Federal Register of Legislation - Australian Government

Primary content

Determinations/Communications as made
This Determination sets out rules that apply to service providers in relation to the supply of premium SMS and MMS services.
Administered by: Infrastructure, Transport, Regional Development and Communications
Registered 11 Mar 2010
Tabling HistoryDate
Tabled HR11-May-2010
Tabled Senate11-May-2010
Date of repeal 01 Apr 2021
Repealed by Sunsetting
Table of contents.

Regulation Impact Statement

 

Issued by the Australian Communications and Media Authority

 

Telecommunications Service Provider (Mobile Premium Services) Determination 2010 (No.1)

Introduction

Background

 

1.      Mobile premium services include both premium SMS and MMS services which provide content or access to content or payment for services via an SMS or MMS using numbers with the prefix 191, 193-197 and 199 for more than the usual cost of sending an SMS or MMS – or content offered on a mobile network operator’s portal. Such services can deliver ringtones, wallpapers, competition voting, sporting results, matriculation results, music clips, public transport information and chat rooms. For the purpose of this regulatory impact statement only premium SMS and MMS services are relevant.

2.      Mobile premium services were first regulated under an industry scheme, the Mobile Premium Services Industry Scheme (MPSI Scheme) which operated from November 2005. The MPSI Scheme, a self-regulatory scheme developed by carriage and content service providers made in accordance with the requirements in the Telecommunications Service Provider (Mobile Premium Services) Determination 2005 included obligations on service providers to provide their customers with information about the services including information about the nature, costs, terms and conditions for receipt of mobile premium services.

3.      The Telecommunications Service Provider (Mobile Premium Services) Determination 2005 was subsequently repealed by the Australian Communications & Media Authority (ACMA) on 14 May 2009. The Mobile Premium Services Industry Scheme was replaced by an industry code, the Mobile Premium Services Code (MPS Code) 2009 C637:2009 (see RIS ID 10169).

Current regulatory environment

4.      The Mobile Premium Services Code which commenced on 1 July 2009 includes detailed rules regulating mobile carriage service providers, aggregators and content suppliers providing premium SMS and MMS services to end users.

5.      The new Code includes a number of new safeguards intended to better protect users of mobile premium services. These include rules which:

·        require that mobile phone users independently confirm their decision to purchase a premium SMS or MMS service twice;

·        require all content suppliers and aggregators (a party which facilitates the provision of content between a content supplier and carriage supplier) be listed in an industry register;

·        bans the advertising of premium SMS and MMS services targeted at children under 15;

·        introduce new procedures for handling complaints involving minors use of mobile premium services;

·        require content suppliers to alert customers about subscriptions to mobile premium services they have entered into once a month or each time they spend a multiple of $30 on a subscription service; and

·        prohibit charges for services from accruing after the credit on a prepaid mobile phone account has been exhausted.

Problem Identification

Operation of premium SMS and MMS services

  1. A premium SMS or MMS service can be charged as a single one off purchase such as a 55¢ charge for voting in a competition or via the incurring of a charge for multiple messages. The latter type of service is called a ‘subscription’ service and delivers content or access to content to the customer via their mobile phone on an ongoing or periodic basis. Subscription services can be costly and may include a sign up fee of as much as $10, together with a charge for each delivery or access to content; for example, three messages per week at $5 per message. The ongoing nature of subscription services can lead to higher costs being incurred than were expected by the customer. The ongoing nature of subscription services can quickly accumulate and result in an unexpectedly high bill for post paid customers or exhaustion of prepaid mobile phone credits.

Unexpected high bill for prepaid mobiles & inability to prevent access to services

  1. Prepaid mobile phones are marketed as a service offering greater control over a customer’s expenditure on phone calls, text messaging and the purchase of premium SMS and MMS services. A customer’s expenditure is limited to the amount of credit that they can afford to purchase for their phone. Such a service is attractive for parents who want to provide their child with a phone service that will allow them to contact or be contacted by their child, but without the fear of incurring high bills. Business customers and parents especially with young children not only want to control the amount of expenditure that can be incurred but also prevent expenditure on certain types of services such as premium SMS and MMS services whether from intentional or inadvertent usage.

Causes of inadvertent usage

  1. Inadvertent usage of premium SMS and MMS services can arise from a failure of the user to understand that they have agreed to pay for the service. This can occur where the advertising for a service is unclear by including ‘free’ offers or ‘free’ use of a service for a period of time and or there is inadequate advertising of the costs, terms and conditions. It can also be a problem for people with little financial literacy such as young children. While the Mobile Premium Services Code prescribes specific advertising requirements, adequate message information as to the price and type of service and the need for a double confirmation for purchase of a service TIO complaints data and ACMA monitoring of services demonstrates that these obligations are not always fully complied with.

