House of Commons - Trade and Industry

Select Committee on Trade and Industry Fifth Report

III CHANGING TELEPHONE NUMBERS

Reasons for Changing Telephone Numbers

16. Oftel has cited several reasons to change telephone numbers, including:

in order to ensure sufficient numbers to meet the growing demand, which Oftel described as "the overriding need, and rationale for all these changes", owing to "rapid technological change" which "is bringing a wide range of new services to users".[37] Oftel identified "two main forms of shortage of numbers":[38]

(i) "the shortage of codes for such functions as mobile, premium rate services etc"; and

(ii) a shortage of numbers within some area codes, including some of those areas to be affected by geographic code changes in 2000

in order to allow for the good husbandry of the supply of numbers in future[39]
so that telephone numbers can provide clear information to consumers. Oftel told us that the "grouping of types of calls in ranges will help users identify the type of service and its cost"[40]
so that consumers can have a clear, unambiguous perception of the number of digits to be dialled[41]
in order to provide the basis for fair competition between telecom operators[42]

We consider these arguments below.

Shortage of Numbers

17. The Director General informed us that the purpose of phONEday, when a "1" was inserted before all area codes, in 1995 was to "create a number pool for the United Kingdom that would last almost...forever". He noted that, by using the numbers released by the phONEday changes — in particular, by expanding remaining nine-digit numbers to ten-digits — a stock of nine billion numbers would be created, compared to the nine hundred million previously in existence.[43] The conversion of remaining nine-digit 0800 numbers to ten-digits, for instance, would expand the stock of such freephone numbers from 2.8 million today to 10 million.[44] A further increase to the number of codes has not been proposed.

18. The changes to geographic numbers in London, Cardiff, Southampton, Portsmouth, Belfast and Coventry are intended to deal with a shortage of numbers within existing area codes. Three criticisms of the changes have been brought to our attention:

that the changes could have been made on phONEday. In answer to this point, the Director General claimed that technological factors lay behind the decision to implement a two-tier approach[45]
that an alternative solution, involving each area being given an additional code for allocations to new users while existing numbers remained unchanged, was proposed by Oftel in 1995 but not implemented. The present Director General explained the change in policy with reference to the "almost unanimous view, both on the part of operators and on the part of the consumers, that moving into a situation where you could have in the same house two different numbers was not proper" and consequently Oftel rejected the option they had originally preferred in favour of the current proposals for change[46]
that, in Northern Ireland, area codes which are not short of numbers are being changed.[47] BT commented in October 1996 that "it is difficult to see how such [number] changes can be sold to customers in, for example...Lisburn, where numbering exhaustion is not an issue". Oftel reported in January 1997 that "consultation showed very strong support for a single Northern Ireland code from local residential and business users, local authorities, and the Northern Ireland Advisory Committee on Telecommunications"[48]

19. Oftel told us that "there is a shortage of freephone numbers" which necessitated the expansion of nine-digit numbers to ten-digits and that the existing 2.8 million capacity of the 0800 code will "not...be sufficient to meet all future demand for 0800 numbers".[49] However, Oftel's 1997 audit of numbers in use reported that only 230,000 freephone numbers had been allocated to customers. This represents barely 8% of total nine- and ten-digit 0800 freephone capacity, leaving aside the other codes currently allocated for freephone.[50] Changes to other types of telephone number have not been motivated primarily by concerns of number exhaustion within existing codes. The proposal for the 07 range to be designated for mobile, pager and personal services is designed to "promote greater efficiency of the Numbering Scheme — using one billion numbers for these services instead of two billion".[51] A shortage of numbers within existing codes is one, but far from the only, reason for the changes proposed by Oftel to telephone numbers.

Number Husbandry

20. The utilisation of numbering capacity within individual codes is surprisingly low, even in those code ranges which are soon to be replaced due to exhaustion. There are, potentially, one million six-digit numbers available behind each standard geographic 01xxx code, but not all can be used.[52] Local numbers cannot begin with "0", to avoid confusion with national dialling codes, "1", to avoid confusion with short access-codes, or "99", to avoid confusion with the emergency services' number. Furthermore, there are always spare numbers which have been recently withdrawn from service and which are not quickly reused in order to reduce the risk of unwanted calls, and a block of 100,000 numbers is commonly set aside for future expansion from six- to

seven-digit local numbering. These factors tend to reduce the availability of numbering capacity by approximately 40%, leaving around 600,000 numbers available in each code.[53]

