April 6, 2011 4 Comments
How much should we pay for calling an 0845 number? Or an 0871 number? Or an 0800 number? How many of us know what we are paying now? Ofcom believe that customer confusion and low price awareness are damaging the market for Non-Geographic Call Services (“NGCS”), so they have been consulting on what can be done to remedy the problem.
Let’s take 0845 as an example –designed to be a “local rate” call. BT will charge you either nothing (if within your call allowance) or 2 pence per minute (ppm) for an 0845 call. Mobile providers charge between 20 and 40ppm. The designation in Ofcom’s National Telephone Numbering Plan that the number be charged at BT’s local call retail price has come to be meaningless, like many such designations, because it can only be enforced against BT. Similar problems with the 0870 range led to the “Say No to 0870” campaign.
Ofcom has suggested that the way to solve the problem is to break the cost of the call into two elements – the Access Charge, which is the amount retained by the customer’s service provider, and the Service Charge, which is the amount paid to the operator that terminates the call and effectively provides the service. The idea is that breaking it down like this so that the calling customer can see who gets what will keep the respective parties honest and competitive constraints will apply.
However, there are flaws to this theory. The customer is no more likely to know and recall their provider’s Access Charge than they are to know the price of calling NGCS now. Telecoms service providers do not compete on the cost of NGCS. Instead, it’s all about the bundle, the inclusive call package, and such numbers tend not to be included in the package.
Ofcom is likely to come under pressure to agree to more than one Access Charge per provider so that, for example, the originating providers can earn more on a premium rate (09) call than on an 0871 call, and an 0844 call. So the customer may have to remember three Access Charges for his fixed line provider and three for his mobile provider, making a total of six. To which he would then have to add the Service Charge (assuming it were advertised adequately) to obtain the cost of the call. How does this level of complication and sophistication alleviate confusion and improve consumer price awareness?
Most of the time, the terminating service providers do not compete on their Service Charges. They sometimes do on the price point for services such as chat lines, which could be advertised side by side. But numbers used for television talent shows or for calling utilities and banks are not subject to competitive pressures because the customer is effectively “locked in” and has no choice but to call that number if they want to use the service (which, in the case of utilities etc, they have already purchased).
Arguably, non-geographic numbers, by their very nature, require a firmer regulatory hand than services which are subject to more obvious competitive pressures at the retail level. Some have argued that Ofcom should take a more interventionist approach and prescribe maximum prices for calls to NGCS. The new EU Framework, due to be transposed into UK law by May 25th, allows them to do this. This could lead to us paying, say, 5 or 6 pence per minute for a call to an 0844 number, rather than the up to 76ppm which one mobile provider charges now.
Ofcom are proposing just that for freephone numbers. Ofcom believe that free should mean free for calls to 0800. This would mean a reduction in price from anything up to 40ppm now to zero.
If Ofcom applied maximum prices to all the 08 and 09 number ranges, they estimate that it would take up to £0.5 Billion in revenue away from the big mobile phone companies. As a result, they would doubtless spend the next three years in court as their decisions were appealed. So it is somewhat of a political hot potato.
Ofcom may decide to take what they see as a pragmatic position in an attempt to keep as many telcos as possible happy. But this is unlikely to improve the situation for the consumer or rejuvenate this failing market. What they arguably should do is have the courage of their convictions and stop the over-charging of consumers by capping retail charges.