CWU RESEARCH
Directory Enquiries in the UK - The Opening of the Market to Competition
Introduction
In December 2002, the telecommunications regulator Oftel (now Ofcom), opened up the UK
directory enquiries market to competition. BT’s original domestic 192 and international 153
services were withdrawn on August 24th 2003, removing BT’s long established directory
enquiries monopoly. Oftel claimed that breaking up the BT directory enquiries monopoly
would bring down prices, improve services and increase customer choice. This has not been
the case. Instead, prices have risen, usage has declined and consumers are confused.
Customers choose service providers because of advertising or because they have memorable
numbers, not on the basis of price or quality of service.
Market size and major operators
Britain’s directory enquiry market is worth an estimated £300m. This prompted a large
number of service providers to enter the market when BT’s monopoly was removed. It is
difficult to assess how many directory enquiry services are currently on the market as no
definitive record is kept. However, there are believed to be over 200 numbers in operation
run by 72 different companies. Despite this large number of service providers, after one year
of competition, 80 per cent of the market was dominated by just two: the Number (118118)
and BT (118500).
At the time of market opening Oftel recognised the potential value of memorable numbers.
Believing it did not have the authority to invite financial bids from prospective service
providers, Oftel distributed the new 188 pre-fixed numbers via a lottery. In refusing to
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auction the new numbers, Oftel gave away a public resource worth millions of pounds. The
company Leaf Telecom, which won the right to use the memorable 118118 number, made no
attempt to use the number and sold it on straight away, making a profit of £2m.
Price
Oftel opened the directory enquiries market to competition claiming that breaking up BT’s
monopoly would bring down prices. However, a 2005 National Audit Office report1 has
found that, though there are now more services available, most consumers are paying more
for them. Only 25 per cent of services are cheaper than the old 192 service.
The prices charged for directory enquiry services are complicated and difficult to compare.
Some service providers charge a flat rate, while others charge a connection fee and a per
minute rate. Therefore, the cheapest service provider will often depend on the nature of the
enquiry, whether it is simple or complicated. Prices also depend on whether the call is made
from a landline or a mobile phone. Mobile phone operators often charge huge additional fees
for directory enquiries calls, dramatically increasing costs to consumers and making the
advertised figures inaccurate and misleading. Table 1 below shows that, depending on the
service provider, prices can vary by up to 900 per cent. There have also been problems with
hidden charges. A common complaint voiced by customers is that operators fail to specify
that a premium rate applies for connecting calls.
Table 1: The cost of calling 118, August 2004
Cheapest (£) Most expensive (£) Range (%)
45 second call
Landline 0.27 1.73 540
Mobile 0.25 2.50 900
Five minute call*
Landline 0.55 4.00 625
Mobile 1.25 12.50 900
*Five minute call used to represent the cost of an enquiry which was connected to the end number.
Source: National Audit Office
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“Directory Enquiries From 192 to 118” (National Audit Office, March 2005)
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It is difficult for consumers to obtain and compare accurate information on prices (no official
source of comparison is provided by the regulator). Consequently, price based choices are
harder to make and so there has been less of a downward pressure on prices from competition
than Oftel expected. Moreover, a 2005 Ofcom report2 on the directory enquiries market found
that neither price nor accuracy were significant motivating factors for the choice of a service
provider. Each were cited as a main reason for service provider choice by only 3 and 2 per
cent of people respectively. In addition, as noted by the NAO, given that the average
residential caller uses directory enquiries less than once a month, price is not as important a
consideration as had been anticipated.
Large business and public sector users were expected to be big gainers from the introduction
of competition as they are able to negotiate prices directly with the service providers. Again,
this hasn’t been the case; a 2004 survey from the Communications Management Association
found that only 17 per cent of businesses considered they had benefited from the introduction
of a competitive market.
Choice
Oftel intended the opening up of the directory enquiries market to improve customer choice.
