ICSTIS Activity Report 1996
ICSTIS STATEMENT OF PURPOSE
"To establish, maintain and ensure compliance with appropriate
standards of protection for users of telephone information and
entertainment services and, in doing so, contribute towards the
developments of the industry. In seeking to achieve this, ICSTIS
In 1996, ICSTIS celebrated its tenth anniversary. Today's premium
rate services have developed well beyond the adult and chat services
which dominated the industry and newspaper headlines 10 years
ago. Consumer awareness is now stronger and there is a greater
level of compliance with the Code of Practice.
Recognition of the success of self-regulation led to the transfer
of responsibility for live services regulation to ICSTIS. This
was confirmed in Oftel's statement, The Future Regulation of Premium
Rate Services, published in October 1996.
The Oftel statement raised a number of important consumer issues
that could have a significant impact on the premium rate industry.
These included unbundling, the separation of the content and conveyance
charges, numbering and the disconnection of customers in dispute
Last year the number of network operators offering premium rate
services doubled, with Scottish Telecom, Norweb Communications,
Torch Telecom and Orange joining existing operators BT, Mercury
Communications and Vodata. This will encourage new services and
provide consumers with greater choice although consumer confidence
will depend on having the right regulatory framework in place.
ICSTIS' effectiveness can be largely attributed to the support
of the network operators. The establishment of the ICSTIS Network
Operators Committee (INOC) will continue to build upon this, with
INOC working to full strength in 1997.
Although most of the four million or so calls made to services
each week do not give cause for concern, public complaints have
remained constant, reinforcing the need to remain vigilant.
Increasing complaints about competitions and virtual chat services
prompted reviews into these areas. I am particularly grateful
to the ICSTIS Industry Committee for their assistance and advice
during these reviews, the recommendations of which will be incorporated
in the eighth edition of the Code, due in the latter part of 1997.
International adult entertainment services highlighted the need
for international co-operation and we will continue to work with
our counterparts overseas to address concerns.
During 1996 there have been changes within the Committee itself.
We welcomed a new member, Gordon Simpson, in March. Gordon, who
has extensive experience of the premium rate industry, is currently
European Director of Softbank Interactive Marketing. Mark Stephens
resigned from the Committee in October. We are grateful to Mark
for his energetic contribution and the expertise he brought to
Under Sarah Harrison's experienced directorship, the Committee
continues to be well served by the Secretariat. The commitment
to dealing promptly and precisely with complaints was demonstrated
by our achievement in gaining accreditation to the international
quality standard ISO 9002.
In the forthcoming year, we expect to see a further increase in
the number of operators licensed to carry premium rate services
and in the types of service using premium rate as a payment method.
Similarly, we expect to see further developments in the way services
are paid for and the use of new media. Changes in the wider regulatory
environment and at Westminster and Whitehall will also bring greater
scrutiny of the effectiveness of systems of industry regulation.
These are the kind of challenges which we are well placed to meet.
The features which have characterised the ICSTIS system of regulation
in the last 10 years - independence, accessibility, flexibility
and effectiveness - will be instrumental in responding to these
developments and in maintaining consumer protection without impeding
Deputy Director and Head of Policy
Head of Compliance and Investigations
Head of External Affairs
Case Team Manager
Policy and Research Manager
Personal Assistant to the Director and Chairman
Finance and Administration Officer
Case Handling and Advice Officers
Media and Public Relations Officer
External Affairs Officers
REVIEW OF 1996
It is estimated that 228 million calls were made to premium rate
services in 1996, generating an approximate annual revenue of
£160 million. Almost 1,000 companies, ranging from large
organisations to one man operations, provide a variety of entertainment
and information lines available by telephone, fax or personal
computer. Services are widely advertised across all media.
ICSTIS received 3,582 complaints about premium rate services in
1996. The number of public complaints remained on a par with those
received in 1995. Approximately three-quarters of 1996's complaints
came from the public, mostly via ICSTIS' 0800 500212 free complaints
However, increased monitoring was carried out in 1996 to address
public complaints and poor compliance levels in the international
adult entertainment services sector. This resulted in a twenty-fold
rise in the number of international cases requiring investigation
and action. This, in turn, contributed to a 10 per cent increase
in overall complaints on 1995.
