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Striking a balance

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Following the judicial review last year and changes at the top there have been calls for telemedia regulator Phonepay Plus to change or to go, But can it change, or will a radically altered PRS market force it to change or die anyway? Paul Skeldon meets Acting Chief Exec Jo Prowse to find out

On the face of it, the music business and the premium rate regulation wouldn’t seem to have much in common. I alone probably turned down being a rockstar to work in it. However, Jo Prowse’s background in music royalty collection has stood her in good stead for her role as Acting Chief Executive at Phonepay Plus.

The ways of dealing with musicians are much the same as handling telemedia companies: some are small, sensitive singer-songwriters and others are massive multinational corporations. Striking a balance between all their needs and getting the job done is the same in both industries.

And Phonepay Plus is, so Prowse tells Telemedia magazine when we meet in her office, all about striking a balance these days. “Consumer outcomes are at our heart, but consumers have shown that they want PRS and that they value the service, so the balance is helping industry introduce innovative new services. We have to strike that balance,” she says, adding: “There has been a shift in customer behaviour which is seeing PRS compete in new ways so promoting innovation is key.”

In other markets, regulators are often much more championing of the industry they oversea, driving innovation and then making sure that it fits with the regulations. There has been a tendency at PPP to perhaps often do it the other way round.

But Prowse asserts that, post the judicial review, there is a growing level of mutual trust between the industry and the regulator and that processes and procedures are changing to make the relationship between regulator and industry more productive rather than one that sees PPP acting as over zealous headmistress to a class of unruly school boys.

“There are lessons to learn from the judicial review and I like to look at it as an opportunity to make it work better,” Prowse says. “Some of the issues had been identified before the case and work was underway to address certain aspects of our procedures and processes, but lessons have definitely been learned.”

Prowse points out how the 13th Code, published and put into practice on 2 July this year, encompasses some of these changes, but that, rather than rush things, “[PPP] is now going to start looking in more detail at Part 4 of the code: the investigations and adjudications part as this needs an overhaul.”

Part 4 is the key part of the code that was effectively at the heart of the judicial review sparked by Ordanduu back in 2014 and ruled on at the start of the year. There is a real and pressing need to take a look at how emergency procedures are applied – and when – and how cases are judged. The High Court was quite scathing about this and an overhaul is overdue.

“This should be ready by 2016,” says Prowse. “We need to ensure transparency and independence in adjudications, but we also need to look more closely at advice and help to people if they are being investigated and adjudicated; we need clear and accessible routes through tribunals and so on and their rights need to be made clear. We are trying to take a holistic view of this and at the moment everything is on the table.”

 

A CHANGE IN CULTURE

This marks a significant shift in the culture of Phonepay Plus, at least outwardly. There seems to have been a shift at the regulator. The arrival of Prowse – who wasn’t part of PPP when the issues that resulted in the judicial review occurred –and the departure of the Chairman, Andrew Pinder, have neatly drawn a line under ‘the old order’ and there is now a golden opportunity to change things for the better for all concerned.

And there seems to be a real willingness to work with the industry to not only try and help drive innovation and help propel PRS into new sectors, but also to address some of the issues of old with how regulation works. A good working relationship with industry body AIME has been part of this process, Prowse notes, but also working more closely with other regulators is also having an impact.

“We work closely with Ofcom, but we are also talking a lot to FSA, ASA, PSR, CMA, ICO and many others – not to mention the MNOs – to try and understand where who’s regulatory remit begins and ends and how to make it all work together,” says Prowse. “We want to be all be complimentary to each other and not make it a regulatory nightmare to work with. Is there too much regulation? There is regulation in place for a good reason: the industry needs regulation – any industry does – and the market needs good regulation. Everyone recognises that and we are trying to make it targeted, focussed and light touch.”

Whatever cultural changes are needed at Phonepay Plus, it is likely that changes in the very market that they regulate will also force the regulator to change how it operates. We have already seen this with the trial of targeted exceptions around Google, where PPP didn’t require individual app developers in the Google Play store to register with PPP to use PRS for in-app billing. The theory is that Google already vets them so the checks and balances are in place.

“It worked well and we have now made it a permanent measure,” explains Prowse.

 

NEW WORLD ORDER

This is symptomatic of the new world that PPP is increasingly finding itself in. While there is a strong interest in PRS for some things, the likes of directory services and voice are in decline. Instead, users are turning more to voting and to apps and in-app purchasing. And then there is charge to mobile.

“We are increasingly going to have to work with big platforms such as Google and Microsoft and PRS is going to see real growth across the three Gs: Gaming, Gambling and Giving [Charity donations],” says Prowse, “so we have to be flexible – and strike that balance between consumer outcomes and innovation – to tap into this growth.”

Prowse also sees that Phonepay Plus has a vital role to play in promoting the industry, especially around how it moves into charge to mobile in new vertical sectors. “We need to promote how robust the regulatory regime is around these services, so that anyone looking to start to use them can have confidence that we are there to deal with any issues that may arise, in a proportionate way,” she expounds. “This assurance is good for everyone: from industry’s view they know they can innovate and have flexibility to create, and consumers and PRS clients can get the sorts of services they need. It is not for us to stand in the way only to make sure it works.”

It is a noble sentiment and a prudent one too. The world is changing rapidly and we stand on the brink of some of these PRS offerings making it big in new markets. Phonepay Plus will be 30 next year – if you count its previous iteration as ICSTIS – and it has managed to stay relevant despite some of the most enormous changes in telecoms technology and consumer user habits over that time.

As it enters its fourth decade many wonder if it is still relevant. “Working with Google is quite different, but we have to be flexible and we have to adapt what we do as the market changes,” says Prowse. “This isn’t because its Google, but because the market is changing. We still have a role to play.”

And she’s probably right. Deloitte predicts that PRS in the UK would still be worth £500million in 2019 – down from the heady days of it being a billion pound market., but still none-too-shabby – and there will be a need to regulate it. Personally, I think that it will be worth more than that: it will become the fabric of mobile micropayments for all sorts of things, including physical goods, and that is going to be the real battle for PPP in the coming years: what does it regulate?

While right now it is, much like the music business, all about ‘the balance’, the next few years are going to see PPP juggling how to regulate PRS when PRS is no longer PRS, but a payment service as well as a set of content services. The question then is can that balance be struck?

 

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