Examination of Witnesses (Questions 100-119)
OFCOM
2 MAY 2006
Q100 Mr Evans: You do not think that
the main operators are making excessive profits because of this
international roaming rip-off?
Lord Currie: No, I think they
are making the pricing above cost in that particular service delivery
but that, as Stephen said, is offset by lower prices elsewhere.
Overall I do not think you would argue that the mobile companies
are making excess profits, but the fact that these cost subsidies
may be inappropriate is something that concerns us. One of the
reasons it may have happened is that in the past a majority or
a very large part of international roaming was business-related,
but that is changing quite significantly and that is a structural
shift in the market that calls for shifts in pricing ranges.
Q101 Mr Evans: Can I ask you both,
have you had the operators before you? Have you discussed with
them the international roaming charges and have you asked them
to reduce their prices and, if so, what did they say to you?
Mr Carter: Yes, yes, yes and "We
are looking at it extremely closely."
Q102 Mr Evans: So why have they not
done it?
Mr Carter: Whilst I would accept
the comment made by the gentleman on the left that international
roaming as a service has been available for some time and so these
high prices have been in the market for some time,I think my Chairman's
point is a very valid one that one of the consequences of cheaper
air travel and increasing travel is the visibility and the penetration
of pre-pay mobile services, and the visibility of expensive international
roaming has only really come to the fore in the last two or three
years and there is no doubt in my mind that the mobile network
operators have been slow off the mark in dealing with that. And
as I made an observation to one of them a couple of months ago
it is a sorry state of affairs when European politicians or domestic
politicians are more in touch with your customers than you are.
So I agree with the point. But since the European initiative,
which is actually relatively recently, the level of engagement
has accelerated and, as I say, I think we will see some significant
progress over the next six to nine months.
Chairman: A somewhat unusual position
for politicians to be in, I accept that. This is a very interesting
area, you can see the passions but we must move on because there
are several areas to cover.
Q103 Rob Marris: I have one final
question on the area, Chairman. Are you pursuing this issue in
series or in parallel? That is, if the European multilateral approach
breaks down and you have a plan B that you are already working
on, are you then going to turn around and say, "Oh, it has
broken down, perhaps we had better look at the unilateral approach
in the UK"?
Mr Carter: Both.
Q104 Rob Marris: So you are doing
it in parallel. On 3G, is it a bust or not? People have paid a
lot of money for these licences; take-up is very slow; do you
think it was a commercially wise decision for the companies to
make that huge investment? The reason I ask, before you say "That
is a commercial decision", is because we have been talking
about release of spectrum on re-platforming and all those kind
of issues that we talked about on the CMS kind of things, but
what is going to happen when those auctions take place and what
kind of approach do you think those bidders will take to what
happened on the 3G stuff where take-up has been slower than most
commentators expected?
Lord Currie: My guess is that
they will be rather more aware of the risks this time around than
they were last time and I think that will affect the types of
bids we see. Clearly that does not alter the fact that an auction
approach to releasing the spectrum makes sense. I do not think
that the Chancellor can expect the bonus that he benefited from
back then.
Q105 Rob Marris: Given what we also
talked about with Mr Clapham about broadband take-up and so on,
does it disappoint Ofcom that the 3G take-up has been lower than
had been forecast?
Lord Currie: Disappointed? I think
we are talking about a new technology and new technologies sometimes
succeed beyond any reasonable expectation and sometimes fail.
It is not for us to comment whether this is a failed technology
or whether take-up is just somewhat slower, but in a dynamic market
of the kind we have you do expect some big successes and you also
expect some failures. It is possible that 3G is in that category,
but I really would not want to speculate. It is really for the
commercial players themselves to make those judgments.
Q106 Chairman: Will the Chancellor
be making so much money from future spectrum auctions as he did
from that one, that is the bottom line? Significantly less.
Lord Currie: It is very hard to
predict these things.
Q107 Chairman: Not that hard.
Lord Currie: It would be unwise
to write it in.
Q108 Mr Weir: Moving to the premium
rate services, one of the things that we MPs—certainly I
do—get complaints about on telecom is premium rate services
and in particular rogue internet diallers where no one seems to
take responsibility for what is happening. I notice that in December
2004 you published a review on this subject, but I would ask how
you are taking this forward as your annual plan does not seem
to give much mention to this area.
Mr Carter: There is a dedicated
co-regulator, ICSTIS, which was set up specifically to regulate
the premium rate industry and, as you rightly refer to, largely
because of a spike of concern around rogue diallers we, in conjunction
with the DTI—in fact at the DTI's request—did a review
of the powers and the rules around operators in that market, and
that resulted in an increase in powers to ICSTIS and an increase
in fining capability and also some changes to the prior permissions
regime and also some changes to the payment regime between different
services providers so that if people were being scammed there
was a reasonable time period whereby one operator could identify
the problem and recoup the money before the money had been paid
on to the other operator. The early signs are that that, on that
particular problem, is beginning to bite.