There is no doubt that there is now more choice, yet few people are taking advantage of it and
the market is dominated by just two service providers. The information necessary to make an
informed choice is difficult to obtain and not provided by the regulator. Meanwhile,
advertising was the most cited reason for choosing a directory enquiries service (mentioned
by 24 per cent of people questioned by Ofcom). Ease of recalling the number and the
perception that the number was the BT service were each cited by 17 per cent of people as the
main reason for their choice.
Seven out of ten consumers claim they are confused by the level of choice in the market, with
two-thirds agreeing that choice was of no use to them as they always used the same number.
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“Evaluation of Directory Enquiry Services” (Ofcom / ICTSIS, March 2005)
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Choice has been further impeded by the fact that even if people identify a good value service
there is no guarantee they will be able to dial it. BT is obliged, under regulator Ofcom’s
rules, to offer access to every 118 operator. Some other service providers block access to any
directory enquiry service other than their own.
Choice has brought few of the intended benefits to customers. Given the nature of the service
and the market for directory enquiries, consumers have not been able to exercise a
meaningful choice and consequently there has not been the expected downward pressure on
price.
Service Quality
Ofcom’s 2005 report found that the use of directory enquiry services has fallen significantly
in the last three years. Between May 2002 and November 2004 self-reported usage fell from
69 per cent to 48 per cent.
Nine out of 10 directory enquiry customers use only one number, 41 per cent use The
Number’s 118118 service and 26 per cent use BT’s 118500 service. Between April and
November 2004, the accuracy of BT’s service declined by 10 per cent to 83 per cent.
However, this is still significantly better than the November 2003 market average of 62 per
cent. Meanwhile, between April and November 2004, The Number’s 118118 service
improved by 4 per cent to reach 94 per cent accuracy. Nevertheless, Ofcom’s survey shows
landline users are more satisfied with BT’s service (73%) than with The Number’s (62%).
Ofcom’s survey went on to find that only one in ten people think that directory enquiry
services have improved since the market was opened to competition, with equal numbers
(four in ten) believing that the service is now either worse or the same as before. We cannot
compare the current service with that of the old BT 192 service as robust quality of service
data was not collected prior to the introduction of competition.
Competition was also intended to bring new services to customers. This has been the case
with the introduction of text-back services to mobile phones, direct connection services and
the availability of service and area specific number searches.
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Summary
The introduction of competition into the directory enquiry market has meant customers now
generally pay more and use the service less. It has provided few of the improvements in cost
and effective choice that Oftel had anticipated. Quality of service is variable and, due to lack
of recorded information, cannot be compared with pre-competition service standards.
If competition in directory enquiries is to benefit consumers it must be easy and worthwhile
for them to compare price and quality, and it is the responsibility of Ofcom to ensure this
happens. Without positive intervention from the regulator, directory enquiries will be the
latest example of a valued public service that has been worsened, with increased cost and no
definite benefit to the public.
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Directory Enquiries 118 Numbers
Table 2: Main UK directory enquiry services*
Number Name
118 888 Conduit Welsh
118 404 BT (Welsh)
118 355 118 866 Ltd
118 453 Freedom
118 321 Tesco
118 800 Directory Enquiries UK
118 118 The Number
118 848 Conduit
118 288 Kingston
118 811 The Number
118 499 Share Charity
118 119 192.com
118 429 GAY
118 114 Opal
118 180 Telewest
118 888 Conduit
118 212 Maureen
118 747 UK Directory Assistance
118 511 British Gas
118 878 NTL
118 099 Cable & Wireless
118 866 11 88 66 Ltd.
118 111 One.tel
118 247 Yell
118 080 Simunix
118 877 Telco Global
118 770 Telewest
118 707 BT
118 500 BT
118 000 Orange
*30 services surveyed by OFCOM, November 2004
Source: OFCOM
Customers with internet access can get their numbers online, and free, at:
www.bt.com/directory-enquiries
Bill Taylor & Natalie Jacottet
CWU Research
23rd June 2005
RD05/06/179
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