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Draft BEREC Report on the handling of third-party payment charges on mobile phone bills
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BoR (21) 36 - Draft BEREC Report on the handling of third-party payment charges on mobile phone bills
The mobile phone bill has evolved to become an instrument, not only for mobile operators to collect mobile phone charges, but also for third party services providers to easily apply charges for goods or services purchased by end-users. Initially, third party services were delivered by means of a voice call or text message charged to the mobile phone bill, albeit at a higher rate than normal calls or text messages (and from this the name premium rate services, or PRS). Nowadays, service providers offering digital content, or even other products or services, have come to see the opportunities that lie within the mobile phone bill to easily charge for their goods and services. The latter payment method is often referred to as direct carrier billing (DCB). DCB allows third party service providers to benefit from the existing relationship between the end-user and his mobile service operator and the fact that the end-user is already known by, and being charged by, his mobile operator.
The increasing popularity of DCB services has also resulted in consumer complaints about these services. Most NRAs/competent authorities confirmed that they have recorded complaints or enquiries on third party billing issues over the last three years. Charging issues are currently the most reported causes of complaints regarding third party billing, for both PRS and DCB. The second most reported causes of complaints are fraud in the case of PRS and consent issues for DCB. It has also put DCB onto the European agenda, resulting in the inclusion of a specific provision on the facility for end-users to deactivate third party billing in the European Electronic Communications Code (“EECC”), currently being transposed by Member States.
This report aimed at understanding what charges are being collected on behalf of third party providers and the related issues. The report also aims at shedding some light on the provisions existing prior to and post-transposition of the EECC. To this end BEREC drafted and issued a questionnaire to its Members and participants. The answers received have also provided insights on the legal status of third party services, the responsibilities of NRAs/competent authorities and the scope of the present legal/regulatory obligations, as well as on current consumer protection measures and complaints.
From the responses received, it appears that in almost all of the responding countries, NRAs/competent authorities have responsibilities regarding PRS, but only one third of them have similar responsibilities for DCB. Given this fact, it is not surprising that as a common thread in the responses to the questionnaire, the existing consumer protection measures are almost always present to a lesser extent for DCB than for PRS. For example, while a significant majority of NRAs/competent authorities indicated that information and transparency measures or tools for PRS are in place in their country, less than half of them indicated that similar measures are in place for DCB; obligations to provide detailed billing are twice as often in place for PRS as for DCB and obligations to provide end-users with facilities to manage services via a customer area or customer support are three times as common for PRS as for DCB.
However, for some measures designed to protect consumers from bill shock or forced purchases, respondents indicated that they are only imposed to a very limited extent for both PRS and DCB. For example, obligations to impose a threshold amount (spend limit) on PRS or DCB services were confirmed to be rarely imposed. Few countries indicated that they impose an obligation to provide an alert service for anomalous traffic for PRS, even less so for DCB and the same can be said for obligations to provide regular spend reminders.
When looking at consent requirements for once-off and subscription services, they are more common for PRS services than for DCB and cancellation confirmation is supported in twice as many countries for PRS as for DCB.
In many European countries, mobile operators allow third party providers to charge their customers via their mobile phone bills for goods or services. Such charges, applied to various services offered by phone call (voice call) or via text message (SMS/MMS), are known as premium rate services (“PRS”) as they are usually charged at higher rates than those normally applied to phone calls and texts. Nowadays, such charges are also applied to the purchase of goods and services by Direct Carrier Billing (“DCB”). DCB is also a system of charging a mobile phone user for a good or service via their mobile phone bill. However, DCB does not rely on a premium rate number or specific short codes, like some traditional PRS, to apply the charge but rather the end-user’s account is directly charged for the good or service being purchased.
This market evolution, from traditional PRS to also including DCB, can also be seen when looking at the research and policy recommendations of European and International organisations on the matter of third party payments on end-user phone bills (see Annex 3 - Literature list). Initially, European and International reports, studies or position papers addressed issues relating to the use of premium rate numbers, but gradually mobile online payments (including DCB) were studied and commented upon.
