Simplifying non-geographic numbers - Final statement
Update: 16 January 2014
Please note that previously in Annex 4 (the guidance on service charge price points), the price points at the level of the 09 service charge caps had incorrectly been stated exclusive of VAT at £3 per minute and £5 per call (whereas all other suggested price points were calculated inclusive of VAT). We have now corrected these prices in Annex 4 so that, consistent with all other SC price points identified in the Annex 4 guidance, they are stated inclusive of VAT at £3.60 per minute and £6 per call.
1.1 This statement sets out our decisions on changes to the regulation of non-geographic calls - specifically the 080, 084, 087, 09, 116 and 118 number ranges.
1.2 Consumers use these number ranges to call businesses, financial institutions, helplines and government agencies, to get information and to make payments for services. However, the evidence we have collected demonstrates that, due to the way the market functions, consumers generally have poor awareness of prices, are deterred from using these numbers, and the availability of services on these ranges is undermined.
1.3 Despite the growth of alternative ways to make contact or obtain information (for example internet, email and smartphone apps), the option to call organisations directly continues to be valued by consumers. For some groups of consumers, particularly vulnerable groups, voice calls are the only practical form of contact for some services. Therefore, as our analysis indicates that the market is not working well for consumers or for those being called, we consider that it is necessary for us to intervene.
1.4 In April this year we published a policy position which set out our view on the changes needed to the regulation of non-geographic call services ('NGCS') to address this consumer harm and consulted on the legal instruments required to implement this policy. This statement presents our final conclusions on the changes and the legal instruments needed for implementation.
The NGCS review
1.5 We initiated this strategic review of non-geographic numbers in 2010 in response to concerns that consumers were confused about what these numbers meant and how much calls cost. After detailed analysis, consumer and service provider research and discussions with industry, we came to the view that there was clearly identified substantial consumer detriment arising from a number of interrelated market failures and this supported the case for a reform of the market, including simplification of the system to protect consumers from that harm.
1.6 In summary we are concerned that consumers generally do not know how much these calls cost and often overestimate the costs. This is making consumers generally suspicious of these numbers and reluctant to use them. In turn this undermines innovation and service availability and, in the worst cases, leads to vulnerable consumers being deterred from easily accessing socially important services.
1.7 We set out detailed proposals for reforming the market to address these concerns in April 2012 (the 'April 2012 consultation'). We proposed to:
- make 080 and 116 numbers free from all telephone lines (both fixed and mobile); and
- set a new 'unbundled tariff' structure for other non-geographic calls. This structure involves the separation of the retail price into an access charge charged by the phone company originating the call, and a service charge charged by the phone company terminating the call and the company which operates the service on that number (a bank or chatline for example).
1.8 We confirmed as part of that consultation that the 03 range would remain in its current form (linked to the price of a call to a geographic number, i.e. 01 and 02 numbers) but that it would be the only non-geographic number of this type. This meant that all 084 and 087 numbers would have a consistent tariff structure. We considered that this would reduce the existing confusion about the charges for 0845 and 0870 numbers which has arisen because the traditional link between these ranges and geographic call prices had been undermined.
The April 2013 policy position
1.9 Following a detailed consideration of stakeholder responses to the April 2012 consultation, in April this year we published a policy position (the 'April 2013 policy position') which confirmed our view that the changes we had previously proposed to non-geographic numbers offered the most appropriate and proportionate means of addressing the consumer concerns we had identified.
1.10 We did, however, make some updates and revisions to our assessment as a result of stakeholder comments made in response to the April 2012 consultation. We also carried out some further analysis on the impact of our proposals. Some of these revisions involved amendments to our analytical approach or new evidence, though none of the changes altered our overall view on the appropriate policy response. We highlighted these changes and offered stakeholders an opportunity to comment on them.
1.11 We therefore said our view on the introduction of the unbundled tariff and making the 080/116 number ranges free-to-caller was subject to final confirmation in light of those specific areas of further consultation.