Q109 Mr Weir: The period was 30 days,
is that correct?
Mr Carter: Correct.
Q110 Mr Weir: Given that people get
telephone bills generally on a quarterly basis do you think that
is a long enough period? It can be some time before you realise
that you have been a victim of a rogue dialler.
Mr Carter: We accept that and
of course it is not the case—because there is this double
lock mechanism because there was an extension in the prior permissions
regime, so that there is an obligation on the service provider
that is allocating the numbers, so you are not wholly dependent
upon the money transfer as a safety. The collective view at the
time was that the 30-day extension was a sensible place to start
and, as I say, the early signs are that it is biting reasonably
effectively.
Q111 Mr Weir: One of the other recommendations
is that ICSTIS should require companies to have effective customer
service and refund policies in place. Do you think that is working:
because again that is one of the complaints, that people go to
the company and cannot get them to take effective action when
they have perhaps very large bills from rogue dialling?
Mr Carter: It would be worth asking
ICSTIS for their own independent view because they are the independent
committee for the supervision of, and they will have their own
view, but I think they would say that the new regime again has
worked well. We have coupled that with an increase in resource
and budget for ICSTIS—we are the budget setting body for
ICSTIS or approval body—and that has given them more resource
to handle the overflow of complaints so that that allows them
to draw the problem to the attention of those providers who are
not living up to those service obligations. I am not sure that
I would describe it yet as a virtuous circle, I think that would
be a too rose-tinted view of it, but I definitely think that on
all of those measures you are seeing it improving.
Q112 Mr Weir: You also recently announced
changes to the 08700 numbers.
Mr Carter: We did.
Q113 Mr Weir: A number of government
departments and others are getting some 18 months after the current
numbering review to implement these recommendations. Why so long
a period?
Mr Carter: Generally, I think,
when you are making major changes in markets it is a good idea
to have a glide path, just because (a) it is good regulatory practice
and (b) it allows people to adjust their businesses and services,
and whilst there are aspects of the 087 number range, which have
been called into some question, I think we have been reasonably
alive to those and, as you say, we have made some quite significant
changes: i.e. we have removed revenue share or are proposing the
removal of revenue share. You need to allow businesses time to
migrate services on to alternative numbers. As it relates to the
government departments and public authorities, of course they
have the choice not to use those in the first instance. That is
not a matter for us, we have issued guidance on that matter and
ultimately it is a matter for individual departments and the Central
Office of Information.
Chairman: We have two more areas to pursue
and we will go on to Directory Enquiries. Rob Marris.
Q114 Rob Marris: Mr Carter, can you
name me four Directory Enquiries' telephone numbers, out of the
200 that there were—there may not still be 200?
Mr Carter: I do not know but I
am not even sure that I should even if I could. I could certainly
name you three but then what would happen is that the 197 I did
not name would phone me up within a second and say, "So what
is so good about them?" to which I think the answer is, as
you have rightly observed, now more than one and that provides
competition.
Q115 Rob Marris: Do you think it
has worked?
Mr Carter: If I am allowed, it
was not done on our watch.
Q116 Rob Marris: No, I realise that;
I checked that and it was done by Oftel in 2003.
Mr Carter: My own personal view—and
I think this is also our official view—on balance, yes.
Q117 Rob Marris: Has it brought the
price down?
Lord Currie: There is quite a
wide range of prices in the market. I am not sure that on average
it has brought it down but, interestingly, if you do look at our
recent survey what it shows is that some of the most accurate
providers of information are not necessarily the more expensive.
So there is still quite a range in the marketplace and my perception
will be that a market which was totally new, started off with
quite a lot of difficulties of adjustment, is now settling down
and that seems to be the evidence from the research that we have
conducted recently.
Q118 Rob Marris: The impression of
many, including me, is that the prices are higher and that the
accuracy is not much greater taken across the piece. Is that not
what you are finding, both in terms of prices and in terms of
accuracy?
Mr Carter: It is undoubtedly the
case that there are a number of providers where the price charged
is higher than the previous charge of 192—unarguably. We
do not know the accuracy number because there was not a baseline
on accuracy previously. So no one knows that—that is pure
hypothesis. One of the issues is, and what that teaches you about
deregulating or liberalising markets, that it is a good idea to
do a baseline analysis, so that you can do a compare and contrast
to see whether or not there has been progress, which is why I
say that on balance we think it has because, as my Chairman points
out, there are actually a number of providers providing considerably
cheaper and highly accurate services. Interestingly there are
also more expensive providers providing accurate services, so
there is a spread across the market.
Q119 Rob Marris: We heard earlier
about uSwitch; is there a kind of "uEnq" that one can
look up to find out where this information is, because if I ask
you to provide it you will probably provide a similar answer that
you did to Mrs Curtis-Thomas?
Mr Carter: We have published,
we have done specific work on the Directory Enquiries market and
as my Chairman has alluded to we have published that twice now
and that is accessible on our website.
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