Existing barring services for mobile phones

  1. As at January 2010, only one of the three mobile carriage service network operators in Australia has the capability to bar all premium SMS and MMS services. Telstra Corporation Ltd (Telstra), is the only mobile network operator that provides a premium SMS and MMS service barring for both prepaid and post paid mobile phone services. Singtel Optus Pty Limited (Optus) and Vodafone Hutchison Australia Pty Limited (VHA) can bar access to all premium SMS and MMS services, but the customer will lose the capability to send non premium SMS and MMS.
  2. While the barring of all premium SMS and MMS services and standard text messaging will protect a customer from incurring charges for premium SMS and MMS services, the loss of non premium text messaging at around 21 to 25 cents per message, a significantly cheaper option to voice calls, would undermine the incentive for applying for barring. This is especially the case as mobile carriage service providers are providing bundled services which allow for large numbers of free non premium SMS messages.
  3. As Telstra and its mobile resellers are the only mobile phone providers which offer barring of all premium SMS and MMS services it could be expected that they would have all business customers, consumers and parents who want barring as customers. However, there appears to be a low level of consumer awareness of the existence of barring. Telstra has advised the ACMA that it offers its customers advice about the ability to bar all premium SMS and MMS services in situations where a customer complains about being charged for such services without their authorisation.
  4. Mobile phone customers in weighing up which mobile phone provider to accept are willing to make trade-offs in order to get particular services they value most and importantly on cost. A provider which offers the best bundled services with the most free text messages or access to exclusive sporting video or results or handsets will succeed in getting the consumer to be become its customer.

Complaints data for children and mobile phones

  1.  Mobile phones are widely distributed to children including children as young as 5 years. Australian Bureau of Statistics survey report into Children’s Participation in Cultural and Leisure Activities Australia, April 2009 identified 20,100 children 5-8 years, 184,200 children 9-11 years and 637,100 children 12 -14 years using mobile phones. While a prepaid mobile phone can allow a parent to control the overall amount of expenditure incurred on a mobile phone provided to their child, they cannot prevent their child from spending money on premium SMS and MMS services unless they have barring in place.
  2. The TIO which is the escalated complaints handling body responsible for resolving complaints about premium SMS and MMS services does not have a separate category to record complaints from parents whose children have purchased premium SMS and MMS services without their consent. Such complaints are incorporated into the category of unauthorised services. Complaints for services which were not requested are represented in the graph on page 7.
  3. There are however, two categories of complaints which point to usage of premium SMS and MMS services by minors without parental consent. These are requirements under the MPS Code that prohibit the advertising for premium SMS and MMS services specifically and primarily targeted at persons below the age of 15 and if an advertisement is likely to attract or encourage a significant number of minors to use the premium SMS and MMS service must include a warning that if you are under 18 you must ask the account holder before using the service. The TIO could not record or deal with these categories of complaints unless the there was also a complaint about the parent as the account holder being charged for a premium SMS or MMS service they had not requested. The reason being that the complainant must have experienced some detriment.
  4. TIO data relating to these two categories of complaint involving the advertising of services and minors totalled 90 complaints for the 8 months period between 1 July 2009 and 28 February 2010. While this number of complaints does not appear large, the issue of minors accessing premium SMS and MMS services is likely to be under represented because only parents who have identified the original advertisement and were aware of the obligation have been identified with this category. For parents unaware of this advertising obligation or unable to locate the advertisement their complaint would be recorded under the category of being charged for an unauthorised service.

Agencies receiving complaints about premium SMS and MMS services

17.  Complaints about mobile premium services have been received by the ACMA, Australian Competition and Consumer Commission (ACCC), Offices of Fair Trading in States and Territories, Members of Parliament and the Minister for Broadband, Communications and the Digital Economy’s office. Reports about unacceptable practices relating to unauthorised services and unexpected high bills feature periodically in articles in metropolitan newspapers and in online forums such as Whirlpool.

18.  The ACMA received 83 complaints between 1 July 2009 and 28 February 2010. 4 complaints related to receipt of an unauthorised SMS promoting mobile premium services which were dealt with under the Spam Act 2003 and 79 complaints about mobile premium services content were referred to the Telecommunications Industry Ombudsman (TIO).

19.  The ACCC received 39 complaints about mobile premium SMS and MMS services between 1 July 2009 and 31 November 2009. Of these 24 complaints relate to unauthorised services and were referred to the TIO.

  1. Complaints about premium SMS and MMS services are raised with either the content supplier or the customer’s mobile carriage service provider in the first instance. Unresolved complaints are referred to the TIO which has the role of escalated complaints handling body under the new Mobile Premium Services Code.

Complaints data on unauthorised services

  1. Between 1 July 2009 and 28 February 2010, the TIO received a total of approximately 7,690 complaints about premium SMS and MMS services. Of these, the greatest single source of complaint each month is the receipt of premium SMS and MMS services which were not requested by the customer. 3,151 complaints or 41% of all complaints relate to receipt of unauthorised services.
  2. The graph on page 5 records TIO complaints data for each month from 1 July 2009 to 28 February 2010. It demonstrates that complaint numbers have declined each month from a high of 1,657 in July 2009 to a low of 615 in December 2009. This trend has also been mirrored for complaints about receipt of unauthorised premium SMS and MMS services which reached a low of 247 in December 2009. While complaints about premium SMS and MMS services appear to have bottomed out in December 2009 there has been a gradual increase for January and February 2010 in the number of complaints for all premium SMS and MMS services and a corresponding increase in complaints about unauthorised premium SMS and MMS services. It is too early to determine whether complaint numbers are likely to continue to trend upward and how large any increase will be.
  3. While the total number of complaints about premium SMS and MMS services has declined significantly since the introduction of the MPS Code on 1 July 2009, the ACMA has also looked at complaint numbers for unauthorised services as a proportion or percentage of total complaints over the 8 months of operation of the MPS Code. The proportion of a category of complaint aids in determining how significant the issue is over time. In this case, unauthorised services were the highest single source of complaint throughout the 8 months of operation of the MPS Code representing 41% of all complaints received by the TIO. The next highest category was a failure to assist customers representing 15% of all complaints about premium SMS and MMS services. While the number of complaints for unauthorised services mirrored the decline in total number of premium SMS and MMS complaints, it was expected that the percentage of complaints about unauthorised services would also decline as a result of the new obligations included in the MPS Code which were specifically targeted at unauthorised services. For example, a requirement for the customer to provide two confirmations before having authorised the purchase of a service. This does not appear to be the case.
  4. The ACMA has been undertaking a compliance programme of monitoring which has led to a number of investigations into content providers who have breached the rules in the MPS Code. Despite this programme, the available compliance options under the Telecommunications Act 1997 are insufficient to promote an adequate level of compliance. This is because of the existing legislative limitations on enforcement. While the MPS Code sets out rules to regulate content providers, compliance with the Code is voluntary unless the ACMA directs a person in writing to comply with the industry code. This is on a content provider by content provider basis and following an investigation process which can take a number of months once the natural justice requirements have been met.
  5. Many of the content providers are multinational companies and operate from countries offshore. The ACMA has no legislative power to enforce a direction to comply with the MPS Code on a person or business which operates outside of Australia. Importantly, for companies operating within Australia they can take advantage of the low entry barriers which allow a company to set up over night and to provide services within a short period of time after contracting with an aggregator. This allows a company when discovered to be operating in breach of the MPS Code rules to close their operation and reappear under a new company name within a matter of days without fear of enforcement action.