21. Moreover, Oftel estimates that a further 20% of numbering capacity, or a third of numbers available once the factors above are accounted for, is lost because of the manner in which numbers are allocated to telephone operators. Oftel normally allocates blocks of 10,000 numbers to operators, which then allocate individual numbers to end users. Therefore, claims that numbering capacity is running short usually refer to a situation in which the supply of blocks of numbers, each containing 10,000 individual numbers, by Oftel is becoming more limited.[54] Various regulatory requirements have been placed on operators to ensure that they use blocks efficiently, especially in geographic code areas close to exhaustion, but "operators are only achieving about 40-45% utilisation rates at the time when a local code change is necessary".[55] For instance, when an operator begins offering a service in a geographic code area, 10,000 numbers is the minimum allocation available from Oftel, even if the initial take-up of the service is low.[56]

22. The inefficient allocation of numbers is an underlying cause of the dispute concerning changes to freephone numbers. One reason given for the changes by Oftel is that they are likely to run out of blocks of 10-digit 0800 numbers for allocation to operators "within a year".[57] Most of the numbers allocated to operators have not been further allocated to end-users, however. As we have noted, in 1997, only some 230,000 freephone numbers had been allocated to customers.[58] FUG estimate that around 100,000 of these are 9-digit 0800 numbers.[59] The remainder of these numbers, estimated to total over 750,000, are allocated to BT and, for reasons of competitive neutrality referred to below, are not allocated to end users.[60] FUG argue that "it is vital that other operators make use of this resource" and that "it is quite possible for numbers, or blocks of numbers, prior to allocation to businesses, to be 'ported' to other network operators on a fair and equitable basis. Whilst technical difficulties may still inhibit the widest take-up of portability, we do not believe that any are insurmountable in today's telecommunications environment".[61]

23. Oftel, as well as some operators, question FUG's assessment of the technical difficulties of their proposed solution to the freephone numbering issue. Oftel told us that FUG's scheme "would employ techniques which are similar to those used for the normal porting of allocated freephone numbers" but that all calls to the ported blocks would continue to be routed through BT's networks, with potential cost and competition consequences. Alternatively, operators could use databases which identify the correct destination from all the digits dialled, rather than only from those which identify the block. Oftel noted that "this would require considerable investment", which it could not require operators to make and which BT argued could constitute a "disincentive to market entry", if insisted upon.[62] The memorandum from NTL/Diamond Communications described FUG's scheme as "superficially attractive" but noted that it would not increase the stock of memorable or "golden" numbers available for freephone customers, an issue which Cable & Wireless also emphasised, and to which we return in paragraph 37.[63] The Director General confirmed that there were "significant technical problems" associated with FUG's proposal, but that "it is not ruled out". He emphasised that it is "key that we have the

operators, BT and Cable & Wireless and Oftel sitting together...to see if there is a solution to this particular problem".[64]

24. Changing telephone numbers does not, in itself, improve the efficiency with which numbers are allocated by operators to end users. If the efficiency of number use is improved, however, even by a small percentage, then there may be less need for Oftel to propose changes to geographic and freephone customers.[65] We are concerned that Oftel has not pursued improvements by operators of the efficiency with which they allocate telephone numbers to end users as vigorously as they have inconvenient and costly changes to customers' numbers. Oftel must not be unduly swayed from putting customers' interests first by operators' claims that improving the efficiency of number use poses them with significant technological problems. We welcome the Director General's announcement that he will sit down with the operators to consider FUG's solution to the freephone numbering issue and recommend that he also discuss with them technical solutions to wasteful number use throughout the whole numbering scheme. If numbers were properly recognised as a scarce, national resource — and they should be — the telephone operators would be on a charge of grossly negligent husbandry.

Customers' Needs

25. One of the criteria of the NNS is to "meet customer needs for a meaningful and user-friendly scheme".[66] In 1996, Oftel identified three factors which "go a long way to meeting customer needs". Customers need:[67]

to have enough numbers for the future;
to enjoy choice and better services as a result of competition; and
not to have non-essential features introduced into numbering arrangements at disproportionate cost to themselves

A number of other factors were also identified as necessary to ensure that the NNS meets customer needs. Oftel stated that Customers expect:

there to be a link between telephone numbers and geographic places. Oftel cited research which suggested that the "majority of people cannot identify charge bands from lists of their nearby area codes" and that "40% of people do not know where the boundaries of their own local area code lie, and most customers do not use the location information in a phone number". It concluded that the link between numbers and geographic areas would become less important to customers in future[68]
"to have a broad indication of the cost of calls", before they dial. Oftel concluded that they would seek "to ensure...that numbers of different types give a broad indication of service/price wherever possible"[69]
a standard number length and a standard structure or number layout[70]
the ability to retain local-dialling[71]

