Select Committee on Trade and Industry Minutes of Evidence



  1.  In the recent hearing, the Chairman suggested that mobile tariffs were "a matter of rather more urgency than your leisurely policy of consulting and chatting with the people requires". As the Director General responded, the price of mobile phone calls is an area in which Oftel has taken a strong interest. The price of mobile phone services has fallen by 21 per cent since January 1999, with prices for pre-pay—now accounting for the vast majority of new subscribers—falling by 40 per cent over the same period. This suggests a functioning marketplace.

  2.  Oftel is pursuing further work in the area of transparency of mobile tariffs both in defining the scale of the problem and ensuring appropriate information is available. This memorandum describes that work. It is being given priority and is very thorough.


  3.  Tariffs are complex. But competing operators do provide a wide range of packages and prices to suit the differing needs of different groups of consumers. Because tariffs are usage based there is no simple single figure that could be imposed to allow the easy comparison of mobile tariffs, such as APR in the financial services market. It is doubtful if any such measure could be devised. Additionally, the imposition of tariff structures on operators and service providers could have a detrimental effect on the extent of price competition and therefore consumers in the long term.

  4.  Oftel will be working with DTI to investigate the issue of tariff transparency in the mobile market and whether there is consumer detriment from alleged tariff complexity. This work has begun.

  5.  In order to monitor price movements by operators in the mobile market, in 1998, Oftel appointed National Economic Research Associates (NERA) to construct a suitable model for the tracking of mobile price changes over time for a wide range of different customer types. The results from this model—reflecting the actual price paid by customers—are published quarterly. The latest results, produced below, show that there have been significant price reductions for all user types.

Overall Index
Usage Level
Package Type
ZeroLow Low/mediumMediumMedium/high HighPre-payMonthly contract Advance contract
30%18% 20%24%21% 20%40%15% 10%

  6.  The NERA model can compare the actual revenues of the mobile sector with the revenues that would have been generated had all customers been on the optimum tariff for their particular customer type. Preliminary analysis suggests that a large proportion of customers are already on the cheapest available package for their type. Oftel will complete a fuller analysis of mobile pricing as part of its current review of competition in the mobile market, all of which will of course be published.

  7.  We are continuing to track consumer satisfaction with mobile services, including such issues as price and quality of service. Our research indicates that satisfaction remains high overall (approximately 93 per cent). The research also indicates that consumers understand the fast changing market and the range of deals available—about half consumers think that their deal is still the cheapest for their needs despite the rapid introduction of new tariffs. Recent market research carried out by Oftel indicates that two in three mobile phone consumers are using some comparative price information to assist their decision making. In the main consumers were satisfied with the range and type of information available. We recognise that, whilst satisfied, they may not necessarily be receiving impartial and independent advice. However, our research also indicates that consumers are aware that retailers may have their own agendas.


  8.  The best way to ensure consumers receive the best deal, whilst ensuring that innovation and price competition is not hindered, is to facilitate consumers' decision making by ensuring access to valid, unbiased price comparison services. The initiative that Oftel initiated for fixed-link, residential telecoms services has proved successful and is in the process of determining whether a similar scheme is required for mobile telephony. This decision will depend on a number of issues including the availability of other sources of information and an assessment of the actual consumer detriment. When Oftel initiated there was no other price comparison service for fixed telephony. However, currently there are a number of price information sites for mobile phone, such as Carphone Warehouse ( and One Stop Phone Shop ( to name but two.

  9.  As there are already established price comparisons sites, which may meet the needs of consumers adequately, Oftel is considering the establishment of an accreditation scheme for third party customer information sources. This would work in the same way as the DTI's TrustUK scheme by assuring consumers that the site was providing accurate and unbiased information.

  10.  A further option would be to initiate a telecommunications information website for consumers. This would act as a gateway to a range of information covering all aspects of consumers' choices of telecommunications services, including price, quality of service, range of services/products, and a jargon buster, amongst other things. Oftel has already initiated and endorsed a similar scheme for small businesses (

  11.  As a result of these initiatives Oftel is expanding the resources dedicated to consumer information within Oftel. It is the intention that, as well as ensuring the best deal for consumers in terms of choice, quality, and value for money, Oftel will be an example of best practice as a provider and facilitator of consumer information.


  1.  In the recent hearing, the Chairman of the Committee used the phrase "your complacency is quite appalling" in the context of the Director General's answers on call boxes. This memorandum supplements Oftel's evidence to the Select Committee by setting out more information on:

    —  market trends;

    —  pricing;

    —  the universal service obligation in relation to payphones;

    —  payphone removals; and

    —  Oftel's plans for the future.

  2.  It demonstrates—as the Director General said to the Committee—that there is no complacency. In summary, Oftel:

    —  has initiated major consumer research on usage and expectations of payphones services;

    —  has encouraged awareness of the scope to install additional uneconomic payphones through contact with local authority associations;

    —  has ensured continued free access to Directory Enquiry services for users with special needs;

    —  has powers to intervene in cases of disputed payphones removal, but received only two complaints on this subject in the last two years. In the calendar year 2000, the number of payphone sites has increased;

    —  monitors payphone prices, but believes that there is no current case for intervention in the light of both the declining profitability and the competition within the sector;

    —  plans to maintain the current level of universal service obligation in relation to payphones; and

    —  will be initiating a major consultation exercise on the future regulation of payphones in the first half of next year.


  3.  There are currently more than 145,000 Public and Managed Call Boxes in the UK (Managed Call Boxes are those boxes which look like Public Call Boxes but which are located on private land such as railway stations, service station forecourts, etc). This compares with approximately 77,000 in 1984. By comparison Germany has slightly fewer Public and Managed Call Boxes for a larger population (137,000 serving 82 million).

