Thursday, 15 July 2010

Premium rate SMS

This actually an old issue which pre-dates my blog, and sadly did not go to court (orange settled). But they really did not understand the issue it seems. The topic came up on irc recently so ... to explain....

I had an orange account and one of the phones on the account was used by my daughter which was (still is) a minor. Orange knew there was a user for the phone. They also knew the user was not authorised to act on my behalf contractually (i.e. she could not call up and change tariff, etc).

She sent a text to a ring tone provider number. The provider then sent numerous texts with ring tones or whatever over a period of time, and these were charged for as incoming texts.

I asked orange where the contract was on this? I have no contract with the ring tone provider. My contract with orange said I had to pay charges on my bill, but nothing in the contract allowed for such charges being put on the bill in the first place. Orange suggested it was a separate contract with the ring tone provider which allowed these. But I am not a party to that contract and my daughter is not authorised to create contracts on my behalf. They tried saying the contract was formed when the initial text was sent. They totally failed to understand that a minor is limited in what contracts they can enter in to.

Basically, I could not see any way contractually that the charges could stand.

If my daughter was older she could have entered in to a contract with a ring tone provider, and so she would be liable to pay them, not me. This is no different to using my phone to order a pizza. The pizza company cannot put the cost on my phone bill just because my phone was used to establish the contract. Being a minor that did not apply anyway as she was too young to enter in to that contract.

I think at one point they said the terms of the contract with the ring tone provider had things like "must be over 18". As I pointed out, that does not help - it just means that the ring tone provider also understands that the contract could not exist as their own terms do not allow it to exist.

Anyway, issued a county court claim and they settled in the end.

It strickes me that the whole premium SMS business is dodgy.


  1. It's complex; there are two goals:

    The first is to enable you to sign up for a service once, and not have to worry about repeatedly paying in some way (e.g. a voicemail to SMS transcription service, paid as a fixed fee per voicemail transcribed). If you don't permit reverse billing, this sort of service becomes awkward to provide (I have to maintain an account with my voicemail transcription service, and top it up whenever I run low on credit - where low varies based on how many voicemails I expect to receive).

    The second is to enable you to sign up outside the telephony system (e.g. by giving a provider your mobile number), and have services supplied that are billed to your phone bill.

    In many ways, it's the same set of issues as DD (Direct Debit) for telecoms services; I don't want my mobile cut off because I've used up all the prepay credit, so I go for DD, and know that I'm unlikely to get cut off. The difference is in the protection provided; DD has the DD Guarantee to make it easy for me to force the mobile company to chase me for payment if I dispute owing them anything, whereas reverse billed SMS have no equivalent.

  2. There is the big issue of the difference between phone "user" and phone "subscriber". The user can make calls and send texts that the subscriber pays for, but not enter in to new contracts with third parties on behalf of the subscriber.

    If you allowed them to enter in to binding contracts on your behalf, what is to stop them buying a car by text? If they cannot put you in a new contract then they can't even buy a 10p joke.

    Disputes are the issue as you say. You contact mobile company and they say that it is a contract with a third party and they can't help (or even say who the third party is). But if that is true it is a new contract and nothing to do with me so the mobile operator has no right to charge (contract is with the "user" not me). They can't have it both ways (i.e. both "not their problem" and "they get to charge for it").

  3. The mobile telcos argue that the user is authorised to run up charges on your behalf, and that you could prevent this happening by taking the phone away from them. They then extend this to arguing that reverse billed SMS is no different to premium rate calls, international calls, calls accepted when roaming, calls made to normal numbers, and SMSes sent by the authorised user.

    I see two unrelated holes in this argument, and would love clarity from a court or primary legislation:

    1) It is possible to receive reverse billed SMSes without ever taking action; if I enter your mobile number into any one of a number of websites, you will receive reverse billed SMSes. Given that I am not an authorised user of your phone, and that you cannot both give out your mobile number so that people can call you and at the same time keep it secret from people who might not be authorised to put charges on your bill, I can't see telcos being able to get away with arguing that you shouldn't give out your mobile number to people not authorised to incur charges on your behalf - if nothing else, it's something I'd expect unfair contract terms legislation to require telcos to tell you about in big letters up front, not just in fine print.

