Review of Premium Rate Services

EXECUTIVE SUMMARY

BT’s support Ofcom’s proposals to:

• Maintain the classification of Payforit as a Controlled Premium Rate Service (CPRS) such that it continues to be actively regulated by PhonePayPlus (PP+)
• Remove mobile and fixed portal services from PP+ regulation.

This reflects the key features of these services and the distinctions between them. In particular:

• Ofcom needs to maintain a level playing in the regulatory treatment of different micropayment mechanisms. This avoids generating competitive distortions. For example, PRS services using fixed lines compete with the purchase of services using Payforit over mobile networks. It would be arbitrary and distortionary to apply PP+ regulation to one service and not to the other.
• The fragmentation of the supply chain for Payforit services compared to the integrated supply chain for mobile and fixed portal content services. This is one of the criteria for judging whether regulation should apply within Ofcom’s analytical framework.

By contrast, clear blue water cannot be drawn between Payforit and PRS services to justify the removal of regulation for one service and not the other. As Ofcom says, “Services bought using Payforit share many of the same characteristics as the PRS” (para 5.38). Using Ofcom’s criteria from its analytical framework:

• The OCP (Originating Communications Provider) is not the actual supplier of the premium rate service, in contrast to fixed and mobile portal services.
• Similar to 09 voice services, the supply chain is fragmented, rather than integrated. There is separation between billing and supply of services.
• There are low barriers to entry for Service Providers (SPs), similarly to 09 voice services.

The compliance performance of Payforit also does not appear to warrant deregulation. The data in Ofcom’s consultation document illustrates that overall compliance of the Payforit sample with the rules was 31%. And as Ofcom also points out, “However, the prospect of consumer harm is higher than for fixed and mobile portal services.”

Comments can be addressed via email to Alex Cheetham.