EURIM Briefing 19 - APPENDIX I

The UK was the first European country to introduce commercial PRS in 1985 and still represents one of the largest European markets with an estimated turnover of between £160 and £200 million in 1996.

Premium rate services offer a wide range of information and entertainment. They are accessed on-demand by telephone, videophone, fax, PC (bulletin board and some Internet access). Services can be recorded, interactive (menu driven) or provided by live operators. Premium rate services (in particular adult services) are being increasingly offered to UK consumers on ordinary international direct dial lines from a variety of locations mainly in the Third World.

There are currently nine network operators carrying premium rate services: BT, General Cable, Mercury Communications, Norweb Communications, Scottish Telecom, Torch Telecom, Vodata, MFS Worldcom and Orange. As competition in the telecoms market increases, it is anticipated that an increasing number of network operators will become carriers of premium rate services.

The number of service providers in the UK is estimated at around 900. Many service providers merely act as `bureaux` providing line access facilities on behalf of a large number of `information (content) providers`. There are 1000s of IPs who market services direct to consumers.

There are 15-20,000 services on the telephone network in the UK. The most popular applications today are:

Premium Rate Services are services with an information or entertainment element, generally charged at rates above those for standard telephone calls. Charges currently vary from a 25p fixed call cost to a £1.50 per minute rate.

Premium rate describes a payment mechanism where the calls to services are billed to the customer by a third party (network operator) acting on behalf of the service (content) provider. The charges are normally billed as part of the ordinary telephone bill. The revenue from the calls is shared between the network operator, which carries the service, and the service provider, responsible for the content. However, these two elements are not distinguishable to the caller as the charges are ‘bundled’ together on the telephone bill.

Premium rate services are defined in the ICSTIS Code as follows:

‘Premium rate services are services where part of the overall charge paid by a customer for the service, being payment for the content of the call, is passed by a network operator, directly or indirectly, on to the individual, organisation or company providing the service’

One of the issues ICSTIS is considering at present is whether there is a need for the scope of the Code of Practice and therefore the definition, to be extended to cover other services offering similar types of entertainment and information but billed in different ways, particularly when it appears that the consumer concerns over those services are the same as those for premium rate.

For example, adult services paid for by credit card have proliferated since tighter rules on adult premium rate services were introduced in 1994. Although the content and promotion of these services is very similar, they fall outside the definition of a premium rate service because the call charges are billed directly to cardholders by the service provider rather than being billed via a third party, the network operator. This billing method ensures a greater degree of authorisation and offers greater protection from offensive content. However, it does not address concerns over the nature and availability of advertising for the services which was the main consumer concern which ICSTIS addressed by introducing the provisions in its Code to restrict advertising for such services to ‘top shelf’ magazines.

This example also highlights an important principle in developing regulation for communications services. Consumer concerns about content are driven by the degree of accessibility to it. Regulations and controls need to be tailored and applied accordingly.

In 1985, BT began to carry premium rate services run by independent providers - previously, it had run its own services. Anyone who remembers the early days of premium rate services will recall Parliamentary concern and newspaper headlines clamouring for the control or banning of adult services and chatlines. Those headlines translated into four main consumer concerns:

The role of ICSTIS is to supervise both the content of, and promotional material for, premium rate services and, with the support of the network operators, to enforce a Code of Practice. ICSTIS undertakes the following tasks:-

Perhaps best described as ‘independent industry regulation’, the ICSTIS model combines some of the best features of self-regulation, such as flexibility and responsiveness, with legally enforceable sanctions.

While ICSTIS is funded by those network operators which carry premium rate services, they have no direct control over decisions. The Committee which adjudicates upon complaints and determines regulatory policy has no industry representation. This is in contrast to the approach taken by many other self-regulatory bodies. Committee members are appointed in consultation with the network operators, Oftel and the DTI. The Committee is comprised of members who have a range of skills and experience relevant to the function which they perform. Vacancies to the Committee are now publicly advertised.

The Committee is supported by advisory committees which include industry representatives and ICSTIS employs a wide and thorough consultation process when developing its Code and policy. However, independence has been important to ICSTIS’ success and has been key in building industry as well as consumer confidence in the regulatory system.

