UK Reg Rejects Calls to Reduce 070 Fraud and Bill Shock by Fixing the Number Plan

UK communications regulation follows a simple three step pattern:

  1. The regulator writes a paper about things it intends to do and asks for feedback;
  2. The industry and members of the public provide feedback, highlighting how the regulator’s plans may be improved;
  3. The regulator ignores all feedback and does what it said it would do in step 1.

Ofcom, the UK comms regulator, has followed the same pattern with the publication of their draft statement on the personal numbering 070 number range. The statement explains, at length, why Ofcom is sticking to its original plans and dismissing every alternative put forward, save for their usual sop of lengthening their transition period. (I assume that Ofcom always suggests a ridiculously short transition period, then agrees to greatly extend it, in order to create the impression that they respect the opinions of others.) Put simply, a long laundry list of problems, including fraud and bill shock, occur because the 070 ‘follow me’ number range is routinely confused with mobile numbers beginning 07. Hence Ofcom’s solution is to:

  • implement wholesale price controls on 070 numbers, so there is less incentive for abuse;
  • not implement retail price controls, because wholesale price controls are thought to be sufficient, even though one of the aims of the review was to reduce bill shock for retail customers;
  • refuse to change the number plan so that ‘follow-me’ numbers no longer begin with 070, even though this would obviously reduce the widespread and acknowledged confusion of this range with the vast majority of numbers beginning 07;
  • hope that changing wholesale prices will not negatively affect hospital patients and staff who rely on services in the 07 range because they do not posses mobile phones or are prohibited from using them;
  • dismiss the benefits of targeted enforcement action against fraudsters responsible for most of the abuse of the 070 range.

This last point is most bewildering. What conceivable reason can the UK regulator have for not seeking the punishment of unscrupulous businesses that profit from crime? Here is the argument, as Ofcom understood it, and their response to it.

Certain stakeholders considered that fraud on the 070 range could be tackled by targeted enforcement. RAG/Biass referred to a paper by Eurecom which concluded that “just 4 operators (out of 88) provide more than 90% of fraud-related UK PRS numbers.” It thought our proposals were unfair, given that in its view, only a small number of known operators are responsible for the majority of the fraudulent activity. It suggested that we direct our efforts at addressing the behaviour of the four operators identified in the Eurecom report. Eurecom also noted that we could reduce abuse by stricter enforcement against fraud.

If the concern was solely one of fraudulent behaviour then targeted enforcement might be appropriate but this would not address the underlying incentives for fraud or the broader concerns over retail pricing, bill shock and the reputation of the range. For this reason, it is not sufficient for Ofcom to target just a select few 070 providers but, rather, to remove the ability of providers generally to exercise SMP over 070 TRs and, therefore, the risk that this number range may be misused for fraudulent purposes.

In any event, as set out above and in Annex 7, we do not consider that an ex post approach to enforcement has been effective on the 070 number range and that further pre-emptive regulatory action must be taken to address the consumer harms identified. We note, for instance, the action that the PSA has taken in certain cases, but also that there have been difficulties in relation to the enforcement of alleged fraudulent activity on the 070 number range, which we consider undermines the effectiveness of targeted enforcement measures operating in isolation.

In short, Ofcom argues they have no reason to punish the businesses who are responsible for most fraud because:

  • Ofcom has other goals as well as reducing fraud;
  • The UK’s authorities have shown themselves to be ineffective at taking enforcement action against fraud;
  • Therefore, nothing is gained by trying to punish fraudsters.

We can be thankful that not every government authority has such a lazy and self-serving attitude towards crime. Has it not occurred to anyone in Ofcom that enforcement also serves as a deterrent? Does none of them think that an unscrupulous businessman who engages in one type of fraud will simply switch to other kinds of fraud if their profit margins are altered by price controls but the authorities announce they do not pursue wrongdoers?

The regulator also dismissed concerns that hospital patients – who are much more likely to be elderly, and hence less likely to own a mobile phone – will be affected by their proposed changes to the 070 numbers used for bedside phones.

With respect to hospital patients, we note that certain groups of individuals may be particularly impacted by any change in the standing charges for using combined television and telephone services. For example, the elderly may be particularly affected, in circumstances as they constitute a higher proportion of the total number of inpatients, particularly during certain times of the year. It is also possible that other individuals who may require hospital services more frequently than other groups in society may be impacted, for example, pregnant women or individuals with certain disabilities.