 


Mobile Premium Services Complaints received by the TIO between 1 July 2009 and 28 February 2010

 

Graph showing the number of complaints about premium SMS and MMS charges for services not requested compared to the total number of complaints.

 

 

Level 1 complaints are those where the carriage service provider has not had an opportunity to resolve the complaint and are not investigated
             by the TIO but are referred to the carriage service provider for resolution.

Level 2 complaints are those where there is a limited involvement by the TIO staff in resolving the complaint, but no formal investigation is
             undertaken.

Level 3 and 4 complaints are formally investigated by the TIO and involve the making of a determination or direction in relation to an
            amount either not exceeding or exceeding $1200 respectively.


 

26.  On 18 May 2009, the ACMA announced a new approach to regulating premium SMS and MMS services. The ACMA’s package contains a number of elements to address the issues associated with premium SMS and MMS services including:

·        Registration of the Mobile Premium Services Code containing a range of new safeguards;

·        A comprehensive monitoring and compliance programme to support the Code;

·        Development of an ACMA service provider determination that will require mobile carriage service providers to provide their customers with the option of barring all premium SMS and MMS services;

·        Development of a second service provider determination to support the operation of a central register of content suppliers and aggregators established in connection with the MPS code, by preventing mobile carriage service providers and aggregators from contracting with content suppliers and aggregators who have not supplied their details for inclusion on this register; and

·        Increased incentives for compliance with the MPS code, by enabling ACMA to order a carriage service provider to cease providing billing services to a content supplier or aggregator that is not complying with the MPS Code.

27.  As part of the Code registration requirements under Part 6 of the Telecommunications Act 1997, the ACMA reviewed the industry and public comments on the draft Mobile Premium Services Code. Consumer representative groups including the Consumer’s Telecommunications Network (CTN), and CHOICE argued that not withstanding the improved safeguards in the Mobile Premium Services Code that all new mobile phone services should be default barred for all premium SMS and MMS services unless the account holder requested the barring be removed. They further argued that default barring would provide greater expenditure control to reduce the possibility of an unexpectedly high bill and would improve protection of minors and vulnerable consumers.

28.  Consideration was given by the Code Committee responsible for development of the Mobile Premium Services Code for the inclusion of an obligation on mobile carriage service providers to develop a capability for barring premium SMS and MMS services. However, the Committee was unable to reach agreement on which barring model (either default barring or opt-in barring) should be adopted. CTN therefore argued for the ACMA to make a service provider rule to ensure that call barring would proceed and be implemented in a timely manner.

29.  The Australian Competition and Consumer Commission in its submission sought barring of all premium SMS and MMS services as it considered that underage consumers were particularly vulnerable to mobile premium service related consumer detriment and additional measures were needed to reduce the likelihood of young consumers encountering problems.

30.  The Minister for Broadband, Communications and the Digital Economy supported a barring requirement being imposed upon all mobile carriage service providers to provide increased protection for consumers who inadvertently access mobile premium services on their mobile phone and would provide suitable protection for parents who supply their children with mobile phones.

31.  Premium SMS and MMS service barring is currently only available from Telstra and has been in operation since the commencement of premium SMS and MMS services in 2003. Barring rates for Telstra customers are approximately 12% for its combined 10.4 million post-paid and prepaid mobile services. Optus has 8.2 million mobile phone customers and VHA has 6.9 million mobile phone customers. Mobile customer numbers are provided at 31 December 2009.

32.  It may be thought that customers who valued the protection of barring all premium SMS and MMS services would gravitate to Telstra which is the only mobile carriage service provider offering barring if they considered barring of importance. However, there are a number of factors which are considered by consumers wanting to buy a mobile phone service. This can include the availability of bundling of services allowing large numbers of calls included in a single monthly price, the availability of various exclusive sporting services, the range of mobile phone handsets and most importantly the awareness level of barring.

Objective

  1. The ACMA is proposing to improve the regulation of premium SMS and MMS services to help address difficulties faced by mobile phone customers. The recommended approach will need to:
    • Give customers an ability to prevent the inadvertent or fraudulent accessing of premium SMS and MMS subscription services;
    • Reduce the possibility of incurring unexpectedly high bills arising from subscription services; and

·        Provide parents and guardians with the ability to manage their dependents’ use of premium SMS and MMS services.