  4.  More than 95 per cent of BT's PCBs are currently in good working order (this compares with roughly 77 per cent in 1987). More than 85 per cent of PCBs allow wheelchair access. The exceptions are the traditional boxes that tend to be retained for aesthetic reasons in areas of architectural importance or at the request of local residents. All PCBs are required to be accessible to persons using hearing aids.

  5.  The Public Call Box (PCB) market in the UK, as in the rest of Europe, has been significantly affected by the very high take up of pre-paid mobile phones. Call minutes and as a result call revenues have sharply declined (for example in Germany according to figures provided by the German regulator the average monthly revenue for a PCB has fallen from 770 DM in 1997 to less than 400 DM at present). Many of those who have recently acquired mobile phones are younger users (such as school children) who have traditionally been heavy payphone users.

  6.  Oftel's understanding is that BT and its competitors in the Public Call Box market are facing similar pressures.


  7.  Often has never subjected PCB charges to formal price control because:

    —  the turnover from the payphone business has been in decline for a number of years;

    —  there is some degree of competition amongst payphone providers;

    —  geographic averaging of prices ensures that all payphone users across the country benefit from the competitive pressures which are exerted in the more profitable and therefore competitive parts of the country; and

    —  Oftel believes that by not formally price controlling, more PCBs would be installed than if formal controls were imposed (see para 3).

  8.  The minimum fee for making a call from a BT PCB was set at 10p in 1984. Oftel is advised by BT that approximately 63 per cent of local calls from its PCBs are single unit calls. Under the 10p charge, these calls were loss-making as the cost of establishing the call exceeded the single unit revenue received.

  9.  BT increased the minimum fee from 10p to 20p in October 2000. The time allowed for the minimum fee increased from 55 seconds to 110 seconds. A single inland fee (within the UK) of 11ppm for local and national calls was introduced. Previously, local calls were charged at 9ppm and national calls at 14ppm. Therefore callers making local calls will pay more but callers making national calls of more than one unit duration will pay less under the revised price structure.

  10.  BT argue that charging for directory enquiry calls is necessary due to the £18 million per annum cost of providing a free directory enquiry service to all users. The cost of a directory enquiry call from a BT PCB will average 20p, which is half the cost of a directory enquiry call from a BT residential line and substantially less in most cases than a call to a mobile directory enquiry service.

  11.  Free directory enquiry calls from both fixed lines and BT's PCBs (via the 195 code and a PIN number) will remain for visually impaired users in addition to other users who would have difficulty using a conventional paper directory.


  12.  The universal service obligation placed on BT (and Kingston Communications) requires them to ensure, inter alia, the provision of reasonable geographic access to PCBs across the UK at an affordable price.

  13.  In 1997 when Often established the current level of universal provision for the four year period from 30 September 1997 to 29 September 2001, BT agreed with Oftel to install up to 500 additional uneconomic payphones, subject to pre-agreed criteria, which examine

    —  the size of the local population;

    —  the type of housing (whether quality private; private; mixed private and private rented; good social housing and poor social housing); and

    —  access to an existing BT PCB.

  Applications for siting of non-economic payphones are made by local authorities (but may be made by any interested party) and are scored against these criteria by BT. The most recent figures Often has (June 2000) indicate that 30 per cent of requests for the siting of such phones were granted in the preceding 12 months. Oftel has received one new complaint so far this year about the refusal of a request which it is currently examining with BT.

  14.  In September 2000 Oftel wrote to local authority associations in the UK reminding them of the criteria and asking those associations to invite their members to consider further requests for installations.

  15.  Oftel is currently reviewing the Universal Service Obligation. Its proposals, published for consultation in September 2000, recommend no change in the obligation in respect of geographic coverage or uneconomic payphones.


  16.  BT must obtain the written consent of the local planning authority and, if appropriate, the relevant Parish Council before resiting or removing any public call box location. The Director General of Telecommunications may make a determination overriding any such consent if he considers that local circumstances do not require the removal or resiting. This power has not been used in practice: over the last two years Oftel's Consumer Representation Service has received only two complaints in relation to PCBs that were removed without consultation. As far as Oftel is aware these complaints have been resolved to the satisfaction of the complainants following referral to BT's Complaint Review Service. It is far more common for Oftel to be asked to assist in the removal or resiting of a PCB, which has become a local nuisance.

  17.  There is no evidence of an increasing trend of payphone removal. Indeed in the calendar year to date BT information indicates that there has been a net increase of 170 PCBs. An additional 356 PCBs have been installed, with 186 PCBs removed for the following reasons:

    At customer request (eg, local residents, police or local council) 84

    Out of service (eg, kiosk destroyed or repeatedly vandalised) 45

    Site improvement (eg, redevelopment of local housing) 33

    Wayleave revoked (by landowner and no suitable alternative) 22.


  18.  In order to better understand the current state of the payphones market from consumers' point of view, Oftel has commissioned independent consumer research across the UK examining both usage patterns of higher volume PCB users and their needs and expectations of a PCB service. In particular, Oftel will seek views on whether the recent price increases have affected usage.

  19.  The results of this research will inform the consultation document on payphones which Oftel will be producing in the first half of 2001. The Consultation will examine the most appropriate form of future regulation for payphones as a whole, in particular:

    —  the future of the payphone access charge. The payphone access charge is a payment which compensates BT (although it is intended that it will be extended to other operators) for allowing freephone calls from its PCBs for which it would otherwise receive no revenue;

    —  possible changes to the criteria for installation of non-economic call boxes;

    —  competitiveness within the market overall and by region; and

    —  any additional policy or regulatory action necessary to maintain accessibility of services.

  20.  Oftel will separately continue to work with the Home Office and the payphone industry to tackle the public nuisance of prostitutes' cards in public call boxes.

30 November 2000

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