 package, where geographic calls cost less than the rates charged for calls to 084x/087x. This problem does not affect other NTS number ranges such as 0844, 0871 and 09, since different retail pricing arrangements apply and there is no linkage to geographic charges. For these ranges, retail prices for BT customers are selected set by company from the various prices available.

The breakdown of this linkage has had an adverse impact on the consumer interest in several respects:

• it has given rise to potentially misleading advertising of 0845 and 0870 numbers as being charged at local and national rates;
• as a result of consumer awareness of the local and national rate linkage and possibly also from misleading advertising, some consumers feel they are being overcharged for 0845 and 0870 calls;
• as discussed further in policy issue C below, it contributes to the current lack of pricing transparency for consumers;
• services provided on 0845 and 0870 numbers are priced higher than they otherwise would be if the linkage were not broken and calls were charged at the geographic rates typically paid by callers;
• Ofcom's research shows that many SPs are not aware that the linkage to geographic rates is now broken and as a result their customers pay higher rates than the SPs intend; and
• the fact that 0845 and 0870 calls are charged at a standard rate (i.e. not one selected by the SP) limits the scope for price competition between SPs and may increase the likelihood of consumers getting poor value for money. This is most likely to occur where a caller has little or no choice of the number being called.

The linkage to geographic charges is also a major contributory factor to the revenue uncertainty problem that affects TCPs and SPs in relation to 0845 and 0870 calls, whether the calls originate on BT's network or that of another CP.

For 0845 and 0870 calls originating on BT's network, the amount paid to the TCP is effectively a residual amount, obtained by deducting BT's regulated charges for conveyance and retailing from the retail price of the call22. BT's retail charges for 0845 and 0870 calls are driven by:

• its standard retail charges for local and national geographic calls, which are subject to regulation through a charge control for residential calls23 and are influenced by competitive conditions in the broader market for geographic calls; and
• any discounts BT chooses to apply to these call types, which are at its commercial discretion (provided the discounts are applicable).

Thus TCPs other than BT are unable to exercise any effective control or influence over the revenues they receive for call termination if they use 0845 or 0870 numbers.

The terminating revenue uncertainty for TCPs extends to 0845 and 0870 calls originating on networks other than BT's, because of BT’s position as a prominent transit provider. In these circumstances, the current practice is for BT to collect its standard termination charge from the OCP and to pay the same amount to the TCP. BT charges either the OCP or the TCP for transit depending on the NTS number range.

The SPs who use NTS numbers are also affected to a greater or lesser extent by the terminating revenue uncertainty as it is likely to be reflected in their revenue shares.

C. Price transparency

Our previous research (reviewed in the October 2004 Consultation) has shown that consumers have a very low level of awareness and understanding of the pricing of 084 and 087 calls. On average, consumers’ perceptions of 0845 and 0870 calls prices are well above typical landline charges.

A significant proportion of consumers continue to associate 0845 and 0870 calls with local and national tariffs, and tend to think that the call prices are considerably lower, although still above their true level. Other consumers either believe that the calls are very expensive, and may therefore be reluctant to call them, or have no idea of the price of calls.

The problem of price transparency is exacerbated by the fact that the pricing designations laid down in the Plan effectively only apply to BT customers, and that calls can cost more for customers of other fixed line OCPs, mobile phone OCPs or from payphones. In some cases, the difference is considerable. Upto 40ppm from a mobile/payphone compared to 4ppm (0845) / 8ppm (0870) from BT landline.

These concerns raise an important issue about the role of the Plan and the effectiveness of its existing provisions. The Plan sets out designations for use of numbers. Included in this are upper limits regarding the retail pricing of calls to the various number ranges. The purpose of these designations is to indicate to industry the intended use for number ranges.

For the most part, the provisions of the Plan are only applied to the price of calls made from BT lines. In an increasingly competitive market, this focus on the prices of one particular company will be increasingly inappropriate.

The lack of price transparency gives rise to costs of two kinds. First, there is an economic cost, because tariff misperceptions will give rise to inefficient purchasing decisions; and second, there is the cost to consumers associated with the potentially misleading promotion of 0845 and 0870 calls as being charged, respectively, at local and national rates.

D. Consumer protection

Because 084 and 087 calls support revenue sharing to third party SPs, they can provide an opportunity for unscrupulous SPs to mislead, defraud or otherwise exploit consumers. As already discussed, where services use ‘09’ numbers, the potential for consumer detriment is restricted because such services are currently regulated by ICSTIS, and would therefore be subject to ICSTIS Code provisions such as the prior permissions regime for diallers. However, this is not currently the case in respect of 08 number ranges as ICSTIS does not currently regulate services falling within these ranges.

In addition to this general concern, two specific issues which have caused consumers concern are:

• rogue internet diallers, which have become increasingly common on 087 numbers. This increase may have resulted from SPs seeking to avoid the requirement to seek prior permission from ICSTIS following ICSTIS’ extension of its prior permissions regime to include premium rate diallers in 2004; and
• adult services, which are now common on 087 numbers, where if consumers wish to bar them means they would lose access to other 08 services. This raises consumer protection issues in relation to children and other vulnerable consumers and undermines the informative nature of the Plan.

For some, the problem is that businesses are increasingly using 0870 numbers, in particular, as a general alternative to geographic numbers. These calls have higher tariffs than calls to geographic numbers and generate a revenue share, which may, in the caller’s opinion, bear no relation to the value of the service provided to the caller. The fact that 0870 calls are charged at a standard rate (i.e. not geographical rates) limits the scope for price competition between SPs, and increases the likelihood of the consumer getting poor value for money. This is most likely to occur where a caller has little or no choice over the number being called.

E. Call centre waiting times

Responses to the October 2004 Consultation indicated that many consumers are irritated and annoyed by long call centre waiting times. Since most of these call centres are operated by businesses outside the communications sector Ofcom considers that ordinarily call waiting times are outside its regulatory remit. However, call centres that use NTS numbers are able to benefit from a revenue share as a result of a regulatory intervention by Ofcom. Ofcom therefore considers that in such cases there may be a case for Ofcom to intervene, if there is evidence to indicate that consumers are not getting value for money from a service they are paying for, at least in part, through their telephone bill.

This can be regarded as another of the consumer protection issues referred to in the previous sub-section.

F. Use of NTS numbers by public sector organisations

There is growing consumer concern about the use of NTS numbers by essential public sector services such as health care and other government agencies. Some consumers feel that public services should not be allowed to use these numbers. This is partly because call charges are higher than geographic calls and partly because of the revenue share that may be involved.

A considerable amount of media attention has been given to some recent cases involving the use of 087 numbers for public services such as the use of 0870 numbers by doctors and the use of an 0870 number by the Metropolitan Police Service for an enquiry line, following the London bombings of 7 July. Incidents such as these have led some to the view that Ofcom should take steps to restrict, or ban altogether, the use of 087 and possibly 084 numbers for the delivery of public services.

A further difficulty with public sector use of 08 numbers is that some 08 number ranges may be inaccessible when calling from abroad. Ofcom has had a number of complaints from UK citizens based overseas who have been unable to contact public services provided on NTS numbers.

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