Options

34.  Consumer groups and other regulatory agencies such as the ACCC have identified the need for barring of premium SMS and MMS services (Refer to problem identification). Careful consideration has been given to the most effective way to address these problems while balancing the objectives and regulatory policy under the Telecommunications Act 1997. Namely, subsection 3(2)(h) states that Parliament’s intention is to provide appropriate community safeguards in relation to telecommunications activities and to regulate adequately participants in sections of the Australian telecommunications industry. Section 4 states that Parliament intends that telecommunications be regulated in a manner that (a) promotes the greatest practicable use of industry self-regulation and (b) does not impose undue financial and administrative burdens on participants in the Australian telecommunications industry.

35.  There are three options available with the two most appropriate avenues for implementation are options 2 and 3 which provide for either an account holder request for ‘opt in’ barring of all premium SMS and MMS services or ‘default barring’ which would include automatic barring of all premium SMS and MMS services on all mobile phone accounts unless the account holder requested the removal of barring.

·        Option 1 – Maintain the existing arrangements without barring;

·        Option 2 – Provision of opt-in barring; or

·        Option 3 – Provision of ‘default barring’.

Impact Analysis

  1. In the Australian market place there are three mobile network operators, Telstra Corporation Ltd (Telstra), Singtel Optus Ltd (Optus) and Vodafone Hutchison Australia Ltd (VHA). Each of these mobile network operators contract with a number of mobile carriage service providers or resellers. There are approximately 30 mobile carriage service providers operating in the Australian market place. The three mobile network operators have contracts with approximately 20 aggregators and the aggregators’ in turn have contracts with an unknown number in excess of 750 content developers to provide premium SMS and MMS services to mobile phone the customers.
  2. Paul Budde Communication Pty Ltd in its 21 July 2009 report Australia - Mobile Media-Premium Rate SMS estimates that premium SMS and MMS market for 2009 will generate approximately 265 million dollars. Of this total revenue one third is retained by the mobile network operators. The mobile carriage service providers reselling mobile phone services have advised that they are not party to the agreements between the mobile network operators and the aggregators or content providers and do not receive a share of the revenue. However, they are required to assist their customers in dealing with enquiries and complaints about premium SMS and MMS services. An Ovum report of September 2009 titled Australian Mobile Market Statistics recorded that mobile resellers represent 3% of the total mobile phone service market.

38.  In terms of market share of premium SMS and MMS services, Paul Budde Communication Pty Ltd in its 21 July 2009 report Australia - Mobile Media-Premium Rate SMS estimates that the market share for the mobile network operators including their resellers would be Optus 43%, Telstra 34% and Vodafone Hutchison combined 23%.

  1. The main stakeholder groups affected by the proposed options include:
    • Mobile network operators;
    • Mobile carriage service providers (resellers);
    • Content suppliers (aggregators and content developers); and
    • Mobile phone consumers.
  1. The table following provides a comparison of the costs and benefits for each mobile network operator and mobile carriage service provider under options 1, 2 and 3.

 

 


Comparison of the costs and benefits for each mobile carrier and mobile carriage service providers under each option.

 

 

Option 1

Option 2

Option 3

 

COSTS TO MOBILE CARRIERS

Cost for establishment of a barring capability for all premium SMS and MMS services.

N/A

 

$5 million

 

$7.2 million

Cost of maintaining the barring of services per annum.

$0.5 million

$0.5 million

$1.5 million

Development of new procedures for processing resellers or mobile virtual network operator requests to remove default barring or apply barring for their customers.

N/A

$0.1 million

$0.4 million

Development of new procedures for processing customer requests to apply for or remove barring including development of the process, equipment changes and staff training.

N/A

 

$0.1 million

 

$0.1 million

Cost of provision of information to customers on the availability of barring of all premium SMS and MMS services.

N/A

 

$1 million

 

$1 million

Tally of the costs per mobile carrier

$0.5 million (Telstra only)

$6.7 million

$10.2 million

 

BENEFITS TO MOBILE CARRIERS

 

Option 1

Option 2

Option 3

Promotion of customer protection.

Telstra has a marketing advantage of being the only mobile phone company which can offer its customers barring of all premium SMS and MMS services.

Opt in barring is a marketable safety feature for parents or persons wanting to prevent access to premium SMS and MMS services.

Barring would be automatically applied to all mobile customers without their need to request it.

Cost of handling complaints in the customer care area.

Approximately $137 per hour x 6,629 complaints

 

$908,173

Reduction in complaints for their customer care staff.

A greater reduction in complaints for their customer care staff to reflect larger number of barred customers.

Cost of TIO investigations of complaints

Direct component

Level 1 $68        Level 3 $522

Level 2 $286      Level 4 $2,475

Plus indirect component equal to direct component above.

 

$901,544

Reduction in TIO investigations of complaints.

Greater reduction in TIO investigations of complaints to reflect larger number of barred customers.

 

COSTS TO MOBILE CARRIAGE SERVICE PROVIDERS (RESELLERS)

 

Option 1

Option 2

Option 3

Any passed on cost of establishment of a barring capability.

N/A

$1 million

$1 million

Any passed on cost of maintaining barring capability.

Nil

Nil

Nil

Development of new procedures for processing customer requests to apply or remove barring including development of process, equipment changes and staff training.

N/A

 

$55,000

 

$55,000

Cost of provision of information to customers on the availability of barring of all premium SMS and MMS services.

