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OFCOM TO STRENGTHEN PREMIUM RATE SERVICES CONSUMER PROTECTION MEASURES

3 August 2004


Ofcom today announced a review of the regulation of premium rate telephone services with a view to improving measures to protect consumers from fraudulent and unscrupulous activity. The review will include an examination of options to strengthen the powers of ICSTIS - the industry-funded regulatory body for all premium rate services - as well as any other actions necessary.


In recent months ICSTIS has received thousands of complaints from consumers about unexpected charges for premium-rate numbers on their phone bills. Those charges have often been incurred as a result of changes to the consumer's internet dial-up connection, whereby dialler settings were switched to premium rate numbers. Upon investigation it has emerged that in some cases those changes were put in place without the consumer's knowledge by malign software programs hidden within spam email or web pop-ups.

Under Section 120 of the Communications Act, Ofcom is responsible for setting the conditions under which premium rate service providers can operate, whilst ICSTIS is the body responsible for creating a Code of Practice and enforcing compliance.

Problems with premium-rate internet diallers have become a cause for concern in recent months and Ofcom has been in close talks with the Department of Trade and Industry, ICSTIS, the telecoms ombudsmen and with the network and service providers to address the problem. As a result, on 15 July 2004, ICSTIS announced plans for new rules requiring premium rate providers to pre-register with the regulator before offering internet dial-up services.

It is apparent to Ofcom, the DTI and ICSTIS that the internet dialler problem is the latest in a series of examples of unethical behaviour which have damaged consumer confidence in the premium rate industry. In order to strengthen consumer protection in the future, a more wide-ranging assessment of the regulation of premium rate services is therefore required. This will include an assessment of whether ICSTIS has the tools it needs to regulate an industry with such a large number of participants in the value chain.

After discussions between Ofcom, the DTI and ICSTIS, the DTI has, in consequence, formally requested that Ofcom undertake a review of the current regulatory arrangements with a view to making recommendations to improve them.

Scope of the review

The premium rate services industry is worth more than £1 billion a year to the UK economy; it has many participants and many aspects, the vast majority of which are entirely legitimate and transparently marketed to consumers.

Where potentially criminal or unethical activity occurs, there will often be several companies or groups of individuals involved, some of whose roles will be unwitting. Applying sanctions against instigators can be difficult in practice. If there is a cross-border dimension, the situation is further complicated by overlapping responsibilities between different types of regulator across the EU and beyond.

Ofcom will therefore seek to explore which additional measures may be appropriate to give consumers a greater degree of protection from misleading, fraudulent or inappropriate activity involving premium rate services.

The Ofcom study will be carried out in August and September 2004. It will involve detailed fact-finding amongst a broad range of stakeholders, including premium rate service providers, originating and terminating network operators and representatives from consumer advocacy groups. Ofcom will also seek input from broadcasters - who offer interactive services (such as audience voting) using premium rate services - and from the independent Ofcom Consumer Panel. Ofcom will work closely with ICSTIS throughout.

Any necessary changes to the ICSTIS Code of Practice arising from the review would be the subject of public consultation in the autumn, as would any other potential changes to the wider regulatory framework.

Ends.

NOTES FOR EDITORS

Ofcom is the independent regulator and competition authority for the UK communications industries, with responsibilities across television, radio, telecommunications and wireless communications services.

For further details please visit www.ofcom.org.uk and http://www.icstis.org.uk

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