We are aware that 070 revenue has, in the past, been used to offset the cost of providing other services (such as television). However, the contribution that 070 revenues are making has declined over time, with the increased use of mobiles in hospitals, so that those revenues are now less relevant in determining the charges imposed for additional hospital services. Further, we consider that there are demand-side factors that are likely to constrain suppliers’ ability to increase prices.

Further, providers of telephony services in hospitals also have the option of using other revenue-raising number ranges, aside from 070 numbers such as 084/087. Such a move will mean that callers will not benefit from lower charges for 070 calls, however we have reason to believe that there is greater awareness of the costs of calling other non-geographic number ranges so the level of bill shock is still likely to reduce.

Therefore, we consider that, overall, no specific group is likely to be particularly negatively affected by our remedies.

An awful lot of words were used to avoid drawing attention to a crucial omission: not a shred of data is offered to support Ofcom’s guesswork. Whilst they know who is most likely to be in hospital, they speculate that demand-side factors will keep prices low. Ofcom is fortunate that the free market works so well when it suits them; it means they feel no need to protect vulnerable retail customers who have limited alternatives. This confidence in the market is maintained even though bill shock is used by Ofcom to justify the imposition of wholesale price controls. This faith in demand-side factors seems all the more remarkable in the context of ongoing national outrage that a lack of alternatives means hospital patients and visitors must endure rip-off charges for everything from toothpaste to car parking. Why believe that demand-side economics will keep prices low for hospital telephony services when the lack of choice leads to sky-high prices for other goods and services sold at hospitals?

It is no surprise that Ofcom rejected the proposal to change the UK number plan so that services currently numbered 070 be given different numbers to avoid confusion with mobile phones, even though it received wide ranging support, including the backing of BT. It was in 1997 that the regulator originally made the blindingly stupid decision to put the trivial 070 ‘follow me’ numbers alongside the enormously important 07 mobile numbers. Obvious confusion prompted a regulatory review of this decision in 1998, but no remedial action was taken. In 2001 the regulator issued a statement on restoring trust for 070 numbers. In 2007 they forced the industry to play a recording warning people of high prices to 070 numbers, but then scrapped it because of the negative impact on hospitals and burglar alarms. A 2009 review noted the problems with 070 numbers but decided not to change the plan because complaints had fallen in number. In 2013 the regulator noted a need to take action on 070 numbers and promised a new consultation in due course. In 2017 they instigated the long-promised review. In 2018 they published the outcome to the consultation. And having held that consultation, they concluded they did not need to change the number range because:

In the 2009 070 Statement we considered closing the 070 number range and migrating end-users to an alternative number range. We found that the costs significantly outweighed the benefits and that such action would be disproportionate to the consumer detriment identified. We consider that this remains the case. Further, in the 2013 NGS Statement we noted the need to simplify the numbering system. To migrate personal numbers to an alternative number system would be contrary to the position in the 2013 Review and would be a disproportionate line of action given the decline in demand for personal number services. We have not received any evidence to suggest this position has changed.

Further, we consider that by aligning the 070 TR with the MTR, we address the risk of fraud on the number range as well as bill shock that arises when consumers fail to distinguish between 070 and the 07x number ranges. We therefore do not think it is proportionate to move PNS to an existing alternative number range to achieve these aims. We anticipate that retail prices will fall in line with the reduction to the termination rate (potentially with 070 calls being included in call bundles) and this will be more effective in addressing bill shock and harm from high prices than further price transparency measures. We therefore do not consider that migration to an alternative number range is required to address the consumer harms identified.

It has taken the UK regulator 20 years to introduce a price control to address fraud with 070 numbers even though the inevitable confusion of 070 personal numbers and 07 mobile numbers was the subject of a review they held just one year after the disastrous decision to group those numbers together. Now the regulator hopes the problems will gently ease over time. None of these issues would have occurred if the regulator had not made an incompetent decision in the first place. They could have reversed a terrible decision soon after it was made, but preferred two decades of intransigence.

The draft statement has been sent to the European Commission for their review. Unless a miracle happens, the euro-bureaucrats will file the statement away and Ofcom will proceed as expected. Another victory will be notched up for the paper pushers. The rest of us can look forward to another regulatory review in 10 years from now, asking why fraud is so widespread but concluding nothing much can be done about it. Should we bother responding to it?

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.