Although most of the four million or so calls made to premium
rate services each week operate without cause for concern, complaints
from the public have remained constant and there is still work
to be done by ICSTIS to address the concerns which these raise
as well as to safeguard consumers.
What causes concern?
Misleading claims about services caused most public concern in
1996. The 935 complaints received about misleading promotional
material and content accounted for over a quarter of all complaints,
once again highlighting the need for services to deliver what
they promise in the promotional material.
The number of cases involving the promotion of adult entertainment
services in generally available, and not top-shelf, publications
more than trebled in 1996 to 736 and accounted for over 20 per
cent of all complaints.
Complaints about inadequate pricing information also rose last
year, although there was a welcome fall, for the second year running,
in the number of cases involving unreasonable delay.
A sharp fall is also evident in the number of complaints involving
consumers who have experienced technical problems when calling
a service. In 1996, there was a 23 per cent reduction in such
complaints - from 34 per cent in 1995 to 11 per cent last year.
ICSTIS' policy of directly referring these complainants to the
relevant service provider is working well, with the majority satisfied
with the outcome.
Competition services continued to generate the highest number
of complaints. Although these fell by almost a quarter on the
previous year, the 683 received in 1996 accounted for almost 20
per cent of all complaints.
A record 220 complaints were received about practical joke lines,
while complaints about live one-to-one conversation services more
than doubled. However, complaints about dating services, racing
tipster and sports lines continued to fall.
Companies wishing to operate services at the higher tariff of
£1.50 per minute require ICSTIS' prior permission to do so.
Prior permission is also required for certain services operating
at £1.00 per minute and now for all live services regardless
of the tariff.
173 higher tariff services were given prior permission to operate
in 1996, bringing the total number permitted since their introduction
in September 1994 to 363. Typical services range from computer
and legal helplines to wine and music information services.
ICSTIS publishes guidelines to assist those service providers
who are planning to set up services which require prior permission.
As well as detailing the applications process, the guidelines
also help service providers understand the types of service that
are likely to be permitted and the conditions that may be attached.
ICSTIS continues to give guidance to service providers and advertising
departments on the Code.
Through feedback from the industry, it is becoming increasingly
apparent that ICSTIS' copy advice and general guidance services
are valued and welcomed.
The Secretariat handles over 100 copy advice and guidance enquiries
each week, contributing to the overall improved levels of compliance
with the Code.
Top 10 Service Types By Complaints Received 96 95
Competitions 683 881
Information 565 621
Adult Entertainment 412 83
Live Conversation 378 148
Virtual Chat 321 268
Dating 235 367
Practical Joke 220 7
Racing Tipster 168 225
Advice 115 94
Entertainment 95 135
Top 5 Reasons For Complaints Received 96 95
Misleading 938 711
Adult (Top Shelf) 736 224
Inadequate Pricing Information 564 356
Unreasonable Delay 217 288
Inadequate Address Information 133 102
Total Complaints Completed 96 95
Upheld 1170 1265
No Breach Raised 1006 (-)*
Resolved Informally 273 165
Not Upheld 11 255
Not Requiring Investigation
Operational Difficulty 596 1109
Not Within Remit 472 98
General 172 103
Billing 32 26
Enquiry 18 121
Other 27 44
* No records available for previous years
Oftel, which has overall responsibility for promoting competition
and consumer protection in the UK telecommunication industry,
has been content that regulation of the premium rate industry
by ICSTIS is effective. This was confirmed in October when Oftel
issued its Statement on The Future Regulation of Premium Rate
Services, which followed a consultation document published in
The Statement dealt in detail with the future regulation of live
services (see page xx). In addition, it raised a number of important
consumer issues which Oftel is looking to the industry to deal
These include a relaxation on the ban on chatlines, allowing business
services such as video conferencing to develop, the introduction
of free selective call barring, new numbering arrangements for
the premium rate industry, the disconnection of customers in dispute
over premium rate charges and unbundling, the separation of the
content and conveyance charges for premium rate services. These
could have a significant impact on the premium rate industry and
ICSTIS will be contributing to work on these issues in 1997.