26. Although customers may find it difficult to match telephone codes with specific geographic areas, as Oftel suggests, this does not mean that customers typically fail to differentiate locally dialled numbers from numbers dialled using a national code. We would suggest that customers do understand that when they dial a local number, they are charged at a local rate, and that when they dial a code before the local number often, although not always, they are charged at a higher rate. The changes proposed for Northern Ireland and for Southampton and Portsmouth create a local dialling, but not a local tariff, regime. Customers dialling a local number in the affected areas may be charged at either a local or regional rate. Only by matching the first two or three digits to specific geographic areas, something Oftel has discovered customers often struggle to do, will customers be able to anticipate the rate at which their calls will be charged. BT has expressed concern that these changes are intended to persuade telephone operators to amend their tariffing policy, something which Ms. Black of CCE suggested would be desirable.[72] We are concerned that, at a time when Oftel aim "to ensure...that numbers of different types give a broad indication of service/price wherever possible", the link between local dialling and local tariffing is being weakened, especially because we are unconvinced that the full implications of this innovation have been explained to, and accepted by, the businesses and consumers most affected.

27. A principal aim of the NNS is to "give much greater clarity to the general public from now on about the nature of the number that they are dialling". In particular, it is intended that consumers dialling 07, for instance, will know that they are contacting a mobile telephone, pager, or personal telephone service and can expect to pay a higher tariff than they would normally for a national call.[73] While the concept of using the telephone code structure to deliver price information to consumers is attractive, there are difficulties associated with it. First, Consumers' Association argued that the research undertaken by Oftel and others on customers' recognition of codes, referred to previously, showed that customers would not generally take notice of the price information communicated by codes. They stated that "for consumers to obtain the maximum benefit from the new numbering scheme there would be a need for a significant awareness-raising exercise".[74]

28. Secondly, the pricing of calls is not a matter over which Oftel has direct control. Whereas the NNS may give some indication of the service being called, the Director General admitted that, in a competitive environment, it would be difficult for the scheme to deliver consistent pricing information. He argued that, particularly in respect of freephone and special rate services, there was a need for "absolute clarity in the advertising for that service so that the number called has underneath it the price that will be charged".[75] It is vital that consumers have easy access to information about the cost-per-minute of the calls they make, before they pick up the telephone, including guidance about whether they will be charged while held in a queue before calls are answered.[76] We believe that the national numbering scheme does provide a useful means of informing consumers whether they will be charged at a local, national or premium rate for a call, or not charged at all, but we are not persuaded that it will be easy for the scheme to convey more detailed information. Nor is it certain that operators will respect Oftel's intentions in designing the scheme when making pricing decisions in future. While we acknowledge that the national numbering scheme can give consumers information about the cost of their calls we recommend that Oftel do more, working with the telecommunications industry, to ensure that pricing information reaches consumers by other means.

29. We are puzzled as to the origin of Oftel's belief that customers need or desire standard number lengths.[77] Ms. Black of CCE expressed concern about number lengths in terms of consumers being confused when presented with numbers behind the same code (such as 0800) but of different lengths.[78] Aside from anecdotal information, we have seen no evidence to suggest that consumers are confused in this way, or that irregular number lengths cause telephone users any significant problems.[79] Oftel has cited a number of consumer "needs" as reason to alter the National Numbering Scheme, which, in the case of the "need" for codes to provide pricing information and for standardised number lengths, are, at best, unproven by detailed research or consultation. We are disappointed that number changes are being proposed, and implemented, on the basis of unsubstantiated claims by Oftel, apparently backed by the statutory consumer organisation, of what customers want from telephone numbering. In the case of freephone numbers, unless research suggests that the costs to consumers of coping simultaneously with nine- and ten-digit numbers outweigh the costs involved with changing those numbers, we recommend that efforts to standardise 0800 number lengths are ended.

Competitive Neutrality

30. Some codes are well recognised by telephone users and possession of numbers behind these codes is claimed to be a source of competitive advantage to operators and to end-users.[80] Foremost amongst these codes is the 0800 freephone code. FUG reported December 1998 research in which 92% of respondents recognised that a call to an 0800 number would be free.[81] Research commissioned by Oftel in 1995 reported that the 0800 code was recognised as freephone by 65% of respondents, whereas the 0500 code was recognised as freephone by only 26%.[82] When in control of the numbering system, BT retained all 0800 numbers for itself, allocating nine-digit numbers to end users. Mercury was allocated blocks of 0500 numbers.[83] In 1994, Oftel took back 200 unused blocks of 1,000 numbers from BT and began allocating them to operators as blocks of 10,000 numbers, thus creating ten-digit 0800 numbers.[84] BT and Cable & Wireless were requested to stop allocating numbers to end-users from the 0800 and 0500 number blocks they retained.[85]

