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The Truth About Premium Rate Calls: A Case Study

By: Chris Hogan MSc - Updated: 25 Aug 2012 | comments*Discuss
 
Premium Rate Premium Rate Numbers

Premium rate phone calls were really a bit of a mystery until relatively recently. Although they have been around in the UK since 1985 it wasn't until television shows began to make use of them that the general public began to take notice. But what made them so useful to television companies and why did it all go wrong?

From 1992 until 2003 Gerry Docker* was the managing director of a firm that ran premium rate telephone systems. He took some time out recently to explain to us how the system worked and why he wasn't surprised by the recent scandals involving the use of premium rate numbers by television shows.

How Premium Rate Works

"The premium rate industry is based on pyramids of interested parties taking a cut of the call charged to the customer at the end of the phone," he explained, "with BT at the top of the chain and people like ourselves in the middle. So for every £1.50 call that was made, for example, something like 19p would be taken by BT, and anything from 25p to 70p taken by the person actually selling the service, whatever it was. Of course the government would be in there too, taking a healthy chunk in the form of VAT."

Recorded information services were the first to start up. People realised that if they had useful information that people wanted they could tape it all and put it on answerphones at the end of premium rate numbers.

Horoscopes as an Example

A good example of how this worked is with newspaper horoscopes. Up until the end of the 80s newspapers would run a full horoscope. Then some newspapers started to cut down the amount of information given in the newspaper and publishing an 0898 (as it was then) number for people who wanted more information.

For the people writing the horoscopes this lead to a massive jump in earnings. The revenue from the numbers called is split between the operators of the premium rate numbers, the newspaper and the person writing the horoscopes. In 2001 over three hundred million pounds was taken in premium rate charges.

Enter the Television Shows

Less savoury services jumped on the bandwagon very quickly. "Sex lines couldn’t have come into existence without premium rate numbers," said Gerry Docker, "that's what made it all possible. But when television shows started jumping on the bandwagon it gave a new air of respectability to premium rate numbers.

"'Who Wants to be a Millionaire' was the first mainstream television format to be designed around premium rate revenues," said Mr Docker, "and for the first few years the earnings were phenomenal. Suddenly almost every television program was in on the act."

How did it All Turn Sour?

"The industry always took advantage of the break-up of BT's monopoly on premium rate numbers", he said "at the time that I was involved the supposed regulation of premium rate numbers was by ICSTIS (it is now a part of Ofcom) and they didn’t really understand the business, nor did they have the clout to get anything done about the serial offenders. It was too easy for companies to be set up one day, completely flaunt the rules, then do a disappearing act once ICSTIS got round to doing anything about it.

"The real problem with the recent television show scandals was a lack of control and management. The companies producing the television shows didn’t really understand how the system works and when things went wrong it was easier for employees of companies like ours to pull the wool over their eyes rather than admit mistakes and work out ways of resolving problems. Not that we were doing any telephone show work," he laughed.

Is Cheating Necessary?

Did that mean that his company was operating fast and loose, even if it wasn't operating numbers for television shows?

"No, we actually did everything we could to stay legal," he claimed, "we had quite a few employees and we were making enough profit from legal operations not to bother with anything under the table. We were more interested growing the company and having a stable environment for us and the employees we were responsible for."

"I think things will settle down now," he concluded, "the production companies are more aware of the pitfalls and the cowboy premium rate operators are being winkled out."

* name changed

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