Directory inquiry switch was costly and confusing, says audit office
By David Derbyshire, Consumer Affairs Editor
The introduction of 118 directory inquiries numbers was condemned yesterday as an "unpopular and unnecessary change" that had left most people paying more.
A report by the National Audit Office found that the number of calls to directory inquiries had fallen since the switch 18 months ago and that a confused public was struggling to find the cheapest services.
Although there are now more than 30 different directory inquiry phone numbers, two companies - BT's 118 500 and The Number's 118 118 - dominated 80 per cent of the market.
Both charged more than under the old system, the report found.
Directory inquiries were opened up to competition 18 months ago by Oftel, the former telecoms regulator, despite research showing that 90 per cent of people were happy with the existing system. The change was designed to give consumers choice and reduce prices.
Edward Leigh, Tory MP for Gainsborough and chairman of the Commons public accounts committee, said: "Ignoring the wisdom of the phrase, 'If it ain't broke, don't fix it', Oftel have made an unpopular and unnecessary change.
"Just because competition generally brings great benefits does not mean it always works. This is an instance where competition was not needed and is not helpful. Yet Oftel almost had a blind faith that competition was always good and jumped in feet first.
"The general public has lost out. Most of us are paying more and do not appear to be getting a better service," he said.
The report from the NAO found no evidence that the switch had achieved its three major aims - improving the quality of service, increasing price competition and encouraging innovative services.
Although most people believe directory inquiry services offer value for money, the NAO found that the majority pay more for the same service. BT's 118 500 charges 51p for a 45 second call from a landline - 21 per cent more than the 40p it charged under the old system. The Number charges 56p for the same average call - 40 per cent higher than before.
The cost of a 45-second directory inquiries call from a landline can range from 27p up to £1.73 - a five-fold increase. The same call from a mobile could be between 25p or £2.50.
Liberalisation also promised new innovative services, such as the option of being put through to the requested number, cinema listings and train times.
But the NOA found that people who agree to be connected this way can pay up to £4 for a five-minute call from a landline and up to £12.50 from a mobile.
There was a "low level of awareness and use of the new services", said the report.
More than a third of callers say they now use directory inquiries less, although the study found this may be due to switching to alternative sources such as the internet.
Despite its criticism, the NAO concluded that Oftel handled the switch-over well.
Sir John Bourn, head of the NAO, said: "The outcome of this market liberalisation for the residential caller has been more choice and innovative services but also an increase in average prices and uncertainty over improved quality."
A study by Ofcom, the successor to Oftel, carried out in November found that 86 per cent of requests led to the correct number. The most accurate service was provided by Conduit Welsh - with 98 per cent of numbers correct. Orange's 118 000 number scored 83 per cent.
Matthew Dearden, general manager of directory inquiries at BT, said: "BT's 118 500 service has great accuracy and very high customer satisfaction. BT therefore disputes Ofcom's mystery shopper accuracy results. We do not believe that they truly reflect the accuracy of our service."