N/A

 

$42,000

 

$42,000

Tally of costs to mobile carriage

$NIL

$1.97 million

$1.97 million

BENEFITS TO MOBILE CARRIAGE SERVICE PROVIDERS (RESELLERS)

 

Option 1

Option 2

Option 3

Promotion of customer safeguard

Mobile carriage service providers reselling Telstra services have a marketing advantage to be able to bar all premium SMS and MMS services.

Opt in barring is a marketable safety feature for parents or persons wanting to prevent access to premium SMS and MMS services.

Barring would be automatically applied to all mobile customers without their need to request it.

Cost of handling complaints in the customer care area.

Approximately $137 per hour x 1,061

 

$145,357

Reduction in complaints for their customer care staff.

A greater reduction in complaints for their customer care staff to reflect larger number of barred customers..

Cost of TIO investigations of complaints

Level 1 $68        Level 3 $522

Level 2 $286      Level 4 $2,475

Plus indirect component equal to direct component.

$144,296

Reduction in TIO investigations of complaints.

Greater reduction in TIO investigations of complaints to reflect larger number of barred customers..


Costs and benefits for content suppliers under the three options

Option 1 - No change to existing arrangements

Costs

41.  Option 1 is the status quo which means that no new obligations or costs would be imposed upon content suppliers.

Benefits

42.  The benefit to content suppliers is that the potential market for premium SMS and MMS services is only reduced for customers of Telstra and its resellers who either have barring or could request barring. At present this equates to 12% of Telstra customers.

Option 2 – Provision of ‘opt in’ premium SMS and MMS barring

Costs

43.  Option 2 is not expected to result in any cost to content suppliers for the development of a premium SMS and MMS barring capability as it will be funded by mobile network operators and mobile carriage service providers.

Benefits

44.  The benefit to content suppliers is that the potential market for premium SMS and MMS services will remain in the millions as only those customers who specifically wish to have barring would request it from their mobile network operator or mobile carriage service provider.

Option 3 Provision of ‘default barring’ of premium SMS and MMS services

Cost

45.  Industry submissions suggest that default barring would have a dramatic impact on their business because it would significantly reduce the potential customer market for premium SMS and MMS services in Australia. One content supplier 1800MUMDAD Pty Ltd operating a mobile phone reverse charge call service enabling children to contact their parents when they had exhausted the credit on their prepaid mobile phone indicated that it expected its business would no longer be viable under default barring since use of its services were ad hoc and unplanned.

Benefits

46.  There are no benefits for content suppliers under a default barring regime.

Impact on business competition

47.  Option 1 would have no impact on business competition as the status quo would continue.

48.  Option 2 providing opt in barring would place all mobile network operators and carriage service providers on an equal footing in terms of a barring safeguard available to their customers. All customers would have access to premium SMS and MMS barring upon request. Industry submissions considered that option 2, opt in barring, was preferable to option 3, default barring, since default barring was counterintuitive to customers, and would create a level of inconvenience and frustration and confusion when customers sought, unsuccessfully to use a service. Further, industry considered that opt in barring was commensurate with the scale of the problems being experienced by consumers in terms of receipt of unauthorised premium SMS and MMS services and considered that opt in barring was a more balanced approach which returns the decision to remove access to services with the users.

49.  In terms of business innovation, option 2 would continue to provide a potential market of millions of mobile phone customers in Australia. Only those mobile phone customers that wished to remove their access or their child’s access to mobile premium services would apply for barring. If we applied the percentage of customers currently with barring for Telstra to the other mobile carriers and carriage service providers there would be a potential customer base of 22.4 million mobile phone customers. The premium SMS and MMS services industry is evolving and revenue has increased each year with an estimated 265 million dollars generated in 2009. New products and services will continue to enter the market place to compete with services available on other media such as the internet and mobile carrier portals.

50.  Option 3 providing default barring would have the most significant impact on business competition. Default barring by its very nature would require that all mobile phone customers would have all premium SMS and MMS services barred. Potentially this could be 25.5 million mobile phone services. If the customer wished to have access to premium SMS and MMS services, they would need to contact the mobile carriage service provider and have the bar lifted. The need to request the lifting of barring could act as a disincentive to persons other than dedicated users of mobile premium SMS and MMS services. Submissions from industry including TMG Asia Pacific Pty Ltd, an international content service provider advised in its submission to the ACMA that premium SMS and MMS service usage was generally ad hoc and unplanned and accordingly many potential customers would be unlikely to have arranged for barring to be removed. The customer may only discover they have been default barred when they unsuccessfully attempt to enter the competition. They will need to weigh up whether they are interested enough in the service to arrange for removal of barring. Industry has argued that such a barrier to accessing premium SMS and MMS services would significantly reduce the number of potential customers and the number and range of services available. In turn, this reduction in potential customers would undermine the financial basis for the industry in Australia and dissuade the development and availability of new and innovative services.

Impact on Consumers

Option 1 – No change to existing arrangements

51.  As option 1 would allow for the maintenance of the status quo, we can expect that complaints about receipt of premium SMS and MMS services that were not requested by mobile phone customers to continue and possibly as shown in the graph on page 5 to increase whether that be as a result of inadvertent or fraudulent or deliberate use by customers.