31. As we noted above, Oftel's proposals to change freephone numbers are intended to move 0500 numbers into the 0800 code and to change nine-digit 0800 numbers into ten-digit 0800 numbers.[86] Oftel told us that it was necessary to merge 0500 numbers into the 0800 range "in order to correct the imbalance whereby C&W and their customers are perceived to be at a disadvantage compared to BT and its customers".[87] Pressure to deal with such imbalances has also been generated by the recent EU Interconnection Directive, which states that national numbering plans should be "applied in a manner that gives fair and equal treatment to all providers of publicly available telecommunications services".[88]

32. From the perspective of telephone operators, the allocation of blocks of freephone numbers before 1994 was clearly inequitable. BT had access to the full 0800 range which, because of its high public recognition factor as a freephone code, was a source of competitive advantage, in terms of attracting customers, denied to other operators. Freephone customers choosing an alternative operator to BT were forced to forego the advantages derived from the 0800 code. The current position is more equitable. Some 79 operators, including BT and Cable & Wireless, have been allocated blocks of 10-digit 0800 numbers for allocation to end users.[89] Any operator wishing to allocate freephone numbers can now be allocated blocks of ten-digit 0800 numbers by Oftel. Although the numbering system did, previously, discriminate against operators other than BT wishing to offer freephone numbers to new customers, it does not appear to do so now.

33. New freephone customers are now allocated either ten-digit 0800 or 0808 numbers. If they choose to have an 0800 number, then they may be placed at a competitive advantage to customers with nine-digit 0800 numbers allocated prior to 1994, if customers fail to recognise a ten-digit 0800 number as freephone or are put off from dialling the extra digit. We have seen no evidence to suggest that customers behave in this manner. Unlike their predecessors, customers seeking freephone numbers today can both choose their operator and be allocated an 0800 number.

34. Although new freephone customers may not be disadvantaged by the present arrangements for the allocation of 0800 numbers, existing 0500 customers may be impeded from moving to the 0800 range. An 0500 customer wishing to move to 0800 and to remain with Cable & Wireless may only be offered ten-digit numbers in the 0800 056, 0800 068, 0800 092 and 0800 096 blocks, thus restricting his choice of freephone number.[90] A broader choice can be made by changing operator, although such a decision could clearly not be made on a fair and equitable basis. In some cases, the 0500 customer may wish to choose a number currently within a block allocated to BT from which allocations to end-users are not permitted. This situation could be alleviated either by changing all nine-digit numbers into ten-digit numbers, as Oftel suggest, or by allowing nine-digit numbers within BT's blocks to be used by other operators, as FUG suggest. Finally, there are 3000 instances of different firms holding the same number in both the 0500 and 0800 codes.[91] Rules to manage such number clashes are required whichever method is used to allow 0500 customers to enter the 0800 range.[92]

35. Oftel's requirement that all 0500 customers migrate to the 0800 range pre-judges the question of whether such customers want to change their freephone numbers.[93] We believe that any migration should be market-led, once barriers to competition have been removed, a proposition which Oftel has advocated in the past, but which now appears to have been discarded.[94] It appears to us that one of the most significant barriers to competition in the numbering scheme is the control by BT of thousands of unused nine-digit freephone numbers. As we concluded in paragraph 24, efforts to overcome the technical difficulties associated with utilising BT's stash of unused freephone numbers should precede proposals to change almost all existing freephone numbers. Although we support efforts by Oftel to remove barriers to competition in the National Numbering Scheme, no compelling case for all 0500 numbers to be migrated into the 0800 range has yet been made.

36. Aside from 0500 and 0800, there is another freephone code — 0808 — from which 17 operators make number allocations, the most significant being Vodafone.[95] Oftel told us that the 0808 code, like 0500, did not provide "a fully satisfactory basis for fair competition", because consumer recognition of the code as freephone is lower than that for 0800.[96] Nevertheless, Oftel do not intend to merge the 0808 code with the 0800 range. It told us that "080 was identified...as the range for freephone. 0808 numbers are thereby new numbers conforming to the Numbering Scheme and are not subject to the scheme". Moreover, Oftel said that "as demand arises and capacity requires, other 080X ranges will be opened to provide additional freephone numbering capacity".[97] We question why, if both 0500 and 0808 codes do not provide a fully satisfactory basis for fair competition, 0500 numbers are being merged with the 0800 range but 0808 codes are to be retained and further 080X freephone codes are to be introduced in future. This situation is particularly puzzling given the number of unused 0800 freephone numbers retained by BT, to which we have already drawn attention.

