Unless you’ve been in Outer Mongolia, on the Moon, or unconscious for the last few years, the trials and tribulations of the non-geographic numbering regime won’t have escaped you.
We’ve had the Department for Business, Innovation and Skills (“BIS”) implementing the European Consumer Rights Directive which mandated the use of basic rate (don’t ask what that really means) numbers for post-contract queries. This came with a list of exemptions so long and complicated it’ll be beyond many on the coalface advising service providers on their telecommunications. The initial drafting also made it unlawful to use a freephone number for around 9 months between June 2014 and March 2015. Thankfully, BIS has recognised this as an issue and has apparently changed the drafting to say that you can use a higher revenue sharing number than just free to caller, geographic or 03 (the original proposal) but you have to offer a refund if you used a higher one. I am yet unclear whether that is a refund on just Ofcom’s proposed Service Charge or the combination of the Access Charge and Service Charge in the new regime coming into force in 18 months (more on that in a second).
We’ve also had PhonepayPlus intervening in requiring signposting services (something I personally find morally questionable) requiring a prior permission certificate (that decision is now subject to a judicial review) as well as BT (with some help) going to the Supreme Court in February this year to overturn a Court of Appeal decision relating to the Competition Appeal Tribunal’s overturning of an Ofcom Determination on their interconnect charges for non-geographic numbers.
Confused yet? That new Ofcom regime requires freephone to be free to caller (a subtle but important distinction as presently, only BT is legally required to have freephone as free) but will also “unbundle” the tariff. You know how when you vote by text for a TV show? It says “Texts cost £1 plus your operator’s standard rate”, the standard rate being the cost in your plan for sending a text. Soon, calling your bank will follow a similar trend. The advert will say “Calls will cost 3 pence per minute, plus your operator’s access charge”. The idea is that this disaggregates what the bank is charging you for the call (3 pence per minute, though the terminating operator will take an amount for providing the service) and what your phone company is charging you on top for making the call. Oh, and 0845 gets lumped in with 0844 and 0870 goes full circle and gets lumped in with 0871.
On top of all that, making 080 free to caller properly is likely also to increase a service providers’ cost, both in pence per minute for receiving the call but also in the volume exposed to a higher origination charge from a mobile operator. Empirical data from the Department for Work and Pensions suggested that the mobile originated volume can increase five-fold when 080 becomes free to caller. One economically likely outcome will be a migration from 080 numbers to 03 numbers, which could actually cause consumer price inflation. We wait to see. Oh, and 050 is being proposed to be closed, with 070, 076, 055 and 056 having a similar question hanging over them. That’s before I get into the reduction of some 300 price points for non-geographic numbers being reduced to around 100, and the premium rate cap going up from £1.51 to £3 per minute (and £5 per call drop charge).
If I were a military man, I suspect I might use a word starting with “cluster” to describe the potentially simultaneous and accumulative impact of all of this.
The reason that Ofcom have involved themselves in all this is because of alleged consumer harm from a lack of transparency in the market place for these numbers. Lots of consumer research data suggests confusion over what 08 and 09 numbers are and what they cost; even to the extent that some people were paying more to get on a bus to use the Citizen Advice Bureau’s phones for free than it would’ve cost them to just call the number at home.
In my own personal opinion, that’s Ofcom code for addressing an abuse perpetuated by a small number of large operators. BT, which represents circa 40% of the market for fixed line telephony was bound by Significant Market Power Condition AAA11 which meant they had to charge certain amounts….. 4 pence per minute meant 4 pence per minute (plus a call set up fee). Some mobile phone operators charged 40 pence per minute for a call that was free from a BT (and almost all fixed operators’) lines. To add insult to injury, the service provider was paying that mobile operator around a penny a minute for the privilege of making the call “free”.
So recently, when I saw a friend berating EDF Energy for charging her £4.20 for calling and correcting their mistake, I drilled into things. Firstly, EDF does make available a geographic number for calling from mobiles….. and the rest of their numbers are freephone. Had she called from a landline (which all broadband customers except for those on Virgin Media fibre have by definition), it would’ve been free, or the 01/02 number would’ve been included in any monthly allowance otherwise.
The immediate response was that “most people don’t have landlines, so it’s still EDF’s fault”. The most heavy concentration of mobile-0nly households are in socioeconomic groups D and E which are around 26% mobile only, with other groups peaking at 14% so that doesn’t entirely stack up. Mobile operators, which retain (according to the 2009 flow of funds study by Ofcom (see Figure 5.4)) an average of 13.3 pence per minute of a call to a non geographic number, compared to 1.7 pence per minute of a fixed line operator; which doesn’t include the circa penny they are paid to make it free in the first place if freephone, might be a better place to look to apportion blame. That £4.20 (or rather, 30 minutes at 14 pence per minute plus the 30 minutes at around a penny EDF paid makes it £4.50) went straight to the bottom line of the mobile operator (give or take the origination costs which are minimal on an incremental basis, a cigarette packet calculation would suggest it contras the EDF payment, so we’re back at £4.20 again).
At a macro level, the market for non-geographic calls (which are designed as a micropayment mechanism to recover some of the costs of providing the service in question) is worth c£1.7bn a year, of which 25% is retained by mobile operators for around 11% of the volume. One really has to ask in this situation, who is the villain here. EDF, a service provider, which made a number of efforts to have its customers avoid paying to call them, or the mobile operator that pocketed the sum of money – potentially from what could be argued as a monopoly position in certain households?
I have often heard the phrase “rip off” numbers; with the implication that the called party is creaming it on the revenue they enjoy. Well, running a contact centre costs around 50 pence per minute of answered calls (according to an internal study by one major service provider which I was privy to); a contribution of sub-10 pence a minute from even the most expensive 0871 number doesn’t make a substantial dent. At the low end, say 0870 or 0845, they may receive next to nothing (or even have a net charge). The frustration from the “rip-off” hyperbole is probably somewhat directed at the wrong place.
I should note, for balance, that there is a school of thought that argues a reduction in charges by certain operators for calls to non-geographic numbers would lead to an increase in rental costs for everyone….. those arguments are theoretical, and have been equally and reputably countered, but clearly does raise interest socioeconomic and welfare issues relating to cross subsidy.
Anyway, not that I should ever advocate the direction of angst at our industry, but when berating a company you call for its choice of numbers and alleged revenue from it, for the next 18 months at least, think long and hard about who is really at fault first – the service provider or the originating communications provider. At the very least, this will help achieve Ofcom’s objective of increased consumer awareness and competitive pressure.