    2) For all the other methods of incurring a charge, you have a simple and obvious way to withdraw authorisation from a user - take the phone (well, actually just the SIM) away from them. This doesn't need a huge amount of co-operation from the user - you just reclaim the phone. In contrast, reverse billed SMS provides you no easy way to indicate that the user is no longer authorised to incur charges on your behalf - you have to find out which reverse billed SMS providers the user authorised, and find out how you indicate to them that they are no longer authorised. If, as is not entirely improbable, the user has forgotten exactly who they authorised, you may be facing an impossible task - and I would suspect that a court would agree that it's unreasonable to expect you to do so.

    Having been quite negative, I can see how the mobile phone companies could fix it quite easily:

    1) Provide an easy way for a customer to repudiate a reverse billed SMS charge - with the stinger that to do so, you and the mobile telco are required to make it possible for the SMS company to bring a case against the user. You want to repudiate a charge in order to get a service for free? Expect to lose a small claims case. You want to repudiate an unauthorised charge? Expect to win a small claims case.

    2) Provide an easy to use one-stop opt-out, that acts to opt you out of all authorisation granted by the user before the moment you opt out. This has two beneficial effects; it lets the user terminate services themselves when they know they're no longer authorised, and it lets you draw a line in the sand to mark the withdrawal of authorisation from a user.

  4. I am sure they would argue the user can run up charges. The issue was that they did not want to discuss the charges in any way as they were claiming to effectively not to be involved in them (i.e. they say there was a contract with a third party provider). That was the mistake as it implies not just "running up charges" but actually creating new contracts and that is pretty clear.

    People like orange have a specific form they require before they will accept that the user can act on the subscribers behalf (e.g. user can change tariff, etc).

    Like I said, they cannot have it both ways - denying all responsibility for the service sold, but at the same time claiming it is part of the existing contract with the subscriber.

    Your point about repudiating charges and they have to go after the user - no reason to see that one would have to identify the user or help them. But in my case the user was a minor so could not enter in to the contract anyway - no contract existed so the charges were simply invalid :-)

  5. Please don't try to muddle the issue; Orange let the user act on the subscriber's behalf without any form at all - no check is made on the identity of the user before I send an SMS, make a call, or (when roaming internationally) answer a call.

    There are some actions the user is not permitted to take without the paperwork in place, but the telcos argue that reverse billed SMS is akin to making calls, not changing tariffs.

    The point about repudiating charges is to find a balance between easy repudiation of charges that were illegitimately incurred, and enabling users to act fraudulently; assume as a general principle that people are honest whenever there is a risk of bad consequences for dishonesty. Putting a contractual obligation on you to pay the charges, or to identify the user who purported to authorise them should, in my opinion be enough; the fear of legal action will deter dishonesty, while honest subscribers won't be afraid to dispute charges and identify the user.

    In your case, this wouldn't have helped the ringtone provider much - chasing a minor wouldn't get them very far, and you'd have discharged your obligation under the contract. Had you been the individual who authorised the charges, the fear of legal action would deter you from disputing them.

  6. It is not me trying to muddy the waters. Orange are the one's that claimed it was a separate contract with the ring tone provider. That is why I went down that road. If a separate contract then either my daughter was acting on my behalf to form a separate contract with a third party (which neither orange nor the third party had reason to think was authorized, and in fact was not) or she was acting on her behalf in which case she and the ring tone provider are unable to involve me or orange in that contract as third parties.

    It the mobile operators want to say it is not a separate contract then that is a different matter. That makes the mbile operator contractually responsible for what the ring tone providers do and sell and in some ways makes things easier to dispute. At least you know who you are dealing with!

  7. It's high time all the UK cellular providers allowed their customers to disable premium-rate SMS altogether. I've had a few unsolicited premium SMS billed to my phones over the years. It's the perfect crime since many users won't notice one or two charges, or even if they notice, it isn't worth their time to query them. Even if the fraudsters get caught, the regulator probably won't fine them enough to make much of a dent in their profits.

    Some of the telcos do let you disable premium SMS, whilst others claim it's impossible. Presumably RevTel Mobile does the right thing?

  8. Having now reread the Orange contract terms, they're relying on two things:

    1) You agree to be liable for all charges incurred on your account by any users (7.1.2 in the current network T&Cs), regardless of the type of charge - so by giving your daughter the phone, you're agreeing to be liable for any charges she authorised. Thus, the "who authorised it?" is a red herring - under the contract terms, you authorised the charges by letting your daughter use the phone.