This report will focus on how third-party payments and charges are handled via both traditional premium rate services and direct carrier billing.
1.2. Directive (EU) 2018/1972 establishing the European Electronic Communications Code (“EECC”)
The market evolution referred to above can also be observed when comparing the former “Telecoms Package” with the Directive (EU) 2018/1972 of the European Parliament and of the Council of 11 December 2018 establishing the European Electronic Communications Code (“EECC”) - replacing the Telecoms Package.
The EECC contains a number of specific measures relating to promoting competition, the internal market and end-user interests in relation to PRS and other services subject to particular pricing conditions. For example, Article 102.6 of the EECC gives Member States the ability to maintain or introduce provisions requiring providers to give additional information on consumption levels and temporarily prevent further use of the relevant service in excess of a financial or volume limit. Recital 266 explains that provisions on consumption limits protect end-users from ‘bill-shocks’ including those in relation to PRS and other services that are subject to particular pricing conditions. Further, competent authorities can require information about such prices to be provided prior to the provision of a good or service and does not prejudice the possibility that Member States can maintain or introduce general obligations for PRS to ensure the effective protection of end-users.
Pursuant to Article 115 of the EECC, Member States shall also ensure that, where relevant, competent authorities in co-ordination with national regulatory authorities (“NRAs”) are able to require all providers of internet access services, or publicly available number-based interpersonal communications services, to make available free of charge all (or part of) the additional facilities listed in Part B of Annex VI to the EECC, subject to technical feasibility, as well as all or part of the additional facilities listed in Part A of Annex VI to the EECC.
These additional facilities that can be imposed in relation to PRS and DCB services, and include, among others, the following:
- Selective barring for outgoing calls or premium SMS or MMS, or, where technically feasible, other kinds of similar applications, free of charge
namely, the facility whereby the end-users can, on request to the providers of voice communications services, or number-based interpersonal communications services in the case of Article 115, bar outgoing calls or premium SMS or MMS, or other kinds of similar applications of defined types or to defined types of numbers free of charge, and
- Facility to deactivate third party billing
namely, the facility for end-users to deactivate the ability for third party service providers to use the bill of a provider of an internet access service, or a provider of a publicly available interpersonal communications service, to charge for their products or services.
1.3. BEREC Work Programme 2020-2021 and related steps
The project relating to the handling of third party payment charges on mobile phone bills, as outlined in the 2020/2021 BEREC Work Programme, requires BEREC to collect useful information (by means of an ad hoc questionnaire and from documents and reports from the European Commission and other relevant sources) to draft a Report aimed at understanding:
● what charges are being collected on behalf of third party providers using mobile phone bills, considering both pre-paid and post-paid contracts, and the related issues, and
● what provisions exist in advance of the introduction of the EECC and after the implementation of the regulatory framework.
To this end, in 2020, BEREC prepared and issued a questionnaire to NRAs, and/or competent authorities, that included questions on the legal status of third party services, the responsibilities of the NRAs and/or competent authorities, the value chain and the scope of legal/regulatory obligations. With the questionnaire were also sought information on current consumer protection measures as well as complaints, complaints procedures and refunds.
The impact of the transposition of the EECC was briefly touched upon given that the questionnaire was issued, and the subsequent responses have been processed, prior to 21 December 2020 - the final date for transposing into national legislation the EECC.
1.4 Aim of the Report
This report aims at giving an overview of the status of third party payment charges in Member States at the moment of completing the questionnaire. It should be however pointed out, that at this moment most NRAs and/or competent authorities were operating under the previous framework, since the transposition process of directive 2018/1972 was still ongoing.
Therefore this Report intends to provide an initial frame of reference in the field of third-party payment charges to enable a more accurate assessment of the impact of the EECC when the transposition processes will have been completed.
The Report also aims to serve as a useful information tool in the search for best practices regarding third party payment charges.
