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PhonepayPlus levy and Registration Scheme announcement 2014

3 March 2014

Following consultation with industry and approval from Ofcom, PhonepayPlus confirms its budget for 2014/15.

The total cost of premium rate services (PRS) regulation in 2014/15, covering PhonepayPlus’ core activity and the Registration Scheme, is expected to be £4,444,645 including VAT.

The proposed PhonepayPlus budget for levy-funded activity in 2014/15 is £4,088,173 including VAT.

PhonepayPlus’ budget up to 2013/14 was reduced by 24.5% in real terms over three years. However, against the backdrop of rising quantity and complexity of calls, enquiries and complaints and increased legal costs it is unsustainable for PhonepayPlus to continue to reduce its budget into 2014/15. Further detail on the cost drivers and the proposed PhonepayPlus Business Plan and Budget 2014/15 can be found in the consultation document here.

PhonepayPlus recognises that any increase in costs is unwelcome but it has a responsibility to the industry and consumers to provide effective regulation. Maintenance of consumer trust is vital in a period when premium rate is competing with other micropayments in a converging market. Responses from the majority of stakeholders to the Business Plan and Budget 2014/15 Consultation understood the reason for the small budget increase. Full responses to the consultation can be seen here.

In real terms the cost of regulation will be 0.5% greater than the current year, taking account of the impact of inflation (RPI of 2.8% as at January 2014) and 3.3% greater in cash terms. Our core levy-funded budget will be greater by by 1.0% in real terms and 3.8% in cash terms with reductions across a number of areas. The Registration Scheme budget has decreased to £356,472 (a decrease of 2.2%).

With the budget now confirmed, PhonepayPlus today announces the adjusted levy along with the fees for the Registration Scheme for 2014/15.

The revised levy and registration fee will apply from 1 April 2014.

Adjusted levy for 2014/15

PhonepayPlus’ adjusted levy for 2014/15 will rise to 0.45%. This adjusted levy applies to all outpayments payable by network operators to providers in respect of revenue generated by PRS. The adjusted rate is the amount PhonepayPlus is required to levy once the costs of regulation are offset by other income such as fines. A number of factors contribute to the calculation of the actual rate levied. Further information on how the PhonepayPlus levy is calculated can be found in our consultation document on our Business Plan & Budget.

The non-adjusted rate is the levy PhonepayPlus would need to raise if it did not receive any other income (such as fines, administration charges or bank interest). Alongside the rise in PhonepayPlus’ budget the predicted value of the UK premium rate market in 2013/14 has decreased. This means that the non-adjusted levy will rise from 0.74% in 2013/14 to 1.18% for the coming year.

The PhonepayPlus levy is calculated as a proportion of every outpayment to ensure that PhonepayPlus continues to receive adequate funding to carry out its activities, as required by Section 121 of the Communications Act 2003. The budget for levy-funded activity does not include the costs of the industry Registration Scheme, as this is funded separately through registration fees. The registration fees and structure have also been confirmed for 2014/15 and are detailed below under ‘Registration Scheme structure and fees for 2014/15’.

Further details will be presented in the PhonepayPlus Business Plan and Budget 2014/15 Statement, to be published in late March.

Registration Scheme structure and fees for 2014/15

Registration with the PhonepayPlus Registration Scheme became mandatory for PRS providers with the publication of the PhonepayPlus Code of Practice (12th Edition) on 1 September 2011. Under the scheme all premium rate providers (including charities) must register with PhonepayPlus before providing a PRS, unless the provider solely operates 0871, 0872 or 0873 services.

PhonepayPlus is committed to reviewing the registration fee, fee structure and related exemptions in its budget each year.

With Ofcom’s approval of PhonepayPlus’ budget for the coming financial year, PhonepayPlus can announce that the registration fee for 2014/15 will rise to £150 plus VAT for all providers unless they are eligible for an exemption.

This rise was forecast in the Business Plan and Budget 2013/14, based at that point on levels of registrants and the split between those who pay and those who are exempt from charges remaining in the same proportion. Our assumptions about the number of registrants, and the split between those who pay and those who are exempt remains broadly on track. The alternative to an increase, attempting to bring more exempt categories into fee payment, would be in our view counter-productive as it would almost certainly deter more new entrants from the market than it would generate in additional income. We do not therefore propose to amend the fee structure and the levels of exemption in place.

The exemption from paying the fee is maintained for registered charities and for new entrants. New entrants to the market whose turnover for premium rate services is less than £10,000 in their first year of operation will be exempt from the registration fee. After this first year of registration they will then be expected to pay the full fee. This better targets the exemption to support new entrants to the market while also ensuring that more providers contribute to the costs of the Registration Scheme. PhonepayPlus undertakes routine checks on registration status and eligibility for exemptions which may lead to regulatory action where appropriate.

Renewal notices will be sent to all providers in good time for them to renew their registration.

The registration fee will apply from 1 April 2014.

For more information on who is required to register and pay the fee, please see our Registration FAQs.

Arrangements as to the payment, adjustment and auditing of the levy are set out in Annex 1 to the PhonepayPlus Code of Practice.

Arrangements as to registration and the registration fee, including exemptions, are set out in paragraph 3.4 of the PhonepayPlus Code of Practice.

PhonepayPlus will shortly publish its full statement following its consultation on its Business Plan & Budget 2014/15.