ICSTIS is not backed by statute, although it is recognised by the Director General of Telecommunications, in respect of live premium rate services, for the purposes of network operators licences. However, ICSTIS is recognised as a body performing public law functions and is subject to Judicial Review by the High Court.

It has been specifically decided in one Judicial review case before the Court of Appeal (R. -v- ICSTIS ex parte Firstcode Limited 1993), that ICSTIS’ power to adjudicate in respect of breaches of its Code exists whether or not there is any contractual obligation to comply with the Code placed on a premium rate service provider by the relevant network operator.

As a public law body, ICSTIS operates on the principles of natural justice and its procedures and processes have been developed with this in mind.

Regardless of the origin of the content of a service, responsibility for compliance with the ICSTIS Code of Practice rests with the service provider. When service providers enter into contracts with network operators, a condition of that contract is service providers’ adherence to the ICSTIS Code. Failure to do so, in effect, puts the service provider in breach of contract with the network operator.

ICSTIS, in turn, enters into contracts with the network operators agreeing to draw up and implement a Code of Practice, with the network operators agreeing to act upon ICSTIS’ recommendations in respect of breaches of this Code. This enables rapid barring of problem services.

This interlocking set of contracts makes ICSTIS effective and focuses clear responsibility for Code breaches on service providers. However, it is important to stress that this can only be achieved with the support of the network operators.

A powerful range of sanctions are available to the Committee including:

A flexible response to new applications and practices has been very important in ensuring that the Code remains relevant and applicable. The ICSTIS Code is now in its seventh edition, having been amended over the years to take account of new types of service and changing technology. Code changes are widely consulted upon but can be implemented quickly.

The Committee also retains flexibility in the procedures it uses to apply the Code. Quick action is essential in some cases and this has led ICSTIS to develop an emergency procedure. This allows services which cause serious consumer harm, and therefore raise serious breaches of the Code, to be removed from the network within hours prior to being adjudicated upon more formally.

One of the main principles of the ICSTIS Code is that marketing and advertising material should contain all information relevant to the service, so that the caller can make an informed decision about whether or not to dial. The Code then goes on to specify what information should be given and how.

The Code contains a variety of general advertising and content requirements including pricing information, privacy and personal data protection and special rules for certain categories of service such as children, competitions and employment.

Most premium rate services involve consumers listening to recorded messages. However, some use live operators to answer calls or to put callers in touch with each other. The operation of live (‘real-time’) services is very different to recorded (‘pre-programmed’) services. ICSTIS recognises the principle and practical differences and therefore employs a different test in applying the Code provisions for live services to providers. ICSTIS applies a test of "reasonable endeavours" to providers of live services providers and if breaches of the live services Code arise the adjudication and sanction process will be based upon this test.

Internet service providers (ISPs) have argued that it would be unreasonable, both in practice and in principle, to monitor all content on their servers. Few formal contractual arrangements exist, as they do with PRS, to enable ISPs to act even if this were considered possible and desirable. However, ISPs have adopted ‘acceptable user policies’ to encourage good practice and these could provide a basis for further development. The issue which merits further debate concerns the relationship between such policies and the self imposed (now mandatory) ISPA Code of Practice. This itself also sets a test of ‘reasonable endeavours’, however, this has yet to be applied and it remains to be seen how ‘reasonable endeavours’ will be defined and applied in practice.

In addition to the ICSTIS Code, other requirements include approvals for certain types of service. For example, service providers wishing to operate services at the higher tariff of £1.50 per minute must seek prior permission from ICSTIS before operating. ICSTIS may impose additional conditions on these services as part of the approval process.

However, because of the volume of services available on the network at any one time and the fact that services can appear and disappear from the network quickly and easily, it is impossible to be wholly prescriptive. Approvals processes or licensing arrangements are not, therefore, capable of wide application within this environment.

As a result, the emphasis is placed on developing a Code of Practice which is adopted and applied by providers in their individual contexts, with guidance from ICSTIS as necessary. The remainder of the process is largely reactive and compliance is addressed in response to public complaints or as a result of proactive monitoring.

In addition to the ICSTIS Code of Practice, content restrictions and blocking mechanisms are employed in the PRS sector. Certain services (adult) are allocated to specific dialling codes and customers are offered call-barring facilities to block these. However, the effectiveness of this measure has not been witnessed because of the poor levels of awareness of these consumer measures.

