UKCTA Response to Phone-Paid Service Authority

1. This submission is made by the UK Competitive Telecommunications Association (UKCTA). UKCTA is a trade association promoting the interests of fixed line telecommunications companies competing against BT as well as each other, in the residential and business markets. Its role is to develop and promote the interest of its members to Ofcom and the Government. Details of membership can be found at www.ukcta.org.uk. Its members serve millions of UK consumers,

2. UKCTA welcomes the Phone-paid Services Authority (“PSA”) consultation on changes to the fifteenth edition of its Code of Practice for regulating premium rate services (“the Code”), ⁽¹⁾ which came into force on 5 April 2022, to address consumer detriment in the UK ICSS market. ⁽²⁾ UKCTA recognises the importance of regulation in this area and is pleased to be able respond to this consultation.

3. We note that Ofcom has overall responsibility for ensuring that ICSS, as a form of premium rate service, are regulated appropriately and that consumers are protected from the harm they cause. Responsibility for regulating phone-paid services is expected to transfer from the PSA to Ofcom in 2023, subject to approval by the Secretary of State of the Department for Science, Innovation and Technology.⁽³⁾

4. We further note that Ofcom already has powers to take enforcement action against those who persistently misuse electronic communications networks and service in ways which cause or are likely to cause someone else, especially consumers, to suffer harm⁽⁴⁾   . Ofcom’s statement of policy on its persistent misuse powers specifically identifies scams which have certain common characteristics as likely examples of such misuse.⁽⁵⁾ These characteristics include: “they exploit the use of premium rate or other revenue sharing services, or in some cases non-revenue sharing services, to generate calls where consumers are misled about the service offered and/or the costs involved”. Given the complaints received and the consumer harm being caused by ICSS services, we call on Ofcom to exercise these powers to investigate these ICSS providers.

5. We note that Ofcom’s Plan of Work ⁽⁶⁾ aims to tackle nuisance calls and scams “by encouraging telecoms companies to develop technical solutions”. Ofcom adds that “cheap technology has enabled a significant and growing volume of scams received by phone calls and text messages, which disproportionately affect the most vulnerable. Whilst we support Ofcom’s work on scams which use incoming calls and texts, we consider that Ofcom and the PSA should urgently concentrate their efforts on scams which use outgoing calls, such as ICSS. Ofcom states that it “will strengthen [its] own rules on preventing the misuse of communications services” and that it “will work closely with industry, Government and other regulators to make scams harder to perpetrate”. Industry has long been asking Ofcom and the PSA to assist by allowing providers to block calls to ICSS number ranges to protect our customers, and we continue to stand ready to do so.

6. Addressing the ongoing issues relating to ICSS, “which remain one of the main sources of complaints to [the PSA]”, is one of the PSA’s top priorities for 2023/2024.⁽⁷⁾ The PSA’s recent thematic review ⁽⁸⁾ confirms that the ICSS market is “simply not working in the consumer interest. Detriment remains high with hundreds of thousands of consumers engaging connection services every year not knowing they are doing so.”⁽⁹⁾

7. UKCTA agrees that addressing ICSS should be a priority for the PSA and Ofcom. The consumer harm caused by ICSS is an issue which UKCTA and its members individually, have expressed concern about to both the PSA and Ofcom on previous occasions.⁽¹⁰⁾ The data from industry clearly demonstrates how the existing regulatory framework is inadequate and fails to protect consumers from the significant harm caused by high ICSS call charges. 8. UKCTA has previously communicated to the PSA and Ofcom that, in its view, the only way to fully address the market failure caused by ICSS and ensure that consumers are fully protected would be to ban ICSS.

8. UKCTA has previously communicated to the PSA and Ofcom that, in its view, the only way to fully address the market failure caused by ICSS and ensure that consumers are fully protected would be to ban ICSS.

9. Failing an outright ban, UKCTA supports the following elements of the PSA’s proposals (subject to the qualifications discussed below):

9.1 free service information to be provided in the pre-connection alert;
9.2 two stage authentication, with a requirement for positive opt-in to connect to ICSS; and
9.3 consumers should not be charged a Service Charge until connection to the ICSS.

10. In addition, UKCTA considers the following changes are also necessary to protect consumers:

10.1 the Service Charge for the first 60 seconds (or if longer, until any informational message has been played) should be zero-rated;
10.2 there should be caps on the maximum call charge per minute after the first 60 seconds;
10.3 originating networks should manage call capping under the Payment Services Directive; and
10.4 terminating networks should be able to block numbers if asked to do so by organisations whose lines are being targeted, e.g. HMRC, the Child Benefit helpline, and the Department for Work and Pensions (“DWP”), utility companies, including communications.

11. Given the current cost-of-living crisis (which is having the biggest adverse impact on those individuals who are likely to be trying to connect to organisations like the Child Benefit helpline, DWP or utility companies), it is more important than ever that this consultation does not become another missed opportunity for the PSA/Ofcom to address the harms caused by ICSS. UKCTA urges the PSA/Ofcom to take appropriate action against ICSS now to protect consumers.

