House of Commons - Trade and Industry

Select Committee on Trade and Industry Fifth Report

III CHANGING TELEPHONE NUMBERS

Cost-Benefit Analysis

41. We are strongly of the opinion that any major regulatory action should proceed only after the costs and benefits of the changes proposed are analysed and the results placed in the public domain. In the past, Oftel has used a cost-benefit analysis to assess the best means of developing the NNS. Oftel employed Ovum Ltd and London Economics prior to its 1989 numbering consultation exercise to research the features which users required from a numbering scheme and the ability of operators to implement different kinds of scheme, to review international numbering arrangements and to analyse the costs and benefits of number changes.[105] London Economics studied five options for expanding UK numbering capacity and decided that the option implemented on phONEday was economically beneficial to the UK as a whole.[106] We find it inexcusable that a cost-benefit analysis was not used by Oftel to assess the impact of its current proposals for changing telephone numbers.

42. FUG told us that "the cost to business of changing...any number [is] of the order of £3,000 per number through changes to literature, sign writing on vans etc".[107] It is estimated that the total cost of phONEday was anything between £450 million and £3.25 billion.[108] FUG and the DMA stressed that the cost of changing freephone numbers was even more significant than that involved with changing other numbers.[109] Mr. Chadwick of Guardian Direct told us that his firm has spent "£50 million advertising the Guardian Direct brand over the last four years", based upon the linkage between his firm's corporate logo and freephone number. He emphasised that the freephone number was a "major competitive advantage to me over...a number of my competitors" and that "if you stick another digit on the front or the back or you change it you are giving me a major financial problem".[110] The DMA estimate that the cost to firms of changing freephone numbers would be £500 million — £300 million due to changing literature, signs and the like and "a conservative estimate" of £200 million due to loss of goodwill and consumer recognition, because, for many firms, their freephone number is "embedded in [their] whole marketing thrust".[111] We recommend that, before Oftel implement any changes to freephone numbers, a full cost-benefit analysis of the changes is prepared and published.

Process of Consultation

43. Oftel told us that it had "developed its policy on the shape of the National Numbering Scheme over a decade in a transparent way with full consultation". We were provided with details of the consultation exercises and research projects related to telephone numbering undertaken by Oftel which, cumulatively, form a considerable body of work. Oftel was also keen to emphasise the occasions on which its policy preferences with respect to numbering were altered as a result of feedback from respondents to consultation papers.[112] Some witnesses, however, expressed reservations about Oftel's consultation policy. The Telecommunication Managers' Association (TMA) told us that "while Oftel continues to consult there is some evidence that it is now doing so reluctantly". It argued that "the 1995 National Code Change was badly flawed mainly because of a 'we know best' attitude at senior staff level in Oftel" and that "the risk of an inadvertent return to the mind-set of those days remains". The TMA also believed that Oftel's Numbering Advisory Group "may be devalued by not having a sufficiently strong consumer protection drive".[113] Ms. Black of CCE mentioned a similar concern, arising from the recent managerial reorganisation of Oftel.[114] We note the claim of the Director General that Oftel has a good record of consultation,[115] but we believe, in this instance, that Oftel has failed to consult adequately.

Freephone Numbers

44. Witnesses, principally FUG and the DMA, raised several concerns about Oftel's consultation exercise on the future of freephone numbers, launched in July 1998, including that:

the proposals "came as a surprise to most freephone users".[116] Several witnesses, including BT, argued that the July 1998 consultation document was "a further step in a policy originally outlined by Oftel in January 1997" although FUG contended otherwise.[117] The Director General admitted in evidence to us that his proposals "did take people by surprise" and that "we have now got to redress that surprise"[118]
"most businesses had no idea that Oftel was proposing to alter freephone numbers, or that a consultation document existed".[119] Mr. Dewitte of Forte Hotels told us that he had discovered the consultation document "by pure coincendence" and that neither Oftel nor Forte's operator, Cable & Wireless, had sought to inform him of the proposed changes.[120] FUG contrasted this situation with the actions undertaken in the US and Germany to inform customers individually of changes to freephone numbers[121]
the views of businesses were not given due weight during the consultation exercise. In November 1998, Oftel announced that most respondents to the consultation document backed their preferred option for change.[122] FUG disputed this claim and figures released in December 1998 showed a clear majority of respondents were opposed to Oftel's proposals.[123] The Director General stressed that "what we are now going to do...is to take all the respondents and to work with industry and work with the major operators and with the users and with the DMA to see whether or not there is an option [for change] that is satisfactory to all sides"[124]
by expressing a preference for option 2 in the consultation document, Oftel cannot take full account of all the views expressed to it, particularly those of businesses entirely opposed to option 2[125]

