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With traditional advertising revenue streams on the downturn in recent years, it is no wonder that participation television, and the cash cow that was premium rate telephone services (PRS), was once heralded as the new business model for modern broadcasting. Unfortunately for broadcasters, the British public were stopped mid-reach for the red button when premium rate services hit the headlines in 2007 with allegations of unfair competitions and audience deception. Both Ofcom, in respect of broadcasting, and PhonepayPlus (“PP+”) (formerly ICSTIS) for the telecoms industry, recognised the need to respond to the media furore with a full-scale inquiry into the phone-in TV practice and for measures to be taken to protect consumers and rebuild their confidence in the industry.
Imposing penalties
In the subsequent months Ofcom and PP+ levied some heavy duty fines on broadcasters and service providers alike for breaches of the Ofcom Broadcasting Code and the PP+ Code of Practice. Channel 4 was badly hit, receiving a £1 million fine from Ofcom for failing to take responsibility in respect of the You Say We Pay competition on Richard and Judy and a further £500,000 fine for similar breaches in relation to staggered selection of competition finalists on Deal or No Deal. In a similar vein, PP+ fined Eckoh UK, Channel 4’s service provider, £150,000 for breaches by its staff who had submitted the winners shortlist to Cactus (the production company) up to twenty minutes prior to the official closing of the competition lines.
Channel 4 responded to its fines by launching an inquiry into its phone-in TV practice, revealing two strands of misconduct: the early selection and the staggered selection of competition finalists. These breaches were found to be in breach of Rule 2.10 (“competitions should be conducted fairly, prizes should be described accurately and rules should be clear and appropriately made known”) and Rule 10.10 ("any use of premium rate numbers must comply with the code of practice issued by ICSTIS") of the Broadcasting Code. Ofcom voiced concerns that the breaches demonstrated a “serious breakdown of trust” between Channel 4 and its audience and criticised the broadcaster’s “lack of oversight” and slow move to take action. Despite the hefty fines however, Channel 4’s expedient and robust response to the situation, immediately taking the programmes off air, commissioning an inquiry into its PRS practices and setting up an extensive refund scheme, helped mitigate the reputational impact of the imposed fines. Ofcom have gone on record saying that the broadcaster’s behaviour went some way to helping them avoid incurring additional, higher penalties.
Background
In March 2007, Ofcom commissioned Richard Ayre to launch an inquiry into the use of PRS in television programmes. Broadcast PRS is governed by a co-regulatory regime, documented in the form of the Ofcom and PP+ Codes. The Report revealed a number of compliance failures and highlighted as a contributing factor the lack of an effective regulatory system and sufficient clarity between the roles of Ofcom and PP+. It also examined the various roles within the phone-in TV value chain: the broadcasters, service providers and producers and made certain recommendations as to how relationships between them, and between them and the consumer, could be developed and improved.
The Report acknowledged that service providers had contributed to the failures in compliance but attributed primary liability to the broadcasters, who were expressly criticised for not “engaging” with the telephony involved in PRS and for not monitoring its use in an appropriate way. The Report called for greater clarity and transparency between the key players in the industry and for broadcasters to apply more forethought from the outset of proceedings, to ensure that even a show’s format is geared towards compliance. According to the Report, the onus is firmly placed on the broadcaster to audit compliance, or to procure a third party to do so, subscribing to the principle that, if broadcasters want to generate the high levels of revenue available from the use of PRS (Channel 4, for example, made over £10M from 2001-2007) they should also be held accountable to the participating public for such use.
PP+ response
In addition to Ofcom’s investigation, PP+ published a consultation paper in May 2007 which outlined a number of conditions that service providers intending to supply PRS services to broadcasters should be required to meet. On 19 February 2008, PP+ published its Prior Permissions Notice for the attention of all service providers operating Premium Rate Services used in Television Broadcasting. This Notice states that service providers are, as of 18 March 2008, required to obtain prior written permission from PP+ before they can provide PRS to broadcasters. Some categories of service, such as live chat and call TV quiz services, are exempt on the basis that prior permission requirements are already in place.