12. We have a number of specific comments and observations on the PSA’s Consultation, set out below.

The consumer harm caused by ICSS is significant and widespread

13. It is indisputable that ICSS cause significant consumer detriment. This is evident from the sheer amount that consumers are being charged for using ICSS to connect to services – the majority of which are otherwise available at no additional cost to consumers – and the continuing high number of complaints from consumers and organisations that connect to ICSS. As the PSA notes in its consultation document:

“ICSS account for less than 5% of the phone-paid services market by revenue, yet they are one of, if not the most complained about service type. While complaints about phone-paid services in total have fallen significantly in recent years, ICSS complaints have remained high.”^[11]

14. According to one UKCTA member’s analysis of its call data for May 2021:

“total spend by consumers calling just seven ICSS ‘09’ number ranges amounted to circa. £161,000. This equates to approximately £1.9m per annum. If those customers had dialled the official numbers for the Government agencies (i.e. HMRC, Tax Credit, DVLA, Trading Standards) or retail organisations/utility providers, the calls would have cost the consumers £6,000. This means that over £1.8m per annum of unnecessary consumer charges have been incurred as a result of ICSS using ‘09’ numbers.”⁽¹²⁾

15. The consumer detriment caused by ICSS is widespread. As the PSA’s thematic review of the sector found, there is:

15.1 consumer misunderstanding, leading to financial detriment within the first minute of a call;
15.2 financial detriment caused by high call costs; and
15.3 consumer detriment caused by calls cutting off mid-call or before the consumer gets to speak to the organisation to which they are seeking to be connected.⁽¹³⁾

The PSA’s current enforcement regime lacks teeth and does not provide sufficient deterrent.

16. UKCTA considers that the PSA’s recent prohibition decisions and ICSS Compliance Update, ⁽¹⁴⁾ published on 4 April 2023, are insufficient to address the significant consumer harm caused by ICSS. Such decisions are unlikely to act as an effective deterrent when one compares the level of the fines against the potential revenue. For example, the recent fine of £750,000 imposed by the PSA on Connect You Limited is unlikely to deter them from operating with a revenue of over £7 million.⁽¹⁵⁾   It is clear that the potential profits for ICSS providers remain significant, even in the rare event that they are subject to a prohibition decision and fined by the PSA.

The Service Charge for the first 60 seconds should be a zero-rated

17. A high proportion of consumers end calls to ICSS numbers after hearing the IVR message. Consumers are being required to pay to listen to the IVR message and charged even if they decide to end the call because of the cost. Consumers are therefore incurring charges even if they do not actually access the service of the organisation which they were seeking to access.

18. There is no reason or justification for consumers who call ICSS numbers to be charged for listening to the IVR message. As the PSA notes, “[c]onsumers should not pay for a service unless they choose to do so, having been given all the information they need to make that choice.”⁽¹⁶⁾

19. There is currently a wide range of high Service Charges which mean that consumers are being required to pay substantially more for using ICSS numbers than if they called the relevant organisations using their official phone numbers (which are often free of charge). As noted in UKCTA’s response to the PSA’s Discussion Document on its Code of Practice in 2020, for the period January 2020 to June 2020, the fixed line customers of one UKCTA member collectively had to pay twice as much for using ICSS numbers (compared to if they had called the organisations’ official phone numbers):

“Calls were charged at £3.60 per min for one range, £1.55 per min for another and £6 per call for the two other ranges. That analysis showed that from January to June their customers paid £591,500 for calls to ICSS when the estimated costs those customers would have paid if they had called the official numbers for organisations was between £25-30k. One customer incurred charges of over £450.”⁽¹⁷⁾

20. If these figures were grossed up to include customers of other communications providers and all the calls made from mobile phones were also added, the total cost of consumer harm caused by ICSS will be exponentially higher – likely many millions of pounds per year.

21. UKCTA considers that, in the absence of an outright ban, the solution is for the Service Charge for the first 60 seconds (or, if longer, the full length of the information message) of calls to ICSS numbers to be zero-rated. This should provide sufficient time for consumers to listen to the IVR announcement advising on the cost of the call and decide whether to proceed. That way, consumers are free to decide whether to proceed with the call once they have been informed how much it will cost.

22. This approach has two benefits:

22.1 Consumers who decide to proceed with the call can then do so on an informed basis.
22.2 Consumers who do not proceed will not be required to pay for a service that they have not received.

23. UKCTA disagrees with the PSA’s conclusion that it would not be possible to require providers to make the alert free of charge to consumers at this time, as it would effectively force providers to use a single price point (and in any case, this price point is not available for use on the 084 and 087 number ranges). ⁽¹⁸⁾

“It is not within the PSA’s remit to be able to specify service charge price points that would facilitate the provision of a free alert to consumers in advance of connection to an ICSS. We understand that there are a number of service charge points that are not currently allocated. We recommend that industry should use these currently unallocated service charge price points to make it possible to introduce a free alert on all number ranges used for ICSS. If and when such price points become available, it would then be possible for the PSA or Ofcom to introduce a requirement for the alert on connection to be free of charge.”

24. The Service Charge is defined by the number range holder which can currently select from 100 different price points. The Service Charge could be easily configured to allow the first 60 seconds of a call to be zero-rated, akin to the ‘118’ cap for which Ofcom gave providers four months’ notice and new price points were introduced in 2019 across the UK. ⁽²⁰⁾ There are precedents in caps for some Service Charges. For example, Service Charge 73 (one of a 100 different price points that 084/087/09/118 calls can be charged at) is at no additional cost to consumers for the first 60 seconds and thereafter £2.50 per minute.  Therefore, zero-rating the Service Charge for ICSS the first 60 seconds should be possible.

Caps on ICSS price points used after the first 60 seconds of the call should be introduced

 25. As discussed above, high call costs for using ICSS numbers are causing consumers significant financial detriment, for a service that typically provides little or no value.