TMT legal update: PhonepayPlus peruses its Code of Practice - call for input

• Technology, Media and Telecoms - Telecoms

06-11-2013

Précis

PhonepayPlus, the organisation which regulates phone-paid services in the UK has launched a review of the current edition of its Code of Practice (“the Code”), on which it has called for industry input and feedback, with the aim of holding a formal consultation process in early 2014. The Code applies to providers of premium rate goods and services which can be paid for by phone, typically via 09, 118, 0871 and 0873 numbers. Whilst PhonepayPlus’ view is that the current Code is working in terms of the overall regulatory approach and key points aimed at consumer protection, its aim is to develop and improve certain areas further, so that it can ‘prepare for the digital future’.

 What?

The Code sets out the rules and regulations for organisations involved in providing premium rate services in the UK. The current, outcomes-based Code came into play on 1 September 2011 with the principles of consumer protection, fairness and ensuring compliance along the supply chain at its core. Whilst PhonepayPlus is not intending to revamp the existing Code or review its fundamental principles, it recognises that there is scope to review and refine certain areas.  The four areas which PhonepayPlus has identified as part of its review are:

• Amendments relating to Ofcom’s upcoming legal instruments on non-geographic call services (NGCS);
• Changes to “future proof” the Code for current and future market developments, bearing in mind recent and forthcoming technological changes;
• Technical changes to streamline investigation and adjudicatory procedures under the Code; and
• Improvements to support the principle of “polluter pays”. 

So what?

NGCS/spending caps

In its Call for Inputs, PhonepayPlus explains its view that spending caps should be revisited to ensure consumer protection, whilst also being “proportionate and encouraging innovation”. PhonepayPlus’s review of spending caps follows Ofcom’s recent publication of its consultation on its NGCS policy position in April this year, the aim of which is to simplify calls made to NGNs and part of which is to include new price caps on 09 numbers.

PhonepayPlus makes clear that its key driver is consumer protection but that any controls on industry, such as spending caps, must not be so restrictive so as to curb innovation in the market. The caps, which currently apply predominantly to sexual entertainment services and services which are particularly attractive to children, currently stand at £25.54 (excl. VAT) and £2.56 (excl. VAT) respectively, following which calls must be terminated. As part of its review, PhonepayPlus will be looking at whether the ‘forced release’ is achieving the aim of protecting vulnerable consumers and whether such protection is necessary for some or all of the services. The current level of the caps will also be examined.

As part of its review, PhonepayPlus will also consider whether spend reminders for all virtual chat services need to be revisited. Currently, reminders must be provided after the user has spent £8.52 (excl. VAT), and after each £8.52 (excl. VAT) thereafter.

 Future proofing

The Code’s current flexible “technology-neutral outcomes-based” regulatory regime, PhonepayPlus explains, is necessary to deal with the rapid technological developments in the PRS market. Developments such as the increase in digital micropayments, it explains, means that preparing for the digital future is a significant consideration in its review and overall business plan. Despite the existing flexibility of the Code, PhonepayPlus suggests there is further scope to future proof its requirements, including in relation to complaints handling processes and registration. Current perceived issues around complaints handling is that the complaints processes may be too prescriptive, in requiring providers to provide a complaints process through a non-premium rate UK phone number. Taking into consideration technological developments and consumer behaviour, PhonepayPlus explains, it is now considering whether this requirement should be more flexible in context of the wide variety of digital products in the marketplace. The key point, it says, is that any complaints procedures meet the outcome of enabling consumers to have complaints received quickly and easily by the relevant providers.

In relation to the registration requirement, PhonepayPlus’s view is that the current exemptions which apply to certain types of service or provider (most notably, 087x numbers) may need to be refined, bearing in mind the current broad categories of exempt services. It may be more appropriate, PhonepayPlus explains, to exempt a certain type of service or provider without having to exempt the whole category of service.

 Enforcement

Phonepayplus is seeking to streamline investigations and adjudication procedures.  Presently, providers can be caught in a lengthy and involved investigation process before it is clear what the potential breaches might be.  The proposals and ‘call for inputs’ appear to be aimed at arriving at a determination quicker and at less cost.  Depending on the outcome of the review, this might result in quicker sanctions and less of an opportunity for a provider to argue its case.  However, there does appear to be a desire for increased clarity and that is to be welcomed.    

‘Polluter pays’

Finally, as part of its review, PhonepayPlus is to examine the current Code to see whether this can be strengthened to assist its overall strategy of “polluter pays” (i.e. that providers in breach of the Code pay their fair share and are incentivised to comply with the regulatory framework set by the regulator). The three key issues it proposes to examine are:

(i) the current withholding of payments regime, which is designed to ensure that consumer monies are left in the system and can be recovered as needed in the event of consumer harm. PhonepayPlus is concerned that this is being undermined in places where monies flow immediately between different levels of provider;

(ii) in relation to the sanctions that a tribunal can impose on a  provider found to be in breach of the Code, from the perspective of “polluter pays”; and

(iii) the current costs of oral hearings before the Independent Appeals Body which are currently capped at £30,000 for PhonepayPlus’ costs and £25,000 for the Tribunal. The costs in certain cases, explains PhonepayPlus, can exceed the thresholds, meaning that the excess costs are added to “the general cost of regulation”. The aim will therefore be to amend the cap so that the appropriate party will meet the true costs of a hearing.

The anticipated consultation process early next year will be key for PRS providers in terms of watching the developments proposed to enable the industry to ‘prepare for the digital future’.