1.12 The April 2013 policy position also set out our proposed modifications to a range of legal instruments that were necessary to implement our proposed changes to non-geographic numbers. In particular we proposed modifications to the existing General Conditions 12, 14, 17, 23 and 24, the Numbering Plan and the Premium Rate Services ('PRS') Condition. In addition, we proposed to set an access condition on communications providers that terminate calls to 080 and 116 numbers, and a condition that required companies (other than phone companies) to promote their charges when they were advertising an unbundled tariff number.
European consultation on the 080 and 116 access condition
1.13 Under Article 7 of the Framework Directive (as amended), we are required to notify draft decisions on any access related conditions to the European Commission ('EC'), the Body of European Regulators for Electronic Communications ('BEREC') and other national regulatory authorities ('NRAs') upon completion of our domestic consultation. Our proposed access condition on communications providers that terminate 080 and 116 calls was therefore subject to this requirement.
1.14 On 22 October, having taken account of the consultation responses to the April 2013 policy position and having made modifications in the light of these comments, we notified our intended 080/116 access condition and an explanatory draft Statement to the EC, BEREC and other NRAs.
1.15 On 22 November 2013, the EC issued a decision letter, setting out its comments under Article 7(3) of the Framework Directive. We discuss these comments in more detail in Section 4.
Summary of decisions in this statement
1.16 Having taken account of stakeholder responses to the April 2013 policy position, and having completed the European consultation process and taken utmost account of comments from the EC, this statement now confirms our decision:
- to set a maximum retail price of zero for calls made by consumers to the 080 and 116 number ranges; and
- to introduce the unbundled tariff for calls made by consumers to the 084, 087, 09 and 118 number ranges.
1.17 Taken together, these changes will simplify the UK's numbering system and allow consumers to gain a better understanding of what different numbers mean, as well as their cost.
Making 080 and 116 free-to-caller
1.18 We consider that making 080 and 116 numbers free-to-caller for consumers from all telephones will offer direct benefits to callers and organisations as well as being an important element in restoring trust in non-geographic numbers overall. The change will enable service providers on these ranges to advertise a clear message to consumers that these numbers are always free. This will encourage demand for services and improve consumer understanding of the ranges, as well as ensuring vulnerable consumers are not deterred from accessing socially important services provided on the ranges. Also, given the high profile nature of the 080 number range, we expect this change to contribute significantly to our efforts to improve consumer confidence in non-geographic numbers in general.
1.19 We recognise that this change will not be without cost, particularly for the service providers using 080 numbers who will have to pay more to ensure calls from mobiles are free, but we consider that the benefits (to both consumers and service providers) outweigh these costs. However, we accept that it is likely that a minority of service providers that currently use the 080 range will opt to move their services away from that range to another non-geographic or geographic range. We consider that there will be less impact on companies using the 116 number range, as all actively used 116 numbers are already free-to-caller - making the entire 116 range free-to-caller will therefore only affect 116 numbers being brought into use in future.
1.20 We recognise that making the 080 and 116 ranges free-to-caller may prompt changes in wholesale arrangements and we want to minimise any period of uncertainty and avoid any delays or breakdowns in connectivity. Accordingly, as noted above, we are also imposing an access condition on terminating communications providers which will ensure that the commercial terms, including charges, for connecting such calls are fair and reasonable to all parties. In addition, we have also today published guidance on how we would be likely to assess what is a fair and reasonable wholesale charge for calls to 080 and 116 numbers if we were to receive a dispute ('080/116 Dispute Guidance').
The unbundled tariff on the 084, 087, 09 and 118 number ranges
1.21 The introduction of the unbundled tariff will create a consistent treatment of all the 'revenue-sharing' number ranges by 'unbundling' the retail price for those calls.
1.22 The unbundled tariff will ensure consumers can know, for the first time, how much of their money is paid to their phone company and how much is passed to others, such as the organisation or service being called. It will require that, instead of paying a single charge to their phone company, they will pay two separate charges:
i) the Access Charge: which will be paid to the phone company which originates the call; and
ii) the Service Charge: which is paid to the phone company which terminates the call and may be shared with the service provider, i.e. the company providing a service using the number (a bank for example), to cover or contribute towards their costs.