The number of dialling codes on which premium rate services are
available doubled in 1996 to 26. The codes are scattered across
the numbering range from 03 and 06 to 08 and 09. This has only
served to confuse consumers. To address this and other numbering
issues, Oftel issued a consultation document, The National Numbering
Scheme in August 1996 .
This proposed that all premium rate services use dialling codes
starting with the numbers 09, therefore making premium rate services
In January 1997, Oftel's follow-up Statement confirmed the move
to dialling codes beginning with 090 - new services using these
codes should start appearing in mid-1997. Existing services will
be allowed to continue for a fixed time before they have to move
to the new codes.
Before the consultation was published, ICSTIS and Oftel carried
out joint research into what consumers wanted from changes in
the numbering system. The results of this research, The Future
Numbering of Premium Rate Services: Identifying Consumers Needs,
was also published in August.
The findings showed that consumers favoured a single dialling
code for premium rate services, as well as clear pricing information
in promotions, already a requirement of the ICSTIS Code of Practice.
A free recorded message during the service giving the cost of
the call was also stated as being desirable.
In addition, Oftel asked questions about call barring. The research
showed that consumers were largely unaware that they could get
their telephone company to bar access to premium rate lines from
their home phone. Many of those asked favoured barring access
to adult services, chatlines and dating services.
Most premium rate services involve consumers listening to recorded
messages. Some, however, use live operators to answer calls or
to put callers in touch with each other. Following problems with
chatlines in the late 1980s and early 1990s, Oftel has retained
ultimate control of the regulation of live services.
However, Oftel and industry recognition of the success of ICSTIS'
regulation led to discussions aimed at transferring more responsibility
for live services regulation to ICSTIS. This was stated in Oftel's
Statement, The Future Regulation Of Premium Rate Services (October
"Oftel's view remains that it does not wish to impose intrusive
arrangements where voluntary arrangements are working well.
The preference remains for industry self-regulation."
This heralded the transfer of responsibility to ICSTIS enabling
it to become the 'one-stop shop' for live services. The new arrangements,
including a new Live Services Code of Practice, came into effect
in January 1997 giving ICSTIS new powers to sanction live service
providers in breach of the Code.
Service providers wishing to operate live services are now required
to obtain prior permission from ICSTIS. As part of this process,
additional conditions may be imposed to ensure the right level
Under the new arrangements, ICSTIS continues to run the compensation
scheme which helps telephone subscribers with genuine compensation
claims for unauthorised use of their phones to live one-to-one
conversation services. The funding arrangements are under review
to ensure that greater responsibility for funding is placed on
those companies against whom claims have been made.
ICSTIS AND THE INDUSTRY
The ICSTIS Industry Committee (IIC) is an advisory group to ICSTIS.
Its role is to inform and advise ICSTIS on issues likely to affect
the development of premium rate telephone services and how they
are regulated and, where appropriate, to make recommendations
to ICSTIS regarding these.
IIC members are appointed in their individual capacities from
both the service provider and network operator communities, bringing
invaluable expertise to ICSTIS' work.
The IIC, which meets every two months, is proving to be an invaluable
focus for industry input into ICSTIS' work. In 1996, the work
agenda covered a wide range of issues including the ICSTIS reviews
into competition and virtual chat services, the transfer of responsibility
for live services from Oftel to ICSTIS and the formation of a
new compensation fund for live services.
In a wider context, the IIC proved to be a useful forum for the
exchange of information on general telecoms issues which may effect
the premium rate industry.
Over the last year, two IIC members representing the service provider
community, Mike Tully and Andrew Wadland, resigned from the IIC
due to other work commitments. ICSTIS would like to thank them
for their valuable contributions.
New Network Operators
In 1996, the number of licences granted to network operators to
operate telecommunications services within the UK increased significantly.
This has had a major impact on the premium rate service market,
with the number carrying premium rate services more than doubling.
Seven network operators currently offer premium rate services:
BT, Mercury Communications, Norweb Communications, Orange (proprietary
service only), Scottish Telecom, Torch Telecom and Vodata.
The emergence of new network operators has led to increased competition
in the premium rate sector and this is expected to continue as
more network operators enter the premium rate services market
in the future.