    2) They are then arguing that the charge for reverse billed SMS is just like any other network charges for calls, data or SMS, and that the position on them is the same as if (for example) someone sent a continuous 10MBit/s of traffic to my AAISP ADSL for a month - AAISP wouldn't consider the lack of contract between me and the attacker reason to not charge me for the resulting usage. Or, closer to the SMS case, if I had a buggy * setup on AAISP SIP, you wouldn't cancel charges for 3 hours to a Bulgarian number just because I hadn't intended to stay on the line for that long.

    The second of these is where I suspect it all falls down for the mobile networks (and the reason they settled rather than fought). In the ADSL downloads case, AAISP aren't paying the attacker anything, and would (I assume) co-operate with me in chasing the attacker. In the SIP call case, I actively initiated the call, and there's therefore clarity on whether a user authorised the charges; in the premium rate SMS case, it's unclear whether your daughter (acting on your behalf as per the contract terms) authorised the charges, or thought that she was going to pay £2.50 or so for a single SMS, then not pay more.

  9. I appreciate your details comments, as ever.

    However, I shill think orange were wrong. Yes, the contract terms meant I agreed to pay all charges shown on the bill. However, the contract did not have anything where by I agreed to the charges for a ring tone sale being placed on the bill. I disputed that the charges were placed on the bill, not that I should not pay what is on the bill. I know it is subtle but it is important I feel. The charge on the bill has to be valid in the first place.

    Orange asserted that the charge for the ring tone was placed on the bill in the first place as the result of a new contract. Not simply as a result of the use of the phone in accordance with the contract I already had with orange. They asserted a new contract was entered in to when the original subscription text was sent, and that new contract (terms of the contract with the ring tone provider, not with orange) are what allowed the ring tone provider to ask orange to place the charges on the orange bill.

    I agree that if I made a contract with a third party that said that charges will be placed on my orange bill, assuming orange agreed to them doing that, it would be valid.

    I asked who entered in to that contract. They said the ring tone provider. I asked who else, I.e. Who was the other party. They did not understand the question. It was basically either my daughter, in which case her entering in to a contract with someone else cannot provide consent for charges on my orange bill, plus as a minor she could not. Or it was me, in which case she would have had to have authorization to act to create contracts on my behalf, which she did not.

    She did have authorisation to use the phone and incur charges as per the existing orange contract. However, even orange knew and accepted she did not have authority to act on my behalf in contractual matters. I.e. She could not call orange and change the tariff, for example. The third party had no indication that she was authorized to act on my behalf, she made no such claim in the text she sent. Even if they mistaking thought she did, the contract can be reversed when they know that is not the case.

    Imagine if this was not the case, if a user of the phone had the power to bind the subscriber in contracts. I could borrow your phone and buy a new car and you would be stuck with paying for it.

    The aaisp usage issue is one I have considered as well. I can't see another way of doing it. You don't have to keep the router connected though. If not connected then there are no usage charges. A bigger concern is charges for incoming calls on mobiles but again you can refuse the call. This is one reason I am keen to ensure no incoming text charges on the service as you can't refuse a text. We have no plans to support premium rate or reverse charge texts though so at least we should not be having that discussion with customers like me.

  10. As aaisp mobile numbers are 01, 02 or 03 rather than 07 then I wonder if it would even be possible to subscribe to premium rate text as they probably only allow 07 numbers to subscribe.

  11. Indeed, but we will have 07 some time.

  12. I suspect you were dealing with the usual level of clue from a major telco's frontline staff - the contract is clear that what you're paying for in the case of reverse billed SMS is the service Orange provide in delivering the SMS to you (which includes Orange paying the originator to receive the SMS), hence the charge is exactly the same (contractually, although probably not legally) as the charge you would incur if your daughter phoned an 09 number for a few hours (where the charge on your bill is for the costs Orange incur in placing the call, including the charge made by the terminating telco).

    Given that they can't get their staff to understand this clearly enough to explain it to you, I'm even less surprised that they settled; it's not in their interests to have the whole thing examined by the legal system, because while I don't believe the "new contract" line has anything in it, I do believe that the "lack of ongoing authorisation" line of attack would succeed in spades, and would effectively end reverse billed SMS, (by making it impossible to stop people fraudulently claiming that the SMS arrived after authorisation was withdrawn).

    Of course, none of this would be a problem if the telcos weren't trying to have both premium rate and reverse billed SMS (the two are separate - there are shortcodes which cost you more than your normal text rate to send to, as well as the nasty ones where you receive messages that cost extra).