52.  Despite the new requirement in the Mobile Premium Services Code necessitating a double confirmation by the customer before access to a premium SMS and MMS subscription service can be authorised and the efforts of the ACMA to enforce these provisions, there continues to be a significant number of complaints from consumers about being charged for premium SMS and MMS services that they had not authorised. The graph on page 5 has shown a significant reduction in complaints about unauthorised premium SMS and MMS services but for the first two months of 2010 there has been a increase in total number of complaints about premium SMS and MMS services and a corresponding increase in the number of complaints about unauthorised services. Without a barring capability available to mobile phone customers, there remains the concern for parents and guardians about children being able to access premium SMS and MMS services with the possibility of incurring an unexpectedly high bill or loss of credits on their prepaid mobile services. Only options 2 and 3 would address this problem through barring and ensure it was provided by all mobile network operators and mobile carriage service providers.

Option 2 – ‘Opt in’ barring premium SMS and MMS barring

53.  The introduction of barring by all mobile network operators and mobile carriage service providers will allow the account holder an additional protection against unintentional or fraudulent or inadvertent subscriptions, unauthorised charges and high bills for premium SMS and MMS services.

54.  The protection offered by premium SMS and MMS barring may be especially relevant to minors and vulnerable mobile phone users. This class of user may possess a low level of financial literacy and may be more prone to inadvertently entering subscriptions. Premium SMS and MMS barring also provides parents and carers with a tool to manage mobile phone expenditure by barring access to higher cost services such as premium SMS and MMS services but allowing the use of non premium SMS messaging and voice calls.

55.  Option 2 The service provider determination requires that a customer not be charged a fee for either requesting the barring or removal of a bar on all premium SMS and MMS services. Additionally, the mobile carriage service provider must not cease providing, commence providing or fail to provide any other service as a consequence of the customer’s request.

56.  Any charge associated with premium SMS/MMS barring or loss of any other services the customer is enjoying may be regarded as acting as a deterrent to consumers using this tool to manage their mobile phone expenditure or to protect minors or vulnerable users from generating unexpected high expenditure. Consequently, the barring determination does not permit mobile carriage service providers to charge customers for activation, operation or deactivation of premium SMS and MMS barring or for barring to affect other services.

57.  Consumers will need to be made aware of the new opt in premium SMS and MMS barring safeguard and how they can request barring. Consumer groups, ACCAN and CHOICE, two consumers, the TIO, and the ACCC argued that the weakness with the opt-in barring option is that consumers will not apply for opt in barring because they will not be aware of it. Any opt in barring approach to barring premium SMS and MMS services would be heavily dependent  upon consumer awareness to be successful. To that end mobile network operators and mobile carriage service providers will be required to provide information to their customers about the availability of barring all premium SMS and MMS services.

Option 3 – ‘Default barring’ of premium SMS and MMS services

58.  Default barring will provide all mobile phone customers including those customers who transfer their mobile service to a new mobile carriage service provider with automatic barring in place for all premium SMS and MMS services. Customers wanting access to premium SMS and MMS services will need to arrange for the removal of the barring. As premium SMS and MMS services have always been available, default barring which would remove access to these services unless a customer asked for the bar to be removed, is counterintuitive to customers and is likely to create a level of inconvenience, frustration and confusion when customers sought unsuccessfully to use a service. The Vodafone Hutchison Australia submission supported this view with its experience as the then Vodafone when in 2005 it disabled access to its prepaid customers to premium SMS/MMS services and subsequently experienced a high number of complaints from its customers about their inability to access services. These complaints led to it reinstating prepaid access to premium SMS/MMS services.

59.  It was contended in submissions provided by industry that the barrier to accessing premium SMS/MMS services provided by default barring would significantly reduce the number of potential customers and this would remove the incentives and financial basis for the premium SMS/MMS industry in Australia. The net result would be that the number and range of services for consumers wanting to use mobile premium SMS and MMS services would diminish.

Consultation

60.  The ACMA issued a media release on 14 September 2009 seeking submissions from the public and industry in relation to the form of the new barring service provider determination. All mobile network operators, several mobile carriage service providers and industry bodies and consumer groups were notified of the consultation via email. A consultation paper and draft determinations were made available via the ACMA website and a period of 6 weeks was provided for the lodgement of submissions. A further media release was issued on 15 October 2009 reminding all interested parties of the closing date for submissions and encouraging them to lodge a submission.

61.  The ACMA received 22 submissions from the stakeholder organisations listed in the table below.

Mobile Network Operators

Mobile Carriage Service Providers

Content
Aggregators

Content
Service
Providers

Consumers
and
Consumer Groups

Regulatory
Bodies

Telstra Corporation Limited

Macquarie Telecom Pty Ltd

Sybase Australia Pty Ltd

1800Mumdad Pty Ltd

Australian Communications Consumer Action
Network

Australian Competition & Consumer Commission

Singtel Optus Limited

Telcoinabox Pty Ltd

Salmat Interactive Pty Ltd

TMG Asia Pacific Pty Ltd

National Ethnic Disability Alliance

Telecommunications Industry Ombudsman’s Office

Vodafone Hutchison Australia Limited

MX Telecom

m.Net Corporation Ltd

Fox Mobile Distribution (Jamster)

MS Queensland

Commonwealth Privacy Commissioner

Julian Sortland

Communications Alliance Ltd

Rob Wise SMSthejob.com

CHOICE

Stakeholder Views

Option 1 – No change to existing arrangements

62.  Mobile content service providers supported option 1 no barring of any premium SMS and MMS services. They argued that barring of any type was unnecessary given the safeguards provided in the Mobile Premium Services Code and the reduction in complaint numbers. Default barring they argued is a heavy handed regulatory approach to complaints about premium SMS services. In terms of default barring it would have a large impact on revenue streams of service providers which would slowly return as consumers became aware of the loss of access to service and requested the barring be lifted. Barring would also remove access to a simple, convenient, secure and almost universally available method of enabling low priced transactions to be performed without resorting to complicated and less universal systems such as credit cards. Barring particularly, default barring in sufficient numbers of customers would inhibit the development of useful communications technologies with general benefit to society. The availability of opt in barring was a more balanced approach which returns the decision to remove access to services with the users.

