Who “profits” from revenue sharing telephone numbers

Defenders of the use of revenue sharing telephone numbers commonly deny "profit" or "receiving income". These comments address that issue.

How do revenue sharing telephone numbers work?
How does this affect the caller?
How does this affect the recipient?
What is "profit"?
Who "profits" from use of revenue sharing numbers?
Summary

How do revenue sharing telephone numbers work?

When a telephone company connects a call to any number beginning 084 the amount they pay to the telephone company that terminates the call (the "termination fee") is inflated so that the revenue they earn can be shared with the receiving party. This arrangement is fixed according to the type of number - all 0845s are of one type, 0844s are of many different types. When someone selects a 0845 or 0844 number they are signing up for this arrangement and its consequences.

Note: Yet higher "termination fees" apply to calls to "Premium Rate Services" (087 / 070 / 09), which are regulated specially. The principle is however exactly the same.

How does this affect the caller?

Because higher costs are involved the telephone company needs to recover this money. This is normally by the imposition of higher call charges and exclusion from call packages. For various reasons, BT deals with this in an odd way – see BT charges may vary from others. The essential truth is that the caller is paying, probably directly, for the benefit delivered to the person called.

In some cases, charges for all "non-standard" numbers are lumped together in a single rate that reflects the much higher costs involved in calling "Premium Rate Services". In this situation the premium paid is due to, but quite disproportionate from, the amount paid as revenue share.

How does this affect the recipient?

The way in which the revenue share benefits the recipient is a matter between them and their telephone company. This is commonly seen as being commercially confidential.

Typically the revenue share is first used to offset the costs of providing the incoming telephone service, which may include a number of additional features such as redirection and call queuing. Where an advanced private telephone network is provided it is likely that the full value of the revenue share would be taken up in offsetting these costs.

The revenue share may also be used to offset costs for unrelated services from the same provider, such as outgoing calls, or other incoming calls on 0800 numbers.

After other services have been fully paid for, a balance may be due to the recipient from the telephone company. In some cases this may be assigned to cover the costs of independently provided local telephone services, e.g. a local exchange and other telephone equipment. This is what happens in the case of the "Surgery Line" system used by many GPs.

Whatever may be received as cash "income" by the call recipient, it is unlikely to be the full value of the financial benefit obtained from use of a revenue sharing number.

Anyone who claims to have forgone any benefit whatsoever is suggesting that they are gifting that benefit back to their telephone company. There is no way that any such decision can have any effect on the cost to callers.

What is "profit"?

For a trading body, "Profit" is generally understood to be what remains from income after expenses have been deducted. Any specific financial arrangement that increases income or reduces expenses is reasonably said to be a contribution to "profit".

Many users of revenue sharing numbers are not trading bodies and therefore cannot declare a "profit". Examples are NHS trusts, government departments, local authorities and most other public bodies.

In deciding what is "profit" it is important to identify the specific financial arrangement that one is referring to. In this case it is important to isolate use of a revenue sharing number as against use of a number that does not provide revenue sharing, rather than referring to the service which uses the number.

Providers of "Premium Rate Services" would generally expect to generate a profit from the service, i.e. income from incoming calls would more than cover all of the costs involved in providing the service. A service that uses a revenue sharing number would have its costs partially offset, but would be unlikely to produce an overall positive return. For example, if a new government helpline were to be set up using a revenue sharing number one would not expect the benefit from use of a revenue sharing number to more than cover all of the costs associated with providing the service.

For this reason, I always try to refer the fact that the costs of a service are SUBSIDISED by use of revenue sharing numbers. In many cases that subsidy will contribute to "profit", however the word "subsidy" avoids the potential for denial due to the wider implications of the word "profit".

"Subsidy" by callers is equally unacceptable in the cases where use of revenue sharing numbers is rightly attacked.

Who "profits" from use of revenue sharing numbers?

Apart from users who can apply the subsidy obtained as a contribution towards a "profit", as described above, others can profit.

Mobile telephone companies commonly impose call charges with a premium that more than exceeds the additional costs involved. Rates for calling revenue sharing numbers are rarely a strong feature in the marketing of telephone services. Competition is seen to apply to rates for calling ordinary numbers, so these are kept low. Calls to revenue sharing numbers are also excluded from both bundled and unlimited packages. Whilst the additional cost involved in placing calls to revenue sharing numbers is much less than that for Premium Rate Service numbers, a common rate is often applied.

Those providing revenue sharing numbers obviously seek to profit (quite properly) from this aspect of their business. Consumer misunderstanding about the cost of calling these numbers is however exploited by those who promote adoption of these numbers by suggesting that all callers pay low rates to call them. Unfairly selective examples of call charges and reference to historic features such as "local rate" are used and then picked up by users of the numbers to mislead.

Perhaps the worst example is those who promote "self-funding" telephone systems. It is indeed possible to fund telephone service and associated local equipment out of the revenue share. The money must however come from somewhere! In the case of the "Surgery Line" system promoted to NHS GPs by Network Europe Group, it is not a gift from Talk Talk, the provider of the revenue sharing telephone numbers. It is simply passed on by Talk Talk, after taking its own slice, from the inflated termination fees paid to Talk Talk by the call originating telephone companies. All such companies, including Talk Talk, invariably recover this money through higher call charges to their customers – in this case, NHS patients accessing NHS services from their NHS GP.

Summary

Not all use of revenue sharing numbers produces cash "income" for the user. The financial benefit is often exclusively, and always to some degree, achieved by the reduction of costs.

Whilst the term "profit" is appropriate in some cases and improper denial should be strongly challenged, I strongly suggest that the word "subsidy" be used to describe the financial benefit achieved by users of revenue sharing telephone numbers.

Profit may be properly denied where it is with reference to a service overall or to a non-trading body. Subsidy may not.