Monday, 10 August 2015

OFCOM numbering tax

I have raised this before, but it is worth re-iterating the stupidity of this latest tax and why I think as a "trial" it should fail and be scrapped.

The basic principle is simple - OFCOM are charging for telephone numbering blocks in some area codes. It is a trial, and hence only 30 areas that are short of numbering. The charges are 10p/number allocated, but a discount of 18p/number for ported out numbers.

There are a number of key problems with this scheme:-

Unfair on existing telcos

The charge has been introduced and applied to existing allocations which have been obtained from OFCOM on the basis that there is no charge for an allocation. Making this charge only to new allocations would have the same effect of reducing unnecessary allocations and encouraging conservation of numbers but without ruining the existing business models of existing telcos.

Unfair on small telcos

A larger telco like BT will have many blocks in each area, and they will be mostly full blocks with a final part filled block. As such they will have paying customers for the majority of number charges. However, as the charge applies per allocation (1,000 block is smallest), a small telco with only a few customers in a block has to pay for the whole allocation. This makes it harder to include the cost of the numbering tax in the pricing for the service. If it is was only "in use" numbers it would be fairer and easy to include in the pricing and business model. Given that OFCOM already have reporting from telcos (for ported out numbers) they could just as easily ask for utilisation levels and charge based on these.

Does not encourage conservation (the objective of the trial)

Conservation is discouraged for two reasons. Firstly as the charge is per allocation, it works better if more numbers are in use in each allocation rather than fewer. This means telcos will want to make incentives to get more paying customers to help cover the costs of the numbering tax that applies to the whole block. If this works that means they need new blocks sooner. Secondly, where a telco uses one of the tricks described below, to port out numbers, they reduce the bill per ported out number, and so will want to encourage more number take up and then porting so as to reduce the bill further.

Not in spirit of Comms Act

The Comms Act actually has a clause that specifically covers cases where the price for numbering allocation has been agreed with a telco when allocated, and prohibits OFCOM increasing that price. This seems to be a good principle and designed specifically to stop this sort of abuse and impact existing allocations. OFCOMs view appears to be that no pricing was agreed (it was not necessary as it was ZERO) but if OFCOM had agreed a price they could not have increased it. Increasing from zero seems to me to be abuse and very much against the spirit of the Comms Act and possibly even in breach of it. Making new charges for new allocations is a separate matter.

Can break numbers for existing users

Until the numbering charge, a block of numbers is an "asset" to a telco, and a portable one. If a telco is wound up, or simply stops doing numbering (e.g. a company stops doing VoIP), then they can sell or give away their numbering blocks to another telco that will be happy to take them on and continue to provide service to existing users. One of the key things with any block is that it may have some "ported out numbers" in the block, which a telco can ensure continue to work. These are not really a money making part of the block but not a lot of hassle either, and allow the rest of the block to be used for profitable customers. Because of this number blocks would almost never be "returned" to OFCOM. However, now number blocks have a cost then they are less of an "asset", and may end up being returned to OFCOM. In that case, even if the telco returning them has no remaining customers, all ported out numbers would stop working. This is especially bad if a small telco goes bust. The ported out number users would find their numbers stop and nothing they can do and nobody they can blame. A situation which simply would not happen before numbering charges came in.

Avoiding the charges?

We had one simple way to reduce charges - we made it part of our terms that anyone getting a number in any of the conservation areas would immediately port the number to another telco (not a related company) who would then sell back a VoIP wholesale service to us for use of that number. We set this up legitimately with a totally separate company and suitable formal cross billing for services. OFCOM have accepted the numbering charge discount with each such number being 18p/year off the 10p/year*1000 charge for the number block. This encourages us to sell more numbers in conservation areas now as each live number reduces our bill.

However, by total fluke we found that the charges were not even valid! Most of our numbers were allocated to a separate subsidiary company Andrews & Arnold (numbers) Ltd. This is a company we purchased that had already obtained blocks in every area code. We had intended to move the blocks over, but OFCOM made that difficult saying that the needed to audit all blocks in the process. So instead we bought and renamed the company and A&A(numbers) leased the use of the blocks to A&A. A&A(numbers) stopped doing any services directly. This means A&A(numbers) is not in fact a Communications Provide now (it has no network or services itself, it just provides use of numbering). OFCOM have had to agree that they are unable to charge a non Communications Provider, and so are refunding last year's charges and not charging this year. A&A do have a few blocks, including one for which we pay, but most of the cost was via A&A(numbers), so that is a win!

Trial failed?

Clearly the trial does not actually meet its objectives, and may be creating actual incentives to use more numbers in conservation areas. It is also incredibly easy to completely avoid these charges with little more than the cost of creating a separate company to hold the number blocks. OFCOM need to re-think things carefully and abandon the trial ASAP.

7 comments:

  1. The devil really is in the details. Nice to see you playing them at their own game and beating them on a technicality!

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  2. Have you formally responded to their consultation or trial giving the points you put in this blog post?

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    1. Is there a new consultation on this - do you have the URL? We do try to respond where possible.

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    2. Did you respond to the original consultation?
      http://stakeholders.ofcom.org.uk/binaries/consultations/geographic-numbers/summary/geographic.pdf

      http://stakeholders.ofcom.org.uk/consultations/geographic-numbers/summary

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    3. To be honest, I do not remember, but we need to keep an eye on these. The problem is that we are a tiny telco and so our views tend to carry very little weight.

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    4. Doesn't look like you did.. other providers (inc. some of your own suppliers?) did..
      http://stakeholders.ofcom.org.uk/consultations/geographic-numbers/?showResponses=true

      I'm not through reading the responses that I want to read but I am surprised that Magrathea suggested 7p instead of 10p rather that saying there shouldn't be a charge.

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    5. Indeed, in some cases we have spoken to suppliers who are making sensible responses anyway. I will try and get more involved in the consultations anyway as clearly they need more people responding sensibly.

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