Ofcom Summary

Response Deadline: 6th December 2005

Summary

The summary below is taken from Ofcom's website here. The full version is available to download (in acrobat reader format) here.

Introduction
Ofcom is the independent regulator of television, radio, telecommunications and wireless communication services in the UK.

Part of our role is to look closely at how these services are run and offered. Where we think things could be improved, we consult everyone involved, from the companies who offer these services to the customers who use them.

This summary of our second consultation in our continuing look into Number Translation Services (NTS). Our first consultation took place in October 2004, when we suggested a number of possible ideas and asked for everyone's views on them. At that time, we heard back from a wide cross-section of private customers and businesses. With this feedback in mind, we're also suggesting how NTS might work in the future - and again, we'd like your views.

NTS calls
What is an NTS call? It's a call to a phone number that usually begins with 08 or 09. These numbers put you through to a range of entertainment and information services, including banks, various helplines, public and government services, and pay-as-you-go internet services.

These 08 and 09 numbers have no connection with any particular place, unlike 01 and 02 numbers which relate to particular parts of the UK (for example, an 02 number is in London). You'll find more information in annex A about how NTS and 'geographic' calls work.

When you call an NTS service, your call is received (the industry term is 'terminated') by a telecoms provider working for that service. So, when you pay your own phone company for the call, they pass on a share of that money to the telecoms provider, who in turn passes on a share to the company offering the service you wanted. This process is known as 'revenue sharing' or micro-payment.

Why we're reviewing how NTS is run
There have been two causes for concern that have led us to carry out this review. The first is about the business arrangements between the various phone companies and providers, and the companies who actually offer the services (the 'service providers'). The second concern was raised by ordinary phone customers, who were asking why NTS calls often cost more than calls to 01 and 02 numbers and why it was so difficult to find out how much these calls cost before making them.

The industry and NTS
Like any phone call, an NTS call can involve more than one phone network. You may be with one phone company, while the service provider you're calling is with another. If you're a BT customer, then BT is the 'originating provider' or 'call originator' of your NTS call. The network who hosts that NTS service is the 'terminating provider' or 'call terminator'. Your call ends with them.

When a BT customer makes an NTS call, the current rules mean that BT must pass on most of the price of the call to the terminating provider. In fact, BT is only allowed to keep enough to cover its costs while any profits go to the terminating provider. But, if you make a geographic call (any call to numbers beginning 01 or 02), BT gets the profits and the terminating provider only gets enough to cover its costs.

The telecoms industry has raised some concerns about how these rules work:

• The terminating providers say that although they may receive the profit from NTS calls, they have little say in how much that profit is, or how much will be available for handing over to NTS service providers. From time to time BT reviews its charges, and this can mean that the terminating providers end up being paid less. In turn, this uncertainty about how much they'll earn affects the companies providing the NTS services, and there have already been several disputes.

• There are different rules on how the money earned for connecting 0844 and 0871 calls is shared compared to 0845 and 0870 calls. The industry would like these differences to be cleared up.

Pay-as-you-go internet services
As well as these concerns, there's a question over the future of pay-as-you-go (PAYG) internet services that use 0845 numbers. Internet service providers (ISPs) offer customers a wide range of these services, and more than five million people in the UK use them. They're perfect for people who don't use the internet very often, and who don't worry too much about high broadband speeds. However, in 2003 BT lowered its retail prices for 0845 calls, and with new discount packages on top, BT is now paying less to the terminating providers. The result is that ISPs may see their profits fall so much that it won't be worth them continuing to use an 0845 number for this valuable service.

One possible answer is that the ISPs move their services to a different NTS number, such as 0844, where BT can't change the amount it pays to the terminating providers. However, this solution may not be as good as it looks. The 0845 numbers of those ISPs are already stored in millions of customers' computers. Changing them would not be easy, and they would risk losing a lot of business. That's why ISPs are keen to hang on to their 0845 numbers, at least until those customers move on to faster broadband internet services.

Customers and NTS
We received over 100 responses to our first NTS consultation, published last October. These responses led us to carry out further market research to find out just how worried customers were about NTS calls. We also asked them what they thought about our ideas to tackle their concerns.

Overall, we identified a number of problems that needed attention, including the following:

• Few people seem to know what it costs to call 084 and 087 numbers, and most people think the calls are more expensive than they really are.

• Some customers think that terminating providers should stop sharing the money they earn through 08 numbers with the companies that provide the services. People think they can be overcharged, particularly when they call public and essential services, or after-sales support lines.

• There's a growing trend for companies to use more expensive 0870 numbers, instead of their 01 or 02 geographic numbers.

There are worries that people can be misled by advertising that describes calls to 084x numbers as 'local rate', and 087x numbers as 'national rate'. These descriptions suggest the numbers are being charged at geographic call rates, when in fact they are more expensive because most of them do not qualify for discounts.

Some customers believe that call centres using NTS numbers deliberately keep people hanging on so they can earn more from the calls.

There are concerns that more adult services are now being offered on 0870 and 0871 numbers, and that these numbers are more difficult to bar from children.

There are fears about fraud with pay-as-you-go internet connections. A customer's computer can be 'hijacked' into dialling more expensive 087 numbers, without them knowing.

Ofcom's proposed approach for NTS

Our first consultation

In our first consultation, we suggested five possible approaches for the future of NTS. These ranged from leaving things as they are, right through to banning revenue sharing altogether on all 08 and 09 numbers. Our own preferred approach was to open up 0845 and 0870 numbers to price competition by letting service providers charge what they want, up to a maximum of 4p a minute for 0845 numbers and 8p a minute for 0870 numbers. However, neither the industry nor its customers agreed with us.

