Why are calls to 084 numbers more expensive, but not from BT?

These comments provide an explanation for information released about the cost of calling NHS Direct. The comments apply to calls to all 084 numbers.

Summary

Some of the revenue derived from all calls to 084 numbers is "shared" between the two telephone companies involved. This effectively provides a benefit to the call recipient at the expense of the caller, as the respective telephone companies pass this on to their customers in some way.

BT is regulated in its charges for calls to 084 numbers, but not for 01/02/03 numbers. Despite the fact that revenue sharing is taking place, BT's tariffs currently create the perverse effect of 084 calls being cheaper overall.

084 calls are not cheaper for those who call under the terms of a BT call inclusive package. Whilst it may be fairly assumed that many calls are made outside the terms of these packages, the overall perverse effect will continue to be seen.

Revenue sharing

On every telephone call a "termination fee" is paid by the Originating Communications Provider (OCP - the caller's telephone company) to the Terminating Communications Provider (TCP - the recipient's telephone company).

The level of the fee is set to cover the following costs incurred by the TCP:

• Geographic numbers (01/02) - work done within the telephone network in connecting the call.
• Revenue sharing numbers (084) - as above, plus an addition to perhaps cover the cost of additional features provided to the call recipient.
• Premium Rate Service numbers (087 / 09 etc.) - as above, plus a guaranteed income to the recipient.
• UK rate (03) - nothing more than the work done within the telephone network in connecting the call. The recipient must meet the full cost of additional features provided to handle calls beyond the network.

Benefit to the recipient

• For 01/02 and 03 calls there is no financial benefit to the recipient. The cost of their incoming telephone service is simply paid for in full.
  
  
• Premium Rate Services earn income for the recipient.
  
  
• There are three ways in which a recipient may benefit from revenue sharing on 084 numbers:

1. Indirectly - incoming call services are provided at a discounted cost, which the TCP makes up from the enhanced termination fees received.
   
   
2. Directly - the recipient pays the full cost for incoming call services, but receives a cash-back from the enhanced termination fee, according to the number of calls received.
   
   
3. Some complex arrangement involving a combination of the two.

Government guidance to public bodies, through the Central Office of Information (COI), urges use of the first of these as it "appears" more proper than the second. Any public body that is paying the full cost for its incoming call services on a 084 number, without deriving any benefit, is gifting money to its telephone service provider.

Exactly what happens at this end of the line makes no difference whatsoever to the cost to the caller.

The benefit gained by NHS Direct

NHS Direct is served by BT Global Services. The differential that it receives in termination fees for a 0845 call over a 03 call is at least 2.1 pence per minute (see note below). For an average 528 second call, that amounts to around 18.5 pence.

In correspondence with myself, and in a written answer provided by the Minister of State for Health (19 Jan 2009 Column 1201W), NHS Direct alleges that it allows BT Global services to keep this money, as it claims that neither of the options referred to above apply.

"NHS Direct does not directly or indirectly receive revenue for the use of any 0845 numbers".

(One may play with definitions of the term "revenue". I will take the reference to "no indirect revenue" to mean no subsidy of its costs for receiving telephone calls, which is a "revenue", as opposed to "capital", expense.)

Note: BT Wholesale publishes the termination fees paid and received by BT in The BT Wholesale Carrier Price List (CPL). The respective figures for 0845 and 03 calls terminated by BT are 2.6654 pence per minute and 0.5600 pence per minute. These are found in tables 1.6.3.2 and 1.6.13.1 of section B1 of the CPL. In some cases the rate for 0845 calls increased considerably after 1 November 2009.

Cost to the caller

The cost of calls to 03 numbers is compelled by regulation to be no greater than the cost of calling 01/02 numbers. This applies to all telephone service providers, including the terms of inclusive packages. There are no known cases of non-compliance.

The OCP will (in some way) recover the cost of the enhanced termination fees from callers. This is typically seen by exclusion of revenue sharing and PRS numbers from inclusive packages and the imposition of higher rates. As the rate for calls to 01/02/03 numbers is highly visible in a competitive market, there is downward pressure on this rate, which does not apply to the rates for calls to 084 revenue sharing and PRS numbers.

The differential may therefore be seen as being disproportionate to the actual cost. Extended differentials may also be seen due to the many different classes of revenue sharing numbers being grouped together in a single rate.

In general therefore, calls to 084 numbers are more expensive, but we have an anomaly ...

The BT anomaly

At one time, all BT charges were regulated by Ofcom. This included fixing the pence per minute element of the charge for calls to 0844 numbers and denying BT the ability to make a full margin on calls to 0845 and other NTS numbers.

Other restrictions on BT charges have now been lifted, however those stated above remain.

BT now applies a heavy call setup fee to all calls where a call charge applies. This covers 0844 calls at all times and 01/02/03 and 0845 calls made outside the period covered by an inclusive package. This setup fee and the rates for calling 01/02/03 numbers, where these apply, are currently being increased at the fairly constant rate of 30% per annum through successive price changes. This is all seen to be part of a policy to encourage subscription to inclusive packages covering all times when calls may be made.

BT cannot increase the pence per minute rates for 0844 and 0845 numbers. It has even found it possible to include 0845 calls within packages without having to increase the package fee by an intolerable amount.

Although BT's pricing policy is strongly geared to most calls being made under the terms of an inclusive package, it is assumed that very many calls are being made at its chargeable rates. Where it can, BT imposes a penalty charge on such calls, i.e. the unregulated charges for calling 01/02/03 numbers. It cannot however impose the same penalty charge in respect of calls to 084 numbers.

This anomalous position will be addressed by Ofcom in a forthcoming review.

Further comment

I have already published comments on BT charges may vary from others, explaining why the suggestion that "other providers' charges may vary" when quoting a BT rate is perhaps addressing the issue from the wrong side.

I will comment further as the forthcoming Ofcom review gets under way.

For now it is sufficient to understand that

084 CALLS COST MORE - BT CHARGES MAY VARY FROM ALL OTHERS.