Ofcom announced a review of the industry in August, following
thousands of complaints from consumers over unexpectedly high
telephone bills, sometimes caused by fraudulent internet
charges.
In the review the regulator highlights an increase in fraudulent
"prize competitions" which require consumers to make long calls to
premium rate numbers (charging around £1.50 per minute) in order to
be eligible for cheap or non-existent prizes.
There has also been an increase in the number of unsolicited
marketing messages sent to consumers, encouraging them to connect
to a premium rate dial-up service, but the greatest number of
complaints relate to the use of rogue diallers.
These are a form of software that installs a default dial-up
number onto an unwitting person's computer to call a premium rate
number, resulting in an unexpectedly expensive call every time the
computer connects to the internet.
"There is a clear need for action here," said Ofcom Chief
Executive Stephen Carter. "These are necessary changes to ensure
consumer confidence in the premium rate industry for the long
term."
At present, premium rate services are regulated by ICSTIS, the
Independent Commission for the Supervision of Standards of
Telephone Information Services, and companies offering premium rate
services in the UK have to comply with the ICSTIS Code of
Practice.
But, according to the Review published today, the rules are not
sufficiently strong to cope with the growth in abuse of
rogue-dialler software and premium rate numbers.
Ofcom therefore recommends that the Department of Trade and
Industry consider increasing the maximum fine that can be imposed
for a breach of the ICSTIS Code of Practice. At present this
amounts to £100,000.
Ofcom also recommends that the Code of Practice be amended to
enable ICSTIS to fine network providers as well as service
providers, where the network providers fail to meet their
obligations.
Another recommendation tackles the issue of customer
refunds.
At present customers pay bills to their telecoms providers for
calls, including those to premium rate services, and the telecoms
providers then pay the relevant network providers' charges for
connecting the calls. Often this means that when a consumer
complains about an unexpectedly high bill, there is nothing that
the telecoms provider can do, as the funds have already been sent
to the premium rate services provider.
Ofcom therefore recommends that network providers should NOT
share these call revenues with companies offering premium rate
services for at least 30 days, to allow ICSTIS sufficient time to
assess complaints and potential fraudulent activity.
These call revenues should also be frozen during any additional
ICSTIS investigation that is necessary, and if necessary for a
further three months after an investigation is complete, to fund
any customer refunds that ICSTIS concludes are appropriate.
The pressure on network providers is further increased by
Ofcom's recommendation that the Code of Practice be amended to
require network providers to support ICSTIS by providing detailed
information on:
- the identity of the companies offering premium rate services
with which they do business and taking all reasonable steps to
ensure that information is accurate; and
- call traffic and revenues where a complaint has been
received.
The Code should also be amended, says Ofcom, to require
companies offering premium rate services to have effective customer
service and refund policies in place.
Telecoms providers should be required to make practical
information on premium rate services available to their customers,
including, for example, information on call barring facilities.
ICSTIS should consult on guidelines that target effective provision
of consumer information on premium rate services, says Ofcom.
Changes to the governance of ICSTIS are also recommended.
According to the review, ICSTIS should proceed with proposed
changes to ensure appropriate accountability to industry
stakeholders. These changes include the conversion of the existing
ICSTIS Committee into a Board including members with industry
expertise, and the establishment of an advisory committee of
industry stakeholders.
Finally, Ofcom recommends that both regulators should agree a
Memorandum of Understanding that will clarify the roles of ICSTIS
and Ofcom in relation to premium rate services regulation, and
ensure appropriate accountability to Ofcom.
A steering committee is now to be formed to take the proposals
forward, according to Ofcom. Public consultations are expected in
the course of the next year.
