Communications Act 2003 (Maximum Penalty and Disclosure of Information) Order 2005

rose to move, That the draft order laid before the House on 23 November be approved [11th Report from the Joint Committee and 17th Report from the Merits Committee]. The noble Lord said: My Lords, the purpose of this straightforward order before the House today is to strengthen the regulatory regime for premium rate telecoms services—PRS—to ensure that consumers are    adequately protected. The order under the Communications Act 2003 makes just two provisions: it raises the maximum penalty which the PRS regulator ICSTIS—the Independent Committee for the Supervision of Standards for Telephone Information Services—can impose on those that abuse PRS from £100,000 to £250,000. it adds ICSTIS to the list of persons to whom Ofcom may disclose information about telecoms companies, including information from application forms for PRS numbers which will indicate to whom such numbers have been allocated. Premium rate services offer information and entertainment via telephone, fax, PC (e-mail, Internet), mobile or interactive digital TV. Many thousands of different services are available, ranging from TV voting lines—for example, ““Strictly Come Dancing””—and competitions, to mobile ring tones and directory inquiries. The services are popular with the consumer and easily accessible. The UK PRS market is worth more than £1 billion per year. It is the oldest and the largest such sector in the world. PRS have been an established and innovative part of the communications sector for a number of years and the Government want them to continue to thrive. But in recent years PRS scams have caused consumers serious problems. For example, Internet diallers have been connecting customers to premium rate sites they did not wish to access. Another common scam is pre-recorded phone messages which claim consumers have ““won prizes”” and require a call to a PRS number at a cost of £1.50 per minute. The unsuspecting consumer then finds out that no such prize exists and in the mean time has run up a phone bill for £10. During the summer of 2004, thousands of people a month complained to ICSTIS of being billed for PRS calls that they had not made. These calls create real consumer harm and many consumers have faced bills of hundreds of pounds for services they had not used. In response to this serious consumer harm, the Government, the industry, the regulator Ofcom and the PRS regulator ICSTIS worked together to tackle the issue. DTI asked Ofcom to carry out a review of the regulation of premium rate services last year to ensure that consumers were adequately protected. Ofcom published its review of PRS regulation in December 2004. A number of recommendations to reduce the scope for consumer harm were made, including raising the maximum penalty for those who abuse PRS; they are now all being implemented. Key areas for ICSTIS action going forward are: more effective regulation; faster enforcement action; consumer refunds and better information for consumers on how to protect themselves from being the victim of a PRS scam. Through the parliamentary process there is now an opportunity to strengthen ICSTIS’ powers further to act more strongly against rogue operators who cause such misery and harm to the consumer. Following harm to consumers caused by the scams which came to light in 2004, ICSTIS argued convincingly in favour of raising the maximum penalty from £100,000 to £250,000. ICSTIS also requested that we take action to enable Ofcom to disclose contact information from numbering application forms so that ICSTIS can be swifter in taking enforcement action against those who misuse PRS. The provisions in this order were subject to public consultation this summer. The responses were overwhelmingly in favour of raising the maximum penalty and of adding ICSTIS to the list of those to whom Ofcom may disclose numbering information. The low collection rate of fines by ICSTIS concerned some of the respondents. The collection rate impacts on the level of deterrence. But ICSTIS reports that collection rates are improving. In 2002, the rate was 36 per cent; in 2003, 43 per cent and in   2004, 66 per cent. Other things which should help   with this are: implementation of an Ofcom recommendation (in September 2005) for terminating communications providers to withhold funds from PRS service providers for 30 days—this means ICSTIS is more likely to be able to collect fines because money will be withheld in the PRS payments system for longer and can be recovered more easily by ICSTIS; the recently introduced key performance indicators agreed between Ofcom and ICSTIS which make ICSTIS more accountable to Ofcom and should help to lift ICSTIS’ overall performance; and improved due diligence with mandatory information requirements on operators who contract with service providers—those who would be fined if things go wrong—so that it will be easier for ICSTIS to find the culprits. The role of ICSTIS is to prevent consumer harm. It does this by requiring premium rate service providers to adhere to a code of practice for clear and accurate pricing information, honest advertising and appropriate and targeted promotions.?? Higher fines will act as a better deterrent against those who abuse PRS and are a more appropriate sanction for those who inflict such widespread consumer harm. The Government are encouraging ICSTIS to use its revised fining powers as flexibly as possible to target the worst abusers of the PRS charging mechanism. Disclosure of company contact information from Ofcom numbering application forms will speed ICSTIS’s response to any wrongdoing. Both Ofcom and ICSTIS requested that provision and, as mentioned earlier, there was overwhelming support for it. The order will enable ICSTIS to more easily trace service providers operating behind misused numbers and quickly take action to close down problem services as necessary, which reduces the scope for consumer harm to accumulate. A regulatory impact assessment was carried out for this order, and the results have been published with the Government’s response to the consultation. The assessment concludes that this order introduces no additional regulatory burden for legitimate businesses. The order is made to strengthen the powers of the PRS regulator, and I commend the order to the House. I beg to move. Moved, That the draft order laid before the House on 23 November be approved. [11th Report from the Joint Committee and 17th Report from the Merits Committee].—(Lord McKenzie of Luton.)