ICSTIS, the industry regulator of Premium Rate Services (PRS), published yesterday a proposed �emergency amendment� to its Code of Practice (the Code) aimed at reducing phone scams using PRS. The proposed amendment, if indeed implemented, will impose on Network Operators an obligation not to make payments to service providers providing PRS over their network for at least 30 days after the PRS calls have been made.

The way PRS works in practice is that a caller to a PRS number pays his telephone company (the originating network) for the service, via his/her phone bill. The telephone company then pays the Network Operator (the operator over which network the PRS is provided) which then makes outpayments to the PRS provider comprising the revenues collected from callers less the originating network�s cut, the Network Operator�s cut and the fees that the PRS provider is required to contribute for the funding of ICSTIS.

In its April consultation on the draft of this proposed amendment to the Code, ICSTIS noted that it has gathered clear evidence that some Network Operators are releasing monies to PRS providers every few days or on a weekly basis in relation to calls made to their services, whilst the Network Operators themselves are only paid by the originating network on a monthly basis and the originating network is only paid by the callers on a monthly or quarterly basis. This payment structure enables fraudsters to run various scams aimed at inflating the callers� phone bills (e.g. by unknowingly connecting them to premium rate based automatic internet diallers) and to simply disappear after receiving payment from the Network Operator. ICSTIS noted that in the first quarter of 2005 alone, this has happened on 17 occasions, with one Network Operator paying over �1.5 million to various PRS providers while ICSTIS was in the process of investigating breaches of the Code.

The proposed provision is aimed at overcoming this problem by granting ICSTIS sufficient time to investigate whether there has been a breach of its Code and, where necessary, to instruct the Network Operator not to make outpayments to the PRS provider until ICSTIS� investigation is over. Where an ICSTIS investigation determines that a breach of the Code has indeed occurred, the Network Operator may be directed to pay ICSTIS the withheld monies and the Network Operator shall itself be liable for these sums if it has failed to withhold such monies as required.

This proposed provision is based on an earlier OFCOM recommendation in its December 2004 review of The Regulation of Premium Rate Services, though it still requires OFCOM�s official stamp of approval before it comes into force.

Amit Rainhartz