Premium rate numbering is currently under review. At present, prs currently operate on over 30 different dialling codes that have no correlation with one another. This has led to serious consumer confusion. It has been decided that all premium rate numbers will be moved onto a new 090 dialling code over a migration period of 2-3 years. This will also open up opportunities for more sophisticated content/cost labelling and selective call-barring.

The value of this approach is that it places the decision about the degree and nature of access to services in the hands of the consumer or the bill payer. However, as the premium rate experience shows, these measures can only be effective for this purpose if they are widely promoted and understood.

Over the past three years there has been a rapid increase in the development of international PRS - these have mostly been adult services. Companies seeking to circumvent national regulations have based themselves off-shore and supplied services to the UK. Guyana is one of the main locations for services coming in to the UK. Concerns about these services range around the offensiveness of advertising and service content, high telephone bills and problems of unauthorised use.

The revenue from calls is shared between the originating network operator (where the call begins), the terminating network operator (where the call ends) and the service provider. Calls to international services are billed to the customer as part of their ordinary telephone bill and appear as ordinary international calls. The imbalances in international accounting rates between the UK and other destinations is such that the revenue generated by these calls out of the UK can be shared by the terminating network operator with a third party, the service provider, who has generated the call traffic in the first place. This traffic has proved very lucrative for terminating network operators and service providers.

Steps have been taken by ICSTIS to try to address the issue of international services at every level:

ICSTIS has extended its Code of Practice to international premium rate services available and promoted within the UK (see annexe 1). The emphasis is not on blocking this kind of traffic but on ensuring that services which are advertised and available within the UK conform to UK standards.

The challenge has been to apply this Code to international services with the same effect as to domestic services. This has mainly been achieved by working in collaboration with BT, the dominant originating network operator of international traffic, to persuade foreign terminating network operators to respond to recommendations made by ICSTIS under the Code. This has had some effect, but weak cross-border enforcement powers reduces the impact.

One of the main difficulties with international premium rate services is that they are not carried on specific and identifiable number ranges and, therefore, cannot be selectively barred. In the UK, the only option available to consumers is to bar access to all international numbers. The development of selective call-barring for international services (if promoted widely) would play a significant part in resolving consumer concerns over access to international premium rate services.

ICSTIS has led an initiative to create a forum of similar regulatory authorities across Europe to share information, debate issues and represent concerns collectively.

ICSTIS has also led the group of European Regulators in calling upon the ITU to act.

Two communiqués (see annexe 2) have been issued to the International Telecommunications Union (ITU) calling for it ‘to examine ways in which the ITU can enable audiotex regulatory authorities to apply consumer protection measures to ‘off-shore’ services, in the same way, and with the same effect, as those applied to similar services operating from within their territories’. The call was not for the ITU to act as a supra-national regulator imposing standards on administrations but rather to act as a facilitator encouraging collaboration between national carriers and national regulators.

At the last World Telecommunications Standards Conference (WTSC) in Geneva in October, the ITU reiterated its commitment to address itself to this issue and deliberations are due to continue within a Study group. Papers from the WTSC are attached (annexe 3). The model (on marked page 4 of annexe 3) shows the principle approach the ITU has agreed so far. The key elements are the emphasis it places on sharing information across borders and encouraging communication and collaboration between carriers on the application of standards - the relevant standards being those which apply in the country where the service is advertised and accessed.

While these are important principle achievements, any practical application of these appears a long way off. The framework and process of the ITU does not lend itself to a speedy resolution of these issues.

One of the characteristics of premium rate services is that there is no direct relationship between the provider of the service and the caller. This remoteness can present issues and does not contribute to speedy and effective redress of consumer concerns.

As a consequence, ICSTIS finds itself in the position of brokering the relationship between the caller and the provider and often acting as a contact point for information and referral.

In recognition and response to this Oftel has recently initiated discussions on establishing a helpline for prs callers or bill payers. It is envisaged that this will be promoted on all telephone bills which carry prs call charges.

This initiative is in its early stages of development but once established will provide another important element in the package of consumer protection measures available to callers of premium rate services.