Final Statement: Personal Numbering – Review of the 070 Number Range

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Final Statement: Personal Numbering – Review of the 070 Number Range Personal numbering – Review of the 070 number range Final Statement [] Redacted for publication Publication Date: 1 October 2018 About this document 070 numbers are designed to be used for personal or ‘follow-me’ services. When someone calls a 070 number, their communications provider pays a wholesale termination charge to the 070 service provider for the call to reach the recipient. The caller is then charged a retail price by their communications provider for making that call. As part of the Call Cost Review, announced in May 2017, we conducted a review of the 070 number range looking at the cost of calling 070 numbers and the frequent misuse of the number range. We found that communications providers who hold 070 numbers can set high wholesale termination rates for calls made to their numbers. This harms consumers, as it leads to high retail prices. Consumers are generally unable to distinguish 070 numbers from calls made to mobile numbers (which begin with ‘07x’ and are much cheaper to call), resulting in ‘bill shock’. In addition, high wholesale termination rates provide incentives for the fraudulent misuse of 070 numbers. This has contributed to the 070 number range gaining a poor reputation. In this statement we set out our final decision on how we will regulate the 070 number range. Contents Section 1. Executive summary 1 2. Introduction and regulatory background 5 3. Market definition and SMP assessment 14 4. Remedies 39 Annex A1. Equality impact assessment 80 A2. The regulatory framework 83 A3. SMP Conditions 93 A4. Estimating the costs of providing 070 calls 108 A5. Costs of implementing billing for end-users 123 A6. List of 070 providers with SMP 130 A7. Evidence of concerns 137 A8. Sources of evidence 157 A9. Glossary 168 Personal numbering – Review of the 070 number range 1. Executive summary 1.1 Personal or ‘follow-me’ numbers, which operate in the 070 number range, allow consumers or businesses to offer a single contact number which they can route to a fixed or mobile number. They were established before the availability of mobile roaming to offer a single number which could be used while travelling in the UK and abroad. 1.2 Since their introduction, the cost of calls to mobile numbers has fallen significantly and is now generally1 included in inclusive call allowances, but costs for calling 070 numbers remain high. 1.3 The key attributes of a personal numbering service include: • a single contact number; • a follow-me-anywhere service that is easy to use; and • value-added services such as voicemail and messaging.2 1.4 When someone calls a 070 number, their communications provider pays a wholesale termination charge to the service provider for the call to reach the recipient. The caller is then charged a retail price by their communications provider. The caller currently pays all of the costs for a 070 call. 1.5 We believe the potential value of the 070 number range to both callers and recipients has been undermined by 070 service providers (“070 providers”) with significant market power (“SMP”). These providers can use this power to set high wholesale termination rates, which harm consumers. Firstly, consumers pay high retail prices. Secondly, consumers are generally unable to distinguish 070 numbers from 07x mobile numbers and tend to be unaware that 070 calls cost much more than calls to 07x mobile numbers. These two factors distort consumer choice and lead to bill shock. 1.6 In addition, high termination rates provide incentives for the fraudulent misuse of the 070 range, in particular: • Service provider fraud: For example, missed call scams, where a consumer may return a missed call from a 070 number as they mistake it for a mobile number, or the promotion of fake job advertisements with a 070 contact number. • International artificial inflation of traffic: Some 070 providers, or those with an agreement to benefit from the termination rate of 070 numbers, can arrange to have large numbers of 070 calls made from countries where telephone companies do not recognise that 070 is different to a normal UK 07x mobile number. They, therefore charge less than the termination rate they will eventually pay. While UK 1 There remain some UK mobile numbers on which UK-based providers are currently charging higher termination rates than our regulation allows (leading to consequentially high retail charges). We are planning an enforcement programme to address this issue. 2 Examples of uses of the 070 number range which comply with the original purpose of the service include, use in classified advertisements, use of online forums by those who want to talk to new acquaintances without divulging their real phone numbers and use by hospital inpatients so that they can have their own number for the duration of their stay. 1 Personal numbering – Review of the 070 number range communications providers are trying to stop these schemes, identifying such calls can be difficult and intervention can be expensive. • Identity-related fraud: Service providers do not usually recover the cost of termination from the recipient (their own customers). They, therefore, do not need to know the recipients’ true identity or establish payment links. This means 070 numbers can be potentially used for criminal activity where a recipient’s true identity is concealed. 1.7 We also have evidence that, due to high prices and the reputation for fraud, potential legitimate users of the 070 range have chosen to use other ranges or not to enter the market. 1.8 This shows the 070 range is no longer properly serving the needs of consumers and its originally intended function. Personal numbering – review of the 070 number range 1.9 On 12 May 2017, Ofcom announced a Call Cost Review to examine the cost of calling 118 and 070 numbers, to ensure consumers are protected from high prices and unfair practices. This statement, the first published in connection with that review, focuses on the 070 number range. 1.10 On 6 December 2017, we published our proposals for regulating wholesale termination rates for 070 numbers (the “December 2017 Consultation”). We identified competition and consumer harms arising from the SMP of range holders of 070 numbers in setting high wholesale charges for calls to those numbers. 1.11 We received 20 responses to the December 2017 Consultation. We have considered those responses in reaching our final decisions. European Commission consideration 1.12 On 15 August 2018, we notified our intended measures and an explanatory draft statement to the European Commission (“EC”), BEREC and other National Regulatory Authorities and we published our draft statement on the Ofcom website. In its decision letter of 14 September 2018, the EC stated that it had examined the notification and had no comments. Our decisions 1.13 In summary: • We confirm our view that the market for 070 numbers is negatively impacted by high wholesale charges, which has led to its reputation being undermined and harm to consumers. 2 Personal numbering – Review of the 070 number range • We have defined 127 separate markets for the termination of voice calls to 070 numbers. Each market corresponds to a provider able to set termination rates for 070 voice calls which have been allocated by Ofcom. • We have designated each of the 127 providers as having SMP for terminating calls to the 070 number(s) it controls.3 070 providers have SMP because each has a monopoly on the termination of calls made to its number range. • We are imposing a charge control on all 070 providers, which will cap the wholesale termination rate they can charge. We will impose a charge control on all 070 providers, to be set at the same rate as the mobile termination rate. This will come into effect on 1 October 2019. We anticipate that the likely effect of this will be that the cost of calling a 070 number will, in future, be shared between the person making the call and the recipient. Our approach to this review 1.14 We have considered the appropriate approach to take to this review and the remedies we impose in light of the current circumstances and how the market will change over the period covered by this review. We aim to ensure that the outcome protects consumers’ interests while imposing no more regulatory burden than is necessary. 1.15 We anticipate that our remedy will address poor consumer outcomes, as well as improving the reputation of the 070 number range. 1.16 In particular, by aligning the 070 call termination rate to that of mobile numbers, the caller will no longer bear the entire cost of the call. We anticipate that 070 providers may therefore seek to recover part of their costs from their customers, the recipients. This is likely to encourage a more efficient choice between using 070 and other options (in particular mobile roaming). 1.17 We also anticipate that aligning the 070 termination charge to that of mobile numbers will remove incentives for domestic and international fraud. It should also clear the way for retail telecoms providers to price 070 and mobile calls similarly, which should, in turn, reduce the potential for consumer harm through ‘bill shock’. Providers may also start including 070 numbers in inclusive call packages. We will encourage retail communications providers to consider these options as soon as possible after implementation of the new regulation. 1.18 We understand that, as a result of the regulation, some 070 providers currently providing the type of service originally intended on the range (such as those offering services for classified advertising) may decide to move to a different number range, and therefore face transition costs.
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