The Notice defines broadcast PRS as: “Premium rate services which are promoted on television (other than by commercial advertising), however transmitted, and which provide a facility for interaction for the provision of information whether in the form of votes entries bids or otherwise howsoever.” This definition is drafted widely in order to capture as many PRS products as possible and to cover any future developments in technology. PP+ have said that they will construe any PRS product which is promoted on television at a premium rate as requiring prior permission. The Notice annexes the conditions recommended in the PP+ consultation (with the exception of costs, which will be picked up in forthcoming Ofcom guidance).
The first condition outlined in the annex, “Connectivity and capacity”, obliges service providers to ensure that all valid responses sent in by viewers are available in sufficient time to be fully considered and reflected in any outcome of an event. Equally, where service providers have outsourced the handling of “peak traffic” to third parties there is an obligation for the responses to be treated in the same way as those received by the service provider. The second condition: “Conduct”, goes to the on-screen relationship with the viewers - calls and SMS entries must not be charged or counted before lines are open or after they are closed and phonelines must be closed when programmes are repeated. Winning entrants for competitions must be randomly selected and the broadcasters should have in place customer service arrangements for handling enquiries. “Coherence”, the third condition, covers the “behind the screens” arrangements, requiring service providers to have clear contractual arrangements in place with any third parties, which clearly delineated responsibilities in the value chain. All staff are to be made aware of the PP+ Code and be suitably trained, and appropriate back-up procedures should be available to deal with problems that are capable of being anticipated.
Ofcom statement
Showing a united front, Ofcom published a statement on 19 February 2008 entitled: “Strengthening consumer protection in participation television”. This statement lends support to Richard Ayre’s Report and confirms that Ofcom will be implementing many of the recommendations, particularly with regard to broadcasters’ accountability for use of PRS. Ofcom have proposed that the TV broadcast licence be amended so that broadcasters, as the outward face of PRS to the public, will now be fully on the hook for any “communication with the public where the mechanism of communication features in the programmes”. The regulator hopes that this will go some way to reassure consumers by establishing a more transparent chain or responsibility and to restore faith in the industry as a whole.
From a consumer’s perspective, then, the liability ladder is now much clearer. Broadcasters will be responsible not only for PRS, but for all forms of telephony, email and other internet-based communications. Ofcom are also imposing a requirement to introduce third party verification where PRS is used for competitions or voting schemes. The new regulations are intended to take effect in two stages: broadcasters will be expected to take general responsibility for communications to viewers immediately but will have a grace period of three months before the third party audit aspect is to be enforced. Ofcom have said that it will carry out “spot checks” for the first year or so. For now, radio broadcasting licences will remain unchanged but Ofcom will be consulting on extending the provisions to radios later this year. Ofcom also intends to publish new guidance for broadcasters with regard to the new licence conditions, which will address the need for clear pricing information during television programmes that use PRS and applicable requirements of the Broadcasting Code.
Conclusions
From a legal perspective, the PP+ regulation may have more impact than the licence conditions imposed by Ofcom, as broadcasters will no doubt be seeking to tighten up contracts with their PRS service providers, to ensure that they have the ability to audit and exert control over the PRS system being provided and that copper-bottomed indemnities are put in place for breaches that are deemed outside of the broadcasters’ control. Internally, broadcasters will need to review staff procedures and focus on improved awareness, communication and training.
Ofcom’s proposed amendment to the broadcast licence to hold broadcasters directly accountable may not, in real terms, have a great deal of practical effect, as broadcasters are already directly responsible for ensuring any use of PRS numbers complies with the PP+ Code under Rule 10.10 of the Broadcasting Code. It is hoped, however the new regulation will boost consumers’ confidence and be a first step to the restoration of public trust in broadcast PRS.
Emma Way
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