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DTI to crack down on cheap phone firms

Unlicensed operators that lease lines and sell cut-price overseas calls are to be subject to investigation, reports Paul Rodgers
THE Department of Trade and Industry is preparing a crackdown on unlicensed operators offering cheap international telephone calls in order to protect customers.

More than a dozen companies have received licences to operate "simple international resale" services, but at least as many more are operating through loopholes in the department's regulations.

"We've got work in progress to tighten up the enforcement process," said a DTI spokesman. "Customers need to be assured that the operators are reputable."

The department, headed by Board of Trade President Ian Lang, would not say exactly what action it plans to take. "Until we've completed the work it would be difficult to speculate about what it will be," the spokesman said. Nor would the DTI identify which companies it has targeted.

"There are definitely firms that have come and gone, that opened systems and then didn't deliver what they said they would," complained one industry insider.

The businesses lease high- capacity international lines from telecommunications giants such as BT and resell time on them for as little as 14p per minute to the US. BT's peak rate to the US is 40p a minute and its lowest is 38p.

Most of the mavericks take advantage of rules that allow them to set up closed networks - essentially private clubs - rather than offering a service to everyone. A few get around the regulations by running a call- back operation from the US. Customers dial into a computer in the US, key in their PIN numbers and the phone number they want to reach, then hang up. The computer then dials both the customer and the party he wishes to reach, so the cheap calls originate outside the DTI's jurisdiction.

Both licensed and unlicensed companies usually require up-front payments before their services become available. But there are no checks on the financial soundness of the unregulated firms. Nor are they subject to security checks to make sure that callers are guaranteed privacy.

The threat of stiffer enforcement was welcomed by established operators, who fear one high-profile collapse could tar them all.

"Several companies in the US were not regulated and did not fulfil their obligations to their customers," said Marc Citron, finance director at First Telecom Plc. "My concern is that it's going to happen here." A number of reputable operators have asked for action to be taken.

Just because an operator is unlicensed does not necessarily mean that it is dodgy, however. Swiftcall, one of the first call resellers, which was set up by entrepreneur Tom McCabe, was in business for years before coming formally under the DTI's authority. "The DTI eventually, after a long period of investigation, exonerated us and at the same time gave us our licence," said Graham Milne, the company's general manager.

However, the licence was issued to Golden Pages Jersey Ltd, also owned by Mr McCabe, in order to save the department embarrassment. He is currently in the process of legally transferring Swiftcall's assets and business to the new entity.

Mr Milne blamed the delay in getting his operation a licence on DTI footdragging. "It took us two years, much heartache and much pain to get a licence from the date of our first application," he said. "It should have taken four to six weeks."