Now that BT call packages and now a couple on Virgin don't charge for 0845 calls who pays the companies using them the 2p or more a minute they are contracted to receive?

I wasn't meaning the telephone companies as they do raise other prices when some go down, but the companies who own 0845 numbers and bought them on the expectation that every call would net them a few p. Unless BT pay them anyway and get the money from higher charges for daytime calls and monthly rental etc, which is robbing Peter to pay Paul via Brian and some of his neighbours, and possibly even an offshore account? Complex to say the least.

I've asked this before but while I'm on that track when the call went up to ban 0870 numbers, before it even happened all firms did was switch to 0844 (which cost even more on Virgin) no doubt at great cost to change the switchboards, letterheads and websites etc, continue to charge people to call them and the customers gain diddly-squat. It's no different from telling thieves they can only steal on Mondays, they're doing exactly the same thing so why simply allow firms to keep switching numbers, either they could stick with 0870 and accept the government are happy to allow it, or say it's immoral and obnoxious and stop it. Just letting them use another number to do the same thing is the sort of thing that ought to only happen in bad jokes.

And of course there are still 0870 numbers so we are no further than we were a few years ago when this debate began in earnest.

Looking at this simply from the point of view of what callers pay leads to classic misinterpretations of the situation.

We have a free market in telecommunications services where, not only can we subscribe to services from any one number of operators, but that we can call all customers connected to all other operators.

To help understand what’s going on, picture the receiver’s provider first. Customers of all other telephone companies must be able to call this party. What happens is that they act as retailers of calls for the receiver’s telco.

Let’s use an example which you’re probably familiar with. Take your mobile phone operator (in this example I’ll refer to Vodafone). Customers connected to landline and other mobile operators must be able ring you and in order to do that they must connect to Vodafone’s network. Thus, other telephone companies act as retailers for calls to Vodafone customers in just the same way as the supermarkets act as retailers for Kelloggs’ products.

In this example, I talked about your mobile provider. The same is true of any fixed or mobile provider, so you could substitute “Vodafone” with your landline provider.

In order for these call retailers (originating telephone companies) to be able to connect a call to the receiver’s provider, they must pay them a termination charge (usually ‘per minute’). This is like the “wholesale” cost of the call. Termination charges vary by number type (e.g. 0845, 0844).

So the termination payments are outgoings on a call provider’s balance sheet and its call charges are incomings. Just because retail call charges have been reduced doesn’t mean that termination payments have been.

Indeed, if call retailers could reduce termination payments so as to reduce the call charges, (whilst not reducing retentions) clearly they would do so. But to receivers’ telcos, termination charges are income, so they aren’t going to reduce them because there’s no benefit to them for doing so.

How does this relate to numbers that carry a premium to the user?

The termination charges for 0845, 0844/3, 0871/2/3 and 09 numbers are greater than those associated with “normal” 01/02/03 numbers. These are the premiums passed to receivers.

The effects on caller’s and receiver’s providers are as follows:

• Caller’s provider incurs greater outgoing, so there is a pressure for call charges to be higher; or some call providers choose to offset the loss in retention elsewhere (more on that below under “The position of BT”).
• Receiver’s provider gets a greater income, so there is pressure for it to charge its client (the receiver) less. And in some cases they give cashback (revenue payments) to their customer.

So, to answer the question posed in the first posting; where a caller’s provider chooses to include 0845 calls in packages, it still incurs the enhanced termination charges just as before, making no change to the receiver’s subsidy. Inclusive 0845 calls are like a loss leader. Thus, it’s fair to say that call providers that do this will be likely to recoup their costs from customers in general.

The position of BT (as call retailer)

With BT (when it acts as the originator), its retention on 0845, 0844/3, 0871/2/3 and 09 calls is limited to a tiny tiny amount (perhaps negligible for the purposes of our discussion) by the “NTS Condition” regulation. So BT’s retail call charges are pretty much equal to the termination charges it incurs.

Thus, the cost (loss of income less outgoings) to it to include these numbers in packages is much lower than with other providers. BT’s loss of income is simply the termination payments it makes (and the tiny tiny regulated retention), whereas other providers would loose the termination payments plus their retentions.

Due to BT’s abnormally low call rates for these numbers, other providers (notably TalkTalk) copy BT (due to competitive pressures) by offsetting their costs elsewhere. That is, TalkTalk chooses to include 0845 calls in packages, thus forgoing retention on these calls as well as revenue to cover termination payments.

Providers like Virgin Media and the mobile operators all charge more for these numbers.

What about 0870 numbers?

You may have noticed that up to press, I’ve not talked about 0870 numbers.

This is because in August 2009 the termination charges for them were brought into line with normal 01/02/03 numbers. Thus, receivers now get no benefit from their use.

But, unlike with 03 numbers, there is no rule that says retail prices must be the same as geographic calls.

Many call providers choose to charge their customers premiums to ring them. In such cases it is the originating telco which the caller subscribes to that is keeping the inflated charges.

This effectively kills the 0870 range, particularly with respect to new users. Many callers pay more to ring with no benefit to number users (receivers). If they don’t wish to seek benefit (but use non-geographic numbers), then they can use 03 numbers as no caller will pay more.


Please forgive my simple economics (and perhaps sometimes incorrect) language here; my understanding of economics is much less than that of telecoms! I hope that the explanation gives an insight as to the function and interaction of the different parties during calls.