45. FUG were formed in August 1998 and by November 1998 had drawn the attention of the press and Members of Parliament to their opposition to Oftel's freephone proposals.[126] Despite their concerns being publically raised, FUG failed to secure a meeting with Oftel until 19 January, after we had heard oral evidence from both parties.[127] FUG also informed us that, when the 888 freephone range was introduced in the US, the operators contacted their freephone customers to alert them to the regulator's proposals.[128] BT claimed that it had "actively encouraged its customers to respond to Oftel",[129] but the message obviously did not get through. We believe that Oftel's freephone numbering consultation exercise was badly flawed. The importance of freephone numbers to many firms and organisations, particularly as key elements of their marketing strategies, was not adequately recognised by Oftel. The consultation document, and subsequent comments on the freephone issue, suggested that Oftel was not interested in the views of respondents but, instead, wished for its own prefered option for change to be rubber-stamped. When FUG and the DMA first questioned the proposals for change, Oftel should have responded more quickly, including by meeting with them and discussing in detail their concerns and their alternative suggestions. We recommend that, with the help of the operators and relevant business groups, Oftel consult individually with freephone customers in order to develop a numbering policy satisfactory to all.

Geographic Numbers

46. As well as issuing consultation papers on proposals for geographic number changes, Oftel has also made efforts to gain the views of firms and consumers in the areas specifically affected by the proposals. These efforts have been surprisingly inconsistent. Oftel told us of public meetings organised in Reading, Northern Ireland and Cardiff to discuss, and publicise, code changes, but no similar meetings were organised in Coventry, London, Southampton or Portsmouth, despite the recommendations of Consumers' Association.[130] We were surprised and disappointed to find that CCE has not taken an active role in publicising or consulting on number changes in the affected parts of England, unlike its Northern Irish and Welsh counterparts.[131] Ms. Black of CCE told us that, where public meetings have been used to gauge consumers' views on other issues in the past, "we actually found it remarkably difficult to get what I would call real consumers in off the street".[132] We recommend that, when Oftel next proposes changes to geographic codes, residential and business consumers in each of the areas affected are directly consulted, including by means of telephone canvassing and focus groups.

Publicising the Changes

47. The number changes proposed by Oftel are to be communicated to consumers by means of the National Code and Number Change (NCNC) campaign. Oftel was "instrumental in establishing the NCNC project team" and is an "active member of the NCNC campaign's Steering Group" but the campaign is to be funded solely by the operators, who are contributing £20 million.[133] During 1998 "the Campaign concentrated on raising awareness of the changes, especially among businesses"; "more intense activity" is planned for this year and next.[134]

48. We are concerned that mobile telephone users may be least prepared for their numbers to be changed. In January 1997 Oftel declared that only "a minority of mobile customers should have to have 'forced' moves" into the 07 range because "the usual method of migration will be by normal customer churn".[135] Under the NNS, all mobile numbers must be located in the 07 range by 28 April 2001; Oftel estimate that 4,417,000 mobile numbers will be forced to change by that date, more than it originally anticipated.[136] Vodafone told us that 2.5 million of its customers, and a similar number of Cellnet customers, will be affected by the commencement of dual-running of old and new numbers on 30 September 1999. They argued that "it is unlikely that a national advertising campaign will be able to effectively communicate this complex change to the 58 million people in the UK who may be attempting to ring these numbers".[137] Furthermore, some analogue mobile telephones are unable to accommodate the new ten-digit number length. We were astonished to learn that, although all mobile numbers must begin 07 in a little over two years and that many analogue mobile telephones will become redundant after that date, analogue mobile phones with numbers which fail to conform with the NNS continue to be sold to customers and will be until September 1999.[138] We recommend that, as a matter of priority, Oftel work with telephone operators to improve consumers' knowledge of the impending changes to many mobile telephone numbers; and that consumers intending to buy analogue mobile telephones which do not accept ten-digit numbers are informed of this at the point of sale.