After a fairly static 10 years in terms of tariff structures,
a range of new premium rate tariffs was introduced in October
1996. It is anticipated that the trend towards fixed charges per
call will open the way for new types of service such as product
Greater pricing flexibility will provide consumers with increased
choice but its success will depend on careful consideration of
The ICSTIS Network Operators Committee
In 1995, in its review of ICSTIS, Coopers & Lybrand recommended
that a Board of Finance should be introduced to improve transparency
and accountability and to deal with the increasingly complex issue
In 1996, in response to this recommendation, ICSTIS established
the ICSTIS Network Operators Committee (INOC). INOC has had a
series of preliminary meetings to consider and agree the composition
of the Committee, its terms of reference and future funding arrangements
INOC is still at an early stage of its development but ICSTIS
looks forward to it working to full strength in the forthcoming
1996 Adjudicator's Report In Relation To Live Conversation Services
The ICSTIS Compensation Scheme was introduced in December 1989
and is available to telephone subscribers who receive high bills
as a result of unauthorised calls to one-to-one live conversation
The Compensation Scheme continued to receive and pay out claims,
although the pattern of falling claims, as seen in 1995, continued
By the end of 1996, the One-To-One Fund had paid out a total of
£1,004,643.82 since its introduction. During the year, 89
claims were received, of which five succeeded in gaining an award.
The total amount paid out of the Fund in 1996 was £2,375.89.
The introduction of BT's 'opt-in' facility in 1994, which meant
that subscribers could only access live one-to-one chat and adult
services with a PIN code, led to a significant decrease in the
number of calls to services and an even greater decrease in the
incidence of unauthorised use. This continued to be an influence
on the low level of claims in 1996.
However, ICSTIS has observed an increasing number of claims being
made because of unauthorised calls to virtual chat services and
international adult entertainment services.
Claims for calls to these services do not fall within the remit
of the Compensation Scheme but do, however, raise issues of concern
and questions over how they should be addressed. These concerns
prompted the recent review of virtual chat services, the conclusions
of which will be reported on in 1997.
During 1996, ICSTIS examined viable models for a new scheme which
would be able to deal effectively with the reduced number of claims
now being received and at a lower cost.
Consultation with representatives of the one-to-one services sector
highlighted the need for new funding arrangements for the scheme
which placed greater responsibility on those companies against
whom the claims were being made.
For ICSTIS, the principles of any new scheme must be to ensure
that, without exception, all legitimate claims for unauthorised
use can be met, to impose the cost of the unauthorised use on
the service provider involved in the claim and to ensure that
the costs of administering the scheme are reasonable and not disproportionate
to the sums awarded.
Various proposals have been considered by the network operators,
service providers and ICSTIS. No suitable alternative to the present
scheme has yet been agreed, although ICSTIS remains committed
to working with the industry in order to find a solution which
satisfies its principle objectives.
Sir John Bailey KCB
Income Notes £(1996 ) £(1995)
Funds Provided (1) 1,270,760 1,332,288
Interest Provided 22,509 29,956
Total Income 1,293,269 1,362,244
Committee And Secretariat Costs (2) 938,200 906,245
Adjudicator And Secretariat Costs (3) 19,214 57,439
Disbursements 96,197 109,420
Legal and Professional Fees 85,703 83,612
Accounting and Audit 13,000 11,260
Other Costs 135,496 186,779
Total Expenditure 1,287,810 1,354,755
Profit Before Taxation 5,459 7,489
Taxation (5,459) (7,489)
Profit After Taxation 0 0
(1) The company is non-profit making. Funds are received form
the network operators and the compensation fund in order to match
the expenditure incurred. The figures have been adjusted to allow
for timing differences in the receipt of such funds.
(2) The Committee and Secretariat costs indicate the costs attributable
to supporting the Committee in its work of regulating premium
rate services and include staff, accommodation, office equipment,
policy advice and Committee members' fees.
(3) The Adjudicator and Secretariat costs include the costs attributable
to the administration of the Chatline Claims ands the Live Conversation
Compensation Funds and include staff, accommodation, office equipment
and Adjudicator's fees.