Option 2 – ‘Opt in’ barring of premium SMS and MMS services

63.  The mobile network operators, mobile carriage service providers and the industry members including aggregators and content providers represented in the industry submission supported opt in barring as outlined in option 2. They considered that opt in barring would further strengthen the existing suite of consumer safeguards that are in place. They drew attention to the effectiveness of these measures as demonstrated by the reduction in complaints to the TIO.

64.  Consumer groups, ACCAN and CHOICE, two consumers, the TIO, and the ACCC argued that the weakness with the opt-in barring option is that consumers will not apply for opt in barring because they will not be aware of it. Any opt in barring approach to barring premium SMS and MMS services would be heavily dependent  upon consumer awareness. Default barring does not rely upon consumer awareness as it is automatically applied to all services.

Option 3 – ‘Default barring’ of premium SMS and MMS services

65.  The mobile network operators, mobile carriage service providers and the industry members including aggregators and content providers represented in the industry submission considered that default barring would have negative consequences for legitimate, sought after and compliant entertainment based services as well as the wider range of valuable community services such as charity campaigns, information services, public transport timetables, etc. It also noted that default barring would undermine the substantial efforts made by industry to develop and implement the range of successful new consumer safeguards.

66.  A content supplier providing a reverse charge call service enabling children to contact their parents indicated that it expected that its business would no longer be viable under default barring. Additionally, default barring would inconvenience consumers of premium SMS or MMS services and generate large numbers of calls from angry or confused customers having to remove barring automatically applied to all customers.

67.  Consumer groups and consumers strongly advocated the adoption of option 3 claiming that default barring was necessary to protect consumers and vulnerable people including minors from unsolicited premium SMS services. ACCAN argued that default barring would address sky-rocketing consumer complaints about premium SMS services and was not just complementary to the Mobile Premium Services Code but a fundamental element to ensure the improved safety of minors from premium SMS services.

68.  The NEDA considered default barring would be preferred because carriage service providers would be more likely to make their customers aware how to remove default barring than to make them aware of the capability to opt in to barring when purchasing a mobile phone. CHOICE supported default barring based upon the increasing number of complaints about premium SMS services as documented in the TIO’s 2009 annual report. However, if default barring is not available the availability of barring should be adequately promoted including at the point of sale of prepaid services and for consumers who hold an account on behalf of a minor.

69.  The TIO supported the introduction of a capability to bar premium SMS services but of the two barring options it considered that default barring offered the greatest level of protection for persons who may unwittingly enter into a subscription service. It noted that complaints about premium SMS services that had been received or charged without being requested by the consumer or without informed consent continue to represent a significant proportion of all premium SMS complaints. The opt in model would only be effective to the extent that the account holder was made fully aware that he/she could request barring or that they even knew what premium SMS services are.

70.  The ACCC noted that it was still receiving complaints about unsolicited premium SMS subscription services despite the requirement in the Mobile Premium Services Code for double confirmation of a request for a service from the customer. It supported the default barring model offered by option 3 as the account holder would need to give consent before access to such services was accessible from that mobile phone. However, it considered that option 2 was a weaker option and if option 2 was accepted that service providers should be required to advise existing and new customers of the availability of barring when they sign up for a mobile phone, on customer bills, in the terms and conditions and on websites and each time the customer makes a complaint to their mobile phone company.

Conclusion and Recommended Option

71.  Consideration has been given to three options to address the current problems experienced by mobile phone customers with premium SMS and MMS services.

72.  Option 1 would involve no change to the existing regulatory arrangements and for this reason does not meet the stated objectives, does nothing to address the number of complaints about unauthorised premium SMS and MMS services and would ignore the calls from consumers and the Minister for Broadband, Communications and the Digital Economy for consumers to have the option of barring all premium SMS and MMS services. An indication of the cost per complaint for option 1 is $338.01.

73.  Option 2 provides for all mobile carriage service providers to implement a premium SMS and MMS barring capability which would permit an account holder to request barring. Account holders who presently have access to premium SMS and MMS services would continue to have uninterrupted access to such services until such time as they choose to request barring. Customers would be made aware of the availability of barring of all premium SMS and MMS services through the provision of information to them from their mobile phone provider. An indication of the cost per complaint for option 2 is $1,286.91.

74.  Option 3 also requires all mobile carriage service providers to implement a premium SMS and MMS barring capability. However, all mobile phone accounts would be default barred until such time as the customer requested the bar be removed. The ACMA is mindful that the total number of complaints about premium SMS and MMS services have decreased following the implementation of the consumer safeguards in MPS Code and the compliance and enforcement activities of mobile network operators and the ACMA. Default barring is not considered commensurate with the scale of problems with premium SMS and MMS services currently being experienced by consumers and runs counter to consumer expectations of having easy access to telecommunications services. For these reasons option 3 is also not recommended. An indication of the cost per complaint for option 3 is $1,742.05.

75.  It is recommended that the ACMA proceed with option 2. Opt in barring is part of the package of measures introduced to address complaints about premium SMS and MMS services, is consistent with the expectations of premium SMS and MMS service customers regarding access to services, and will minimise risks of mobile users losing access to desired services and any collateral damage to services fulfilling socially and commercially useful purposes. Accordingly, option 2 will meet all the stated objectives by providing all mobile phone account holders with the option of barring all premium SMS and MMS services. The impact of this requirement will not be as expensive on the mobile industry and is unlikely to have the same impact on the content industry as default barring.

