<p>Questions about specific markets in specific countries require targeted applied research to be answered - this is the fine hour for applied microeconomics and industrial economics.  </p>

<p>Telecommunications is a regulated market usually -and indeed the link provided by the OP quotes the industry regulator</p>

<blockquote>
  <p><em>The rising cost of directory enquiry calls to some 118 numbers is very
  concerning, an industry regulator has said</em>....</p>
  
  <p><em>...Ofcom has said it will announce details of a review of
  the directory services market soon...</em></p>
  
  <p><em>..A spokesman for the watchdog said: "Ofcom is very concerned about the
  rising prices of some 118 numbers, and we are already planning to
  review this market to ensure prices are transparent and fair to
  consumers."</em></p>
</blockquote>

<p>It appears the regulator is concerned.</p>

CC BY-SA 3.0
2017-05-09T13:21:41.337Z
All markets are regulated to some degree. But the 118118 company were free to raise their prices in this way. They weren't forced to by the regulator.
Mick
CC BY-SA 3.0
2017-05-09T13:22:43.013Z
@MIck Who said such a thing? The point is that the regulator is concerned that there is a case of abuse of market power here.
Alecos Papadopoulos
CC BY-SA 3.0
2017-05-09T13:24:07.800Z
so are you saying that this is a market failure?
Mick
CC BY-SA 3.0
2017-05-09T13:29:49.503Z
@Mick You have first to define "market failure". But if the market is oligoplistic, such steep price increases are usually end up being characterized as such.
Alecos Papadopoulos
CC BY-SA 3.0
2017-05-09T13:39:41.050Z
Re: "if the market is oligoplistic" - but there are loads of rivals (https://www.telecom-tariffs.co.uk/dialdirq.htm) ... it just seems that nobody has ever heard of most of them.
Mick
CC BY-SA 3.0
2017-05-09T13:44:02.613Z
@Mick relative size matters. This is why I wrote i my answer that this requires a proper applied study of the specific industry. Steep price increases either come from unexpected external hard costs increases, or imply that initially there was "price dumping" (selling at a loss to increase market size and attract market share), or that companies attempt to exploit market power they have or think they have.
Alecos Papadopoulos
CC BY-SA 3.0
2017-05-16T21:47:48.460Z
118 118 is well known due to brilliant marketing and a memorable number, and it charges a high price (higher than the previous monopoly system) because it can.  The same company apparently also provides a free (at least from landlines) automated service on 0800 118 3733, though you have to listen to an advertisement; this is much less known and is not marketed.  Other companies with different 118XXX numbers charge different prices, some even more and others rather less, but few market just on price. So this is an example of a regulator creating a free market with worse outcomes for most users
Henry
CC BY-SA 3.0
2017-05-09T13:09:24.333Z
2017-05-09T13:09:24.333Z
Alecos Papadopoulos
<p>When there was only one telephone service supplier, BT directory enquiries used to be free. If you did not know the number of who you wanted to call, you could not call. Once you got the number from the phone book or directory enquiries, you could make the call and would be charged for it - instant payback for the phone company.</p>

<p>After the telephone market was opened to competition, BT started charging for directory enquiries eventually reaching 40p per call.</p>

<p>After de-regulation of directory enquiries in 2003, hundreds of suppliers have sprung up. The cheapest is currently 40p per minute plus your phone provider's Access Charge. The most expensive is £15.98 per call, plus £7.99 per minute after 60 seconds, plus your phone provider's Access Charge.</p>

<p>Prices for a number of 118 services have risen substantially over the years.</p>

<p>118 118 prices have risen sharply in recent years...</p>

<p>1 July 2015 - £5.74 per call, plus £2.99 per minute after 60 seconds, plus your phone provider's Access Charge.</p>

<p>1 March 2016 - £6.98 per call, plus £3.49 per minute after 60 seconds, plus your phone provider's Access Charge.</p>

<p>1 May 2017 - £8.98 per call, plus £4.49 per minute after 60 seconds, plus your phone provider's Access Charge.</p>

<p>It is no surprise that the most well-known services such as 118118 and 118500 are the most heavily advertised.</p>

<p>It should come as no surprise that the most heavily advertised services are among the most expensive. All that advertising has to be paid for somehow.</p>

<p>The cheapest services have no budget for advertising. In order to advertise, they would have to increase their prices.</p>

<p>What is needed is a third-party to rate and review all of the suppliers and their services and for this information to be freely available and easily accessible.</p>

CC BY-SA 3.0
2017-05-20T07:21:57.960Z
2017-05-21T10:57:53.680Z
2017-05-21T10:57:53.680Z
Ian G
<p>This seems very clearly not to be a result of any market failure. It seems like more of a problem of demographic. Older people who are less competent seem to be the primary market. This isn't the fault of the businesses running these services. Should prices be more clear? Probably. If there is anything misleading about the prices, it could be considered fraud, which is an externality and can cause system inefficiencies. However, its difficult to call fraud a market failure since fraud is not legal. <em>If</em> there is anything fraudulent about the system, it would be more accurately considered a government failure (where the failure is a failure of the justice system to hold fraudsters accountable).</p>
<p>The <a href="https://governology.substack.com/p/the-role-of-government-part-1" rel="nofollow noreferrer">3 types of market failures</a> are:</p>
<ol>
<li>Externalities</li>
<li>Anti-competitive markets</li>
<li>Suboptimal initial resource allocation</li>
</ol>
<p>But high prices for phone call services in a competitive market don't fall under any of these categories. Its silly to blame the free market for incompetent customers.</p>

CC BY-SA 4.0
2023-08-31T04:05:50.630Z
2023-08-31T04:05:50.630Z
Governology
<p>Is the <a href="http://www.mirror.co.uk/money/calling-118-118-costs-least-10381419" rel="nofollow noreferrer">shocking cost of directory enquiry numbers</a> in the UK a market failure, or the economy working perfectly well?</p>

<p><strong>EDIT:</strong> I know that proponents of free markets often like to blame over-regulation or government interference for perceived problems in markets, so I wonder if anyone could point to some regulation that has caused this incredible series of price hikes.</p>

CC BY-SA 3.0
2017-05-27T17:28:51.320Z
https://www.theguardian.com/money/2017/may/27/ofcom-review-directory-inquiries-charges
luchonacho
<market-failure>
Calling 118 118 (UK) - A market failure?
Mick
# Calling 118 118 (UK) - A market failure?

