Oftel faces action after chaos of opening up directory inquiries

The Department of Trade and Industry is understood to be conducting a review of Oftel, the telecommunications watchdog, after the chaos of the deregulation of directory inquiries. "You would expect us to look into what has happened," a spokesman said.

After a run-in of more than eight months, on 24 August BT's 192 and other directory inquiry services were shut down, leaving the market open to competition from two dozen companies, although 80 have been allocated numbers. Every franchisee has had to take a six-digit number beginning 118.

The most heavily advertised, the US-owned The Number, has 118 118 and has run a campaign featuring two mustachioed runners and spectators shouting at them: "We've got your number!"

This slogan has achieved the cult status of becoming a school playground game, and has persuaded thousands of adults to ignore the cost. It is one of the most expensive services, charging 49p per connection plus 9p a minute.

But although the campaign has earned it an estimated 50 per cent of the market, The Number has been a target for the most severe criticism. This week it had to sack 30 people from its call centre for cutting callers off or giving them wrong numbers to qualify for bonuses rewarding short calls. William Ostrom, communications director for The Number, said that this had been caused by a mis-interpretation of the bonus system, which was designed to reward call accuracy and service standards as well as call volume.

But although the new system had been run in tandem with the old since last December, as soon as 192 ended other companies began to fall by the wayside. Conduit, which has 118 888, almost immediately laid off 250 staff because its calls were so far below target despite an extensive advertising campaign aggressive enough to earn a rap on the knuckles from Oftel.

By mid-September, BT, which has 118 500, said the total number of calls had fallen by half. Last year, people paid £280m to make 700 million inquiries. But since August, they have struggled to cope with the confusing proliferation of services and charge structures. Some are charging by the call, others by the minute, others make a connection charge to the requested number. Orange charges two-and-a-half times more if you should call its 118 000 number from a land line. The 192 service cost a flat 40p a call, down from 50p after Oftel intervened.

This week, a beleaguered Caroline Wallace, Oftel's directory inquiries project manager, was reduced to claiming other countries had had similar "teething problems", as she put it. She added: "We take the concerns of the public very, very seriously. But public awareness of the new services is very high."

In December, David Taylor, Orange's commercial director, warned: "With more than 20 companies competing in this space offering a range of services, there is a danger of wide customer confusion."

Ms Wallace was left to take the flak. But last December, when the new numbers began to operate, Oftel's director general, David Edmonds, was happy to front the announcement. He said: "For the first time, consumers will have a choice of directory inquiries services at a range of prices." Oftel predicted the original entrants to the market would be whittled down to 10 or so, but gave no indication it expected a bloodbath.

But Oftel has reluctantly been forced into making "mystery shopping" calls to check whether the rival operations are conforming to minimum quality standards. One common trick has been not to give refunds to customers with valid complaints unless they ask for one. This has prompted an early change in the rules to make them do so. "This is a big change in the regulations," Mr Ostrom said. "We will comply with it, but we want to see it applied fairly and across the board by the regulator."

Another big source of unhappiness is the charge made for putting a caller through to the number they ask for. The Oftel rules clearly state the price of the so-called call completion service must be given to you if you choose it. But anecdotal evidence suggests this option is often offered casually as an add-on service without any price being mentioned. Only later do customers discover that the call has been charged at a premium rate.