1.23 In order to ensure these different charges are made transparent to consumers, we are setting rules about the structure of the access and service charges so that consumers can more readily understand and, where appropriate, remember them. These include:
- one access charge per tariff package, for calls to all unbundled non-geographic number ranges, though the access charge may be included in a bundle of inclusive minutes for some or all non-geographic numbers;
- the access charge to be set as a simple 'pence per minute' rate;
- each individual 084, 087, 09 or 118 number to have a single service charge that applies to calls to that number from all fixed and mobile phones;
- with the exception of 118, there will be caps on the maximum rate of the service charge, according to the unbundled non-geographic number range. For example, the cap on the rate of the service charge for numbers in the 084 ranges will be 7p (inc. VAT) and the cap for numbers in the 087 range will be 13p (inc. VAT);
- phone companies to publicise the amount of the access charge for each tariff package they offer consumers; and
- organisations and service providers to include their service charge whenever the number is presented (i.e. in advertising and marketing).
1.24 Currently call cost descriptions follow the format:
"this call will cost you X pence per minute on a BT line, other landline providers may vary and calls on mobiles may cost considerably more."
1.25 Under the new structure we expect the announcement to follow the format of :
"This call will cost you X pence per minute plus your phone company's access charge."
1.26 The unbundled tariff will, we consider, provide significant benefits to consumers: clearer prices, better competition between phone companies and, perhaps, service providers, and reinvigorated consumer confidence in using these numbers.
1.27 As well as benefits for individual consumers, UK businesses stand to gain. Greater consumer confidence will in turn give UK businesses more confidence in using these services to be contacted by consumers and to provide new and innovative services to consumers.
Changes to our April 2013 policy position
1.28 Whilst the decisions in this statement confirm the overall position we set out in April 2013, there are some individual issues on which we have revised our position or on which we are providing more guidance in response to stakeholder comments. These are:
- inclusion of the access charge in call bundles: in April 2013 we provisionally concluded that where the access charge was included in a bundle of inclusive call minutes, that inclusion could not vary by number range. However, having considered stakeholder comments and in light of the risk that consumers may lose out if calls to these numbers are no longer included in call bundles, we have now decided that communications providers will be allowed to select the number ranges it wishes to include in call bundles. This means that, for example, a communications provider will be able to include only the access charge for the 0845 and 0870 ranges, or all the 084 ranges, in a bundle of inclusive call minutes offered to its customers without having to also include calls to the higher rated 09 and 118 ranges. See Section 3 and Annex 3 where we explain our reasoning for this decision;
- service charge price points: several stakeholders raised concerns about how the process for establishing service charge price points would work in practice in response to the April 2013 policy position. We recognise that guidance would be helpful to aid implementation and have therefore set out this guidance in Annex 4. This sets out a list of service charge price points for the 084/087, 09 and 118 number ranges which we have derived from current outpayments and associated call volume data for these ranges. Our expectation is that originating communications providers will make these price points available upon implementation of the unbundled tariff in order to comply with their regulatory obligations, although it remains open to them to set alternative price points if the evidence available to them suggests that these will be a better reflection of the volume and range of demand for service charge price points from other providers. In response to stakeholders' responses, we have also set out in Annex 3 a process which we consider will facilitate the determination of new service charge price points which differ from current outpayments made on these ranges. While we expect industry to take the lead in developing a process of this nature, we will continue to work closely with stakeholders during the implementation phase to provide assistance and guidance where appropriate;
- revisions to our approach to assessing 080 origination charges: in order to assess the impact of a free-to-caller approach on the 080 range, we have reached assumptions about the likely wholesale origination charges that would arise in practice under this approach. We have revised these assumptions since April 2013 to take account of updated cost data and more recent time series data that has become available since then, and in light of stakeholder comments. Our revised assumptions are a fixed origination charge of 0.4 - 0.5ppm and a mobile origination charge of 1.5 - 2.4ppm; and
- extension of the 080 and 116 access condition to business calls: in the April 2013 policy position our proposed access condition was limited to 080 and 116 calls made by consumers, because the requirement for a maximum retail price of zero only applies to calls made by consumers (albeit we expect that communications providers are likely to voluntarily offer these calls free of charge to business callers as well). Several stakeholders raised concerns, however, that this approach could lead to uncertainties over appropriate origination payments for business calls to free-to-caller 080 and 116 numbers, as well as additional disputes, potentially resulting in call blocking and other connectivity issues. In light of these concerns, and in recognition of the risk of interconnection problems for voluntarily zero-rated business calls to 080 and 116 numbers, we have extended the access condition so that it applies to all 080 and 116 calls which have been charged at zero at the retail level (regardless of whether those calls are made by consumers or businesses).