We needed to decide whether the whole idea of companies sharing money from calls could be a bad deal for customers. From our research, we found that most people had no problem with the basic idea of paying for NTS services through the cost of their calls. In fact, many people thought that most NTS calls were reasonable value for money. There were concerns, however, about using NTS numbers for public services, and we have raised these concerns with the various public and government agencies. As a result, the Government's advisory body, the Central Office of Information, has announced that 087 numbers should not be used for public services.

Now that we've considered the views of customers, the industry and the NTS service providers in more detail, we have decided to change our approach. Our new proposals are set out below and, because they're quite different from our first ideas, we want everyone to have the chance to give us their feedback again. Please give us your views.

What changes are we proposing?

Under our new approach, NTS would change in the following ways:

• Cheaper 0870 calls. The main concern from customers is the growing number of service providers who are using 0870 numbers and the high costs of calling them. So, we are proposing that after the first year, calls to 0870 numbers should be charged at the same rate as a call to a geographic number. This change would mean that most calls to 0870 numbers would become cheaper.

In that first year, prices of 0870 numbers would be capped at their current price, and calls should no longer be advertised as being charged at 'national rate'. This is to avoid any confusion that these calls cost the same as geographic calls.

• A possible end to revenue sharing on 0870 calls. By lowering the cost of calls to 0870 after the first year, it should mean there would be very little money to share between the phone companies and NTS service providers. We also propose to stop supporting revenue sharing on 0870 numbers. These proposals would be likely to put an end to revenue sharing on 0870 calls.

• Classify 0871 as premium rate. We are also proposing that 0871 numbers should be brought within the current regulatory framework that exists for premium-rate services (PRS) operating on 09 numbers. This would mean that services using 0871 numbers would have to follow the same rules as those using 09 numbers. This would increase the level of consumer protection, including the need for call prices to be displayed on adverts for services using 0871 numbers. We are also asking whether all adult services should come under PRS regulation, whatever their cost, and we want your views on whether these services should only be allowed to use '09' numbers. Otherwise, there would be no changes to the prices of 0871 calls and revenue sharing would be allowed to continue on these numbers.

• Review revenue sharing on 0845 in the future. Since 0845 numbers are so popular for pay-as-you-go (PAYG) internet access, we propose to allow revenue sharing to continue on these numbers for at least another two years. By then, we'll know whether broadband internet services mean that there's little demand for PAYG. If so, we may suggest that 0845 calls are charged at geographic prices, as is proposed for 0870 calls. Meanwhile, 0845 calls would be capped at their current price, and calls should no longer be advertised as being 'local rate'. Again, we want to remove any confusion that these calls cost the same as geographic calls.

• No change on 0844. Calls to 0844 cost no more than 5p a minute, and we think the rules should stay as they are. The risk of customers being overcharged is lower than with 087 numbers. Also, if we took away revenue sharing altogether, many popular services would disappear. We will be keeping an eye on 0844 calls, however, and if we see any problems developing, we would consider extending the PRS rules to cover these numbers too.

• A gradual change. Because these proposals would mean big changes for everyone involved in NTS, introducing them too quickly could harm businesses that rely on income from phone calls. So, we have proposed a 12-month delay before any changes are made to 0870 numbers. This would give companies that rely on revenue sharing the time to move their services to 0844 or 0871 numbers.

• Announcements at the start of each call. After 12 months, originating providers would need to lower the price of 0870 calls and charge their national geographic call price. Or, if they decided to charge more than this, they would have to announce the actual price at the start of each call, before the call was connected.

• Public organisations. We don't want to force any organisation to use a particular type of number. However, we have suggested that NTS numbers may not be suitable for use by public organisations. This is particularly true for organisations who serve people on low incomes. So, when public organisations choose NTS numbers, they should get advice from the Government's Central Office of Information.

• Improved consumer information about call prices. As a separate exercise, we are looking again at the rules on how originating providers show their prices for NTS calls. Many of them have different prices to BT's prices, and we believe they should make their costs to 08 and 09 numbers much clearer on price lists, in advertising and on their websites. This rule will be the same for all, including the mobile networks.

What difference will these changes make?
You might think that these proposals will simply shift any problems with 0845 and 0870 numbers to 0844 and 0871 numbers instead. We don't think this will happen.

In our research, quite a number of service providers told us that what they really wanted was non-geographic 0845 and 0870 numbers because this would be worth more to them than any share of revenue they might earn. In fact, many said they don't receive a share at all, or that they could finance their service in some other way. It's also difficult and costly to change numbers, and many have numbers that their customers have stored on their computers. For these reasons, we think that many of these services will stay with 0845 and 0870 numbers, but at a lower cost to customers.

However, if a service relies on revenue sharing, it would be able to move to 0844 or 0871 numbers. Without this option, some services may simply disappear - and that wouldn't help anyone.

At Ofcom, we believe these new proposals go a long way to answering the concerns we picked up from customers and the industry. Even so, we need your views before we can make any changes. You'll find our contact details in the next section of this booklet, together with the deadline for your comments. We are also very interested in your views on two particular questions, which are in the next section. For more background, you can see the full consultation document on our website at www.ofcom.org.uk

Consultation Options Considered

For a more indepth explanation of the options above see here, or download the full consultation (acrobat .pdf format) here.

To go back to the Consultation questions please click here.