76.  The community is expected to receive the greatest net benefit from option 2. Customers will be permitted to determine for themselves whether they require barring of all premium SMS and MMS services and should they opt for barring will not be charged for the availability of premium SMS and MMS barring and will not be disadvantaged by loosing access to any services because they have requesting barring. Those customers wanting the protections afforded by barring will be able to opt in to barring of all premium SMS and MMS services without causing inconvenience and disruption to those customers who currently use premium SMS and MMS services. Further the range and availability of premium SMS and MMS services offerings will not be diminished by a reduction in potential customers expected with default barring.

Implementation and Review

77.  The ACMA proposes to make the Telecommunications Service Provider (Mobile Premium Services) Determination 2010 (No.1) as outlined in option 2.

78.  The ACMA monitors complaints data about mobile premium services including complaints about unauthorised mobile premium services and the numbers of mobile phone customers who have requested barring. The Determination will be reviewed within 18 months of its commencement to ensure that it is still relevant to the needs of mobile phone account holders.


Tables 1& 2: Summary of impact of options

 

Table 1 below contains the costs and impacts on the relevant stakeholders for option 2 – ‘Opt in barring’ of all premium SMS/MMS services

 

 

PARTIES

 

SAFEGUARDS & COSTS

 

IMPACT

Mobile network operators

(3 mobile network operators)

Provide a capability for barring all premium SMS/MMS services for their customers and their resellers with no loss of access to services other than those barred. The cost of developing a barring capability will need to be met by mobile network operators. Provide user friendly methods of making a request for barring and provide information to customers about barring.

 

Refer to the table for option 2 costs.

Telstra currently provides barring of all premium SMS/MMS services for its customers and resellers and will not need to make any changes to its network.

Optus will need to develop a barring capability for all premium SMS/MMS services for its customers and its resellers.

Vodafone Hutchison Australia will need to develop a barring capability for all premium SMS/MMS services for its customers and its resellers.

Mobile carriage service providers

(approximately 30)

Mobile carriage service providers that are not network operators (mobile resellers) who have not contracted with Telstra will need to contribute to the cost of barring, develop new procedures for processing requests to implement or remove premium SMS/MMS barring. It will also need to provide information on barring to their customers.

Refer to the table for option 2 costs.

Resellers of Telstra’s network will not need to take any action as they have access to an interface to implement barring or removal of barring requests.

Resellers of Optus and Vodafone Hutchison Australia will need to establish an interface and to train staff in the procedures and modify current customer information.

Mobile content providers

20 Aggregators 750+ content developers

Mobile content providers are not expected to incur any cost for the development of a barring capability. Presently Telstra does not impose such a cost for it’s barring capability.

 

Consumers who do not already have barring of all premium SMS and MMS services will be given information on barring and may ask for barring of all premium SMS/MMS services. The impact of opt in barring on the demand for premium SMS and MMS services is not known.

Mobile phone customers

(approximately 24.3 million)

Customers of prepaid and post paid mobile phones will be given information that they can request barring of all premium SMS and MMS services and if they request barring will have their service barred at no cost and within 1 business day and will not cease receiving, commence receiving or fail to receive any other service as a consequence of the request.

Telstra customers or customers of resellers using the Telstra network will experience no change.

 

 

Table 2 below contains the costs and impacts on the relevant stakeholders for option 3 – ‘Default barring’ of all premium SMS/MMS services

 

 

PARTIES

 

SAFEGUARDS & COSTS

 

IMPACT

Mobile network operators

(3 mobile network operators)

Provide a capability which will default bar all mobile phone customers for all premium SMS/MMS services and their resellers with no loss of access to services other than those barred. Provide information to customers about default barring.

The cost of developing a barring capability will need to be met by mobile network operators.

Refer to the table for option 3 costs.

Telstra will need to modify its existing ‘opt in barring’ capability to default bar its mobile phone customers and those of its resellers customers.

Optus will need to develop the capability to default bar its mobile phone customers and the customers of its resellers.

Vodafone Hutchison Australia will need to develop a default bar capability for its customers on its network for resellers on the Vodafone network. No resellers are operating on the Hutchison network.

Mobile carriage service providers

(approximately 30)

All mobile carriage service providers will need to develop and have processes in place to deal with requests from customers to remove ‘default barring’. Also they will need to provide information to customers about default barring.

 Refer to the table for option 3 costs.

Resellers of Telstra, Optus and Vodafone Hutchison Australia will need to establish an interface and to train staff in the procedures and modify current customer information to deal with requests from customers for removing ‘default barring’.

Mobile content providers

20 aggregators

750+ content developers

Mobile content providers are not expected to incur any cost for the development of a default barring capability.

 

Mobile content providers could expect to have a substantial reduction in customers and potential customers as all mobile phones are to be default barred for all premium SMS and MMS services. Some content service providers may chose to discontinue providing services.

Mobile phone customers

(approximately 24.3 million)

All customers of prepaid and post paid mobile phones on the Telstra, Optus and Vodafone Hutchison networks and their resellers will have their customers default barred at no cost and must be able to reapply barring where it has been removed.  Customers will receive information about default barring and how to have it removed.

All mobile phone customers both network operator and reseller customers will be default barred premium for all SMS/MMS services unless they request access to these services.