Review of Premium Rate Services - Decision on an application of the analytical framework

Statement Published 02|07|12

Proposals

1.1 In October 2009, following consultation, Ofcom published the PRS Scope Review statement, "The PRS Scope Review: an analytical framework for assessing the risk of consumer harm, and steps to improve PRS regulation" . It included an analytical framework that can be used to analyse any particular form of Premium Rate Service ('PRS'), to help assess whether it should be subject to PRS regulation because of the risk of consumer harm. This framework looks at the demand and supply side characteristics of the service and assesses the extent to which this may lead to a risk of consumer harm.

1.2 Following that publication, mobile communications providers ('MCPs') asked Ofcom to assess whether certain types of PRS require specific PRS regulation and, specifically:

• fixed and mobile portal content services charged to the customer's phone bill ('own portal services'); and
  
• PRS bought using Payforit as a payment mechanism ('PFI services').

1.3 In July 2011, Ofcom published a consultation document, "Review of Premium Rate Services: an application of the analytical framework") ('the July 2011 Consultation') , in which, in light of our application of the framework, and our analysis of the case for regulation of the services under review, we proposed the following:

• own portal services should be removed from the scope of PRS regulation; and
  
• PFI services should remain within PRS regulation but that we would ask PhonepayPlus ('PP+') to consider how it would regulate those services in a manner that takes into account the reduced potential for consumer harm in comparison with other forms of PRS.

1.4 In respect of PFI services, we also said we would re-consider the position if MCPs were able to give us sufficient confidence that, if formal regulation did not apply, current levels of self-regulatory control would at least be maintained, and an effective means of redress for consumers direct with the MCP introduced. To this end, we met with MCPs post-consultation to clarify what would be required for us to re-consider our position in relation to PFI services.

1.5 We also consulted on an amendment to the PRS Condition which would give effect to our proposals.

1.6 The consultation closed on 7 October 2011. Ofcom received 30 responses, all of which were from industry stakeholders. The responses substantially agreed with our analysis and proposals on own portal services but not on PFI services, where the majority of respondents disagreed that these services should remain subject to regulation.

Decision

1.7 Based on our application of the framework, analysis of consultation responses (including the assurances provided to us by MCPs as to self-regulation) and overall assessment of the risk of consumer harm, Ofcom has decided to confirm the proposals set out in the July 2011 Consultation. This is for the following reasons, explained more fully in this statement:

• Own portal services: our assessment is that there are important differences between own portal services and more conventional PRS whose characteristics have in the past given rise to consumer harm and that, therefore, there is more limited risk of consumer harm arising. Our view is that the case for regulation is not made.
  
• PFI services: our assessment is that, while the risks of consumer harm from PFI services are somewhat less than with other (more conventional) PRS, the similarities and associated risks are such that removal of all regulation would not be warranted. Our view is that there remains a case for some regulation, but that regulation should be limited so as to be proportionate to, and targeted at, the risks identified.

1.8 In order to give effect to this decision, this statement includes a notification modifying the PRS Condition.

1.9 Ofcom is satisfied that the statutory requirements for modifying the PRS Condition are met. In that regard, Ofcom believes that making modifications the effect of which is that own portal services will be outside the scope of PRS regulation, and that PFI services will be within it, are objectively justified and consistent with the principles of transparency, proportionality and non-discrimination.

1.10 This modification to the PRS Condition (which is outlined in Annex 3) will be effective from 1 September 2012.