37. If Oftel implements its preferred option for change to freephone numbers then, as well as changing existing nine-digit 0800 numbers, FUG claimed that "it will create numbers that are similar to existing [nine]-digit numbers, thus allowing competitors to cash in on the new scheme.[98] For instance, under Oftel's proposals, Forte's 0800 40 40 40 number would be changed to 0800 6 40 40 40, allowing a rival firm to request, and be allocated, 08000 40 40 40. Arthur Orbell of Cuffley Communications suggested Oftel keep a register of those firms interested in ten-digit numbers similar to their existing nine-digit numbers; a related procedure was used in the US to assist firms with memorable 800 numbers when the 888 range was developed and, in 1993, Oftel suggested that, if nine-digit freephone numbers were changed to ten-digits, then it might be possible for existing freephone users to "have an option on the corresponding block of ten numbers, subject to appropriate terms and conditions.[99] FUG told us that Oftel now had "no plans...to allow a subscriber who had built up goodwill and brand identification in the original [nine]-digit number to have the right of first refusal on the new number created by implementation of the migration scheme" and that "Oftel plans to auction attractive numbers created by changes in the scheme".[100]

38. In November 1998, Oftel announced that its consultation on the freephone numbering issue would "take into account responses received to the consultation Developing Number Administration before determining the most appropriate way forward".[101] This latter consultation exercise is concerned with defining the ownership of telephone numbers and the possibility of memorable, or golden, numbers being auctioned by Oftel to end-users. In the absence of a detailed explanation, by Oftel, of the reasons why changing all 0800 and 0500 freephone numbers is the only option capable of alleviating the competition concerns identified earlier, we are left with the impression that Oftel's proposals are at least partly motivated by a desire to create new golden numbers for Oftel to sell. We would strongly deprecate any attempt by Oftel to raise revenue at the expense of existing freephone customers, who would bear significant costs as a result of being forced to alter their freephone numbers.

Conformity with the Numbering Scheme

39. The first objective of Oftel's freephone numbers' policy, set out in their July 1998 consultation paper, was that "all freephone numbers should conform to the Scheme".[102] We reject the validity of this objective. The scheme in itself is not an objective. It is a set of rules which, taken together, may achieve objectives, such as good husbandry of numbers, but may also be subject to amendment and may even be over-ruled if it were felt in the public interest to do so. For instance, there are no proposals to alter some well-known nine-digit 0800 help-line numbers, even though they do not conform with the scheme, because of the potentially grave nature of any problems which may arise if calls to them are misdialled due to number changes.[103] A further example of the flexibility of the scheme is that three of the seven options outlined in Oftel's freephone consultation document would require the NNS to be amended if implemented.[104] We question the benefits to consumers arising from clearing the 03, 04, 05 and 06 ranges entirely of telephone numbers over the next few years, when no use is to be made of these ranges in the short term and, in the case of the 04 and 06 ranges, no proposals for their potential use at any time have yet been brought forward. The National Numbering Scheme is an administrative arrangement, whose first aim should always be the protection of consumers' interests in respect of telephone numbering. Number changes should not be proposed purely for the sake of keeping the Scheme neat and tidy.

Conclusion

40. We do not believe that Oftel has stated clearly the reasons for many of the number changes it has proposed; nor backed up many of its assertions about what customers want and need from the telephone numbering system; nor adequately considered alternatives to change. In particular:

the shortage of numbers identified behind certain geographic codes, and behind the 0800 code, could be alleviated by the more efficient use of number blocks by operators. This option should have been explored exhaustively, and the results widely disseminated, before it was proposed that consumers would be required to change their telephone numbers to deal with this problem

Oftel should not justify number changes by reference to customer needs, unless those needs have been comprehensively surveyed and the results subjected to public scrutiny

we are totally unconvinced by Oftel's arguments for changing freephone numbers and have been left with the impression that its proposals are, in fact, a smokescreen for an attempt to create new golden numbers which Oftel can auction to firms

we are concerned that some numbers are being changed in order to suit arbitrary administrative arrangements rather than because consumers are expected to benefit from the change

37 Ev, p1, paragraph 5 Back

38 Ev, p2, paragraph 6 Back

39 Freephone, paragraph 3.1 Back

40 Ev, p2, paragraph 8 Back

41 Freephone, paragraph 3.1 Back

42 Ev, p2, paragraph 8 Back