The legal instruments and timing of the changes
1.29 We also received several stakeholder comments on our proposed legal instruments. Having considered these comments, we have made some modifications to the legal instruments on which we consulted. Our notification of the final legal instruments can be found at Annexes 8 to 12 of this statement. They are explained in more detail in Section 5.
1.30 Given the scope and significance of these changes, communications providers will need time to implement the changes as well as inform their customers. In addition, service providers using the numbers will need time to make any necessary changes to how their numbers are advertised. We therefore consider that a period of 18 months is required to implement the changes.
1.31 We are aware, however, that the timing of the publication of this statement means that the initial implementation timing would straddle the Christmas period. The access condition requires terminating communication providers to notify their proposed revisions to origination charges within one month of the date on which the condition enters into force - we were therefore concerned that they would struggle to meet that deadline, particularly where they have a large number of notifications to make. We have therefore decided to delay the entry into force of the access condition until two weeks after the date of publication of this statement. We consider that this will give terminating communications providers two additional weeks from the publication of this statement in which to prepare and dispatch their notifications, and will make up for any office closures, etc. over the Christmas period. In order to ensure consistency, we are also delaying the entry into force of our modifications to the other conditions (General Conditions and PRS Condition) by two weeks. This means that the free-to-caller and unbundled tariff regimes will be implemented on 26 June 2015, 18 months after the modifications to the General Conditions enter into force.
1.32 Our decision to make the 116 range free-to-caller will only require a change to the designation of the 116006 number in the Numbering Plan. The 116006 number has not yet been allocated to an SP or brought into use and therefore, unlike our changes to the 080 range, we consider that this change should be brought into effect immediately. As explained in April 2013, we want to avoid a situation where a service provider may be allocated this number and set it up on a Freephone basis, only for it to change to free-to-caller in June 2015. Our notification of the changes to the Numbering Plan in Annex 9 therefore includes an immediate modification of the designation of the 116006 number from 'Freephone' to 'Free-to-caller'.
Other number ranges within the NGCS review
1.33 There are still some outstanding non-geographic number ranges which we are considering within this structure, and which may require changes. In particular we are intending to consult in due course on options for the 070 and 076 ranges, and we are also currently reviewing the operation of the 055 and 056 number ranges to see if changes are required. We have now issued a further consultation on the 0500 range and aim to issue a final statement on the future of the range in 2014.
Implementing the changes
1.34 These changes are significant and will affect all consumers of telecoms services and every business that uses these numbers. Successful implementation will therefore require careful and detailed planning by communications providers and service providers using the numbers. We recognise that we also have an important role to play in ensuring that all stakeholders understand the changes that are needed so that they can be planned for and delivered in good time.
1.35 We have set up an implementation team to oversee the changes. This includes the establishment of industry working groups covering all aspects of the implementation programme, bilateral discussions with relevant stakeholders, as well as starting to develop a core set of communications materials to explain the changes. This work will continue throughout the implementation period and we are committed to remaining closely involved with stakeholders to help facilitate the changes and ensure successful implementation in June 2015. Our implementation plan is discussed in more detail in Section 6.
1.36 As we explained in April 2013, we have also committed to a review of the changes some time after they have been implemented in order to ensure that they have been effective in addressing our concerns, and that communications providers are adhering to the requirements. We have set out more details of this review in Section 6.