1.5 Basic definitions and models
As previously stated, third party services are to be interpreted in a broad sense and include both PRS and DCB. This Report considers that PRS are services offered via phone call (voice call) or text message (SMS/MMS) which are charged to the mobile phone bill at a higher rate than normal phone calls or text messages.
In this Report, DCB is when digital content services, or other products or services, are charged directly to the end-user’s mobile phone bill.
The following figure shows a schematic representation of the relationships (and payments) between parties involved in a voice premium rate call:
Figure 1 - Schematic representation voice premium rate call
Although BEREC acknowledges that there can be variations according to the market, and the type of purchase involved, it considers that basic relationships and steps in a transaction charged through Direct Carrier Billing can be roughly represented as follows:
Figure 2 - Schematic representation direct carrier billing 
A list of other useful definitions can be found in Annex 1 – Definitions of this Report.
In most countries – nineteen (19) out of twenty eight (28) – third party service providers are subject to legal or regulatory obligations regarding PRS and around one third of the respondent countries – ten (10) out of twenty eight (28) – indicated that third party service providers are also subject to obligations regarding DCB.
Existing obligations for electronic communication service providers do not cover DCB in any respondent country.
Price control is the most mentioned regulatory provision in place for PRS, but also other provisions as contractual transparency, general information disclosure, prior information disclosure, prior consent and billing transparency were frequently mentioned. Fewer countries indicated that they have obligations in place for both PRS and DCB, and among those, billing transparency was the most mentioned.
Regarding companies providing content or services online, there are fewer countries that have established rules the most mentioned cases covering both types of services included billing transparency, general information disclosure, prior information disclosure (4 countries).
PRS content providers are mostly subject to PRS obligations regarding prior information disclosure (six (6) countries) and prior consent (four (4) countries). Obligations covering both types of services (PRS and DCB) usually cover contractual transparency, billing transparency, prior consent and others indicated by a few countries.
When asked if these legal or regulatory obligations were in place prior to the transposition of the EECC in the Member States, sixteen (16) countries confirmed that they were in place and one (1) country indicated that they were not.
Further, five (5) countries mentioned that following the transposition of the EECC they plan to implement legal or regulatory obligations on electronic communication service providers. Among those, the most frequently mentioned future regulations include billing transparency, general information disclosure and prior consent; seven (7) countries indicated that they have no plans to regulate this matter. Respondents were also asked whether, at the time of filling the questionnaire, they expected the legal provisions set out in the responses were to change following the transposition of the EECC into national legislation. Five (5) countries responded positively and fourteen (14) countries responded that the legal provisions may change.
The majority of NRAs at the time of completing the questionnaire indicated they did not have legislation transposed yet, with some having legislation prepared and before the national parliament awaiting voting.
2.2 Complaints and enquiries
Number of Contacts
The questionnaire asked whether NRAs had recorded any contacts (complaints or enquiries) about third party billing issues in the last three years and, if they had, how many contacts were recorded. From the answers it was possible to ascertain that 79% of reporting NRAs recorded complaints or enquiries, 14% did not have any records and 7% didn’t answer the question. The distribution of the number of registered contacts per NRA is shown in the next figure.
Figure 3 - Distribution of NRA’s by Amount of Contacts 
Figure 3 depicts the distribution of countries over five categories corresponding to different (increasing) levels of the number of contacts over the three-year period considered. The noticeable shift of the distribution of countries from the rightmost categories, associated to higher numbers of contacts, to the leftmost, associated with lower levels of contacts, shows a general tendency to a decrease in the number of contacts. This does not apply to those countries that recorded more than 1000 registered contacts, which remain stable, .
Major issues concerning third party billing complaints
BEREC asked NRAs/competent authorities whether certain issues were mentioned by end-users in complaints regarding third partybilling for PRS and DCB. The distribution of those issues is shown in the next figure:
Figure 4 - Amount of times issues were rated major
One can conclude that the two most reported issues regarding third party billing, are charging issues and fraud for PRS and charging and consent issues for DCB. The least reported issue was lack of billing transparency for both PRS and DCB.