(Asked by: username_0 on 2017-05-09)

Is the [shocking cost of directory enquiry numbers](http://www.mirror.co.uk/money/calling-118-118-costs-least-10381419) in the UK a market failure, or the economy working perfectly well?

**EDIT:** I know that proponents of free markets often like to blame over-regulation or government interference for perceived problems in markets, so I wonder if anyone could point to some regulation that has caused this incredible series of price hikes.

**Tags:** market-failure
> **Comments:**
> **username_1**: https://www.theguardian.com/money/2017/may/27/ofcom-review-directory-inquiries-charges  

---

## 3 answers

### Answer by username_2 on 2017-05-09. Score: 1

Questions about specific markets in specific countries require targeted applied research to be answered - this is the fine hour for applied microeconomics and industrial economics.

Telecommunications is a regulated market usually -and indeed the link provided by the OP quotes the industry regulator

> *The rising cost of directory enquiry calls to some 118 numbers is very
> concerning, an industry regulator has said*....
>
> *...Ofcom has said it will announce details of a review of
> the directory services market soon...*
>
> *..A spokesman for the watchdog said: "Ofcom is very concerned about the
> rising prices of some 118 numbers, and we are already planning to
> review this market to ensure prices are transparent and fair to
> consumers."*

It appears the regulator is concerned.

> **Comments:**
> **username_0**: All markets are regulated to some degree. But the 118118 company were free to raise their prices in this way. They weren't forced to by the regulator.  
> **username_2**: @MIck Who said such a thing? The point is that the regulator is concerned that there is a case of abuse of market power here.  
> **username_0**: so are you saying that this is a market failure?  
> **username_2**: @Mick You have first to define "market failure". But if the market is oligoplistic, such steep price increases are usually end up being characterized as such.  
> **username_0**: Re: "if the market is oligoplistic" - but there are loads of rivals (https://www.telecom-tariffs.co.uk/dialdirq.htm) ... it just seems that nobody has ever heard of most of them.  
> **username_2**: @Mick relative size matters. This is why I wrote i my answer that this requires a proper applied study of the specific industry. Steep price increases either come from unexpected external hard costs increases, or imply that initially there was "price dumping" (selling at a loss to increase market size and attract market share), or that companies attempt to exploit market power they have or think they have.  
> **username_3**: 118 118 is well known due to brilliant marketing and a memorable number, and it charges a high price (higher than the previous monopoly system) because it can.  The same company apparently also provides a free (at least from landlines) automated service on 0800 118 3733, though you have to listen to an advertisement; this is much less known and is not marketed.  Other companies with different 118XXX numbers charge different prices, some even more and others rather less, but few market just on price. So this is an example of a regulator creating a free market with worse outcomes for most users  

---

### Answer by username_4 on 2017-05-20. Score: 1

When there was only one telephone service supplier, BT directory enquiries used to be free. If you did not know the number of who you wanted to call, you could not call. Once you got the number from the phone book or directory enquiries, you could make the call and would be charged for it - instant payback for the phone company.

After the telephone market was opened to competition, BT started charging for directory enquiries eventually reaching 40p per call.

After de-regulation of directory enquiries in 2003, hundreds of suppliers have sprung up. The cheapest is currently 40p per minute plus your phone provider's Access Charge. The most expensive is £15.98 per call, plus £7.99 per minute after 60 seconds, plus your phone provider's Access Charge.

Prices for a number of 118 services have risen substantially over the years.

118 118 prices have risen sharply in recent years...

1 July 2015 - £5.74 per call, plus £2.99 per minute after 60 seconds, plus your phone provider's Access Charge.

1 March 2016 - £6.98 per call, plus £3.49 per minute after 60 seconds, plus your phone provider's Access Charge.

1 May 2017 - £8.98 per call, plus £4.49 per minute after 60 seconds, plus your phone provider's Access Charge.

It is no surprise that the most well-known services such as 118118 and 118500 are the most heavily advertised.

It should come as no surprise that the most heavily advertised services are among the most expensive. All that advertising has to be paid for somehow.

The cheapest services have no budget for advertising. In order to advertise, they would have to increase their prices.

What is needed is a third-party to rate and review all of the suppliers and their services and for this information to be freely available and easily accessible.


---

### Answer by username_5 on 2023-08-31. Score: 0

This seems very clearly not to be a result of any market failure. It seems like more of a problem of demographic. Older people who are less competent seem to be the primary market. This isn't the fault of the businesses running these services. Should prices be more clear? Probably. If there is anything misleading about the prices, it could be considered fraud, which is an externality and can cause system inefficiencies. However, its difficult to call fraud a market failure since fraud is not legal. *If* there is anything fraudulent about the system, it would be more accurately considered a government failure (where the failure is a failure of the justice system to hold fraudsters accountable).

The [3 types of market failures](https://governology.substack.com/p/the-role-of-government-part-1) are:

1. Externalities
2. Anti-competitive markets
3. Suboptimal initial resource allocation

But high prices for phone call services in a competitive market don't fall under any of these categories. Its silly to blame the free market for incompetent customers.


---

