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Home > About Ofcom > Accountability > Annual Reports and Plans > Ofcom Annual Report 2005 - 06 > Core Areas of Activity


Core Areas of Activity

Telecommunications

Spectrum

Broadcasting: cross-sector

Broadcasting: television

Broadcasting: radio

International

Investigations programme

Supporting stakeholders

Support services

Telecommunications

Strategic Review of Telecommunications

During 2005/6, Ofcom concluded its wide-ranging Strategic Review of Telecommunications, some 22 years after the UK telecoms market was first opened up to competition. In concluding its Review, Ofcom set out a new regulatory approach for fixed-line telecommunications designed to benefit both consumers and the communications sector as a whole.

Genuine competition in the fixed-line telecoms markets, at the deepest levels of infrastructure, creates a virtuous circle of new investment in emerging technologies and innovation in services and price competition. This benefits consumers and helps to maintain the competitiveness of the UK economy as a whole.

At the heart of Ofcom’s review is a desire to bring about real equality of access to those parts of the telecoms network that BT Group plc’s competitors cannot viably replicate, and so promote competition between networks. In June 2005, Ofcom identified six objectives underlying its new approach:

In June 2005, the board of BT Group plc agreed in principle to offer the Ofcom Board legally binding Undertakings. These were subject to further consultation during the summer and were accepted by Ofcom in September:

Ofcom believes the Undertakings will deliver real equality of access to all providers, encouraging investment and innovation, reducing prices and expanding choice for consumers and businesses, while underpinning the UK’s industrial and economic competitiveness.

Ofcom committed to the publication of a quarterly Implementation Report intended to track BT Group plc’s progress in complying with the Undertakings. Ofcom also committed to monitor the impact of the Undertakings, including:

Openreach was launched on 21 January with its own senior management team, its own headquarters in Mayfair and a field-force of around 30,000 people assigned to work for it.

Openreach

The Undertakings required BT Group plc to set up a new and operationally separate business unit, which it branded Openreach, to be responsible for BT’s local access and backhaul network.

The role of Openreach is to support all communication providers’ retail activities (including those of BT Wholesale and BT Retail) on an exactly equivalent basis, known as Equivalence of Input.

Openreach was launched with a distinct brand and identity, and staffed by around 30,000 employees responsible for the operation and development of BT Group plc’s local access networks. Openreach has:

  • separate bonus and incentive schemes;
  • separate operating and trading systems;
  • begun to introduce its own branding on uniforms, ID cards and vehicles; and
  • established ‘Chinese walls’ to restrict information-sharing between Openreach and BT Group plc.

 

Equivalence of Input

Equivalence of Input is the model where all communication providers – including BT Group plc itself – purchase exactly the same wholesale products through exactly the same systems. Equivalence of Input applies to:

  • access to unbundled local loops, including fully unbundled loops (where a provider takes full responsibility for all of the customer’s voice and broadband services) and shared loops (where BT Wholesale continues to provide voice services while another provider is responsible for broadband);
  • wholesale line rental, where a provider takes responsibility for line rental and typically provides a single bill for both line rental and calls;
  • backhaul products, which are used to connect the local access network to the core network. Some providers have built out their own backhaul networks, but many others are dependent on BT Group plc for wholesale backhaul services; and
  • BT Group plc’s wholesale broadband access services, used by many internet service providers to offer broadband connections for their customers.

The Undertakings also set out a number of principles which BT Group plc must follow in the design, procurement and build of its 21st Century Network to ensure that other providers who will depend on interconnection with this network do not suffer competitive disadvantage.

 

Equality of Access Board

Compliance with the Undertakings by Openreach and other BT Group plc business units is monitored by the Equality of Access Board (EAB). The Undertakings require BT Group plc to act swiftly on the recommendations of the EAB.

Key characteristics of the EAB:

  • it is a compliance board, not an operating management board;
  • it is chaired by a non-executive director on the Board of BT Group plc and is comprised of four other members, of whom three are independent;
  • all board members have been appointed in consultation with Ofcom;
  • it produces and publishes a regular summary report of its activities;
  • it has extensive powers to seek access to information from wherever in BT Group plc it deems necessary to do its work; and
  • it is obliged to report all breaches of the Undertakings, material or not, to Ofcom.

Local Loop Unbundling

Local Loop Unbundling (LLU) enables providers other than BT Group plc to take full control of the loop connecting homes and businesses to the local exchange, and provide a range of competitive services over that connection.

Ofcom believes that a well-functioning LLU market is an important component of a competitive fixed-line telecoms market. Competition in LLU means that alternative broadband providers can control their own networks and tailor price and service offerings more closely to customers’ needs, offering the potential for lower prices and faster broadband speeds.

In order to promote competition in the broadband market, Ofcom set a ceiling in September 2005 on the price that BT Group plc could charge its competitors to rent a fully unbundled local loop. The aim was to ensure that BT Group plc’s charge is fair, reasonable and cost-orientated.

Ofcom set the maximum price at £81.85; this was introduced at the end of October after one month of consultation. The move followed BT Group plc’s voluntary price reduction in August from £105.09 to £80. However, Ofcom also believed that establishing a price ceiling was important, to ensure charging transparency and to avoid the possibility of increased charges in the future.

By March 2006, there were more than 300,000 unbundled lines in the UK.

Retail Price Controls

A combination of new technology and greater competition between providers based on appropriate regulated products means that consumers today have wider choice and lower prices than before. Ofcom published proposals in March 2006 to deregulate the retail price controls on BT line rental and calls which have governed the UK telecoms market since it was liberalised. The proposals reflect the increasing competition in the market.

Subject to a public consultation, the proposals are intended to come into effect on 1 August 2006, when the existing charge control is due to lapse. For the first time all phone companies – including BT Group plc – would be free to set their own prices and compete for customers in the future, with clear protections in place to protect vulnerable groups.

In the UK, average call prices have come down by around 60 per cent since 1996. The key drivers behind this change include:

Ofcom also proposed to launch a public information campaign to make consumers aware of the new deregulation.

Next Generation Networks

The UK’s fixed-line telecommunication networks will be transformed over the next three to five years by a major upgrade, which will significantly change the way they operate. Termed ‘Next Generation Networks’ (NGNs), they will make use of digital technology to connect telephone calls and other network traffic more efficiently than traditional networks. Internet Protocol (IP) services will be developed more quickly and at a lower cost to communications providers. Over time, NGNs will offer consumers a wider choice of new products and more value for money.

However, the establishment of NGNs represents a significant technological change and demands substantial investment and planning. As with many emerging technologies, the providers need to agree the technical and commercial arrangements for connecting to each other’s networks.

To encourage progress and provide a clear point of focus, Ofcom established a new industry body, NGN UK, under Executive Chairman, Peter Black. The purpose of this body is to facilitate decision-making for the whole of the UK telecoms industry on the commercial and technical arrangements for NGNs. At its launch in March 2006, eight companies had already committed to NGN UK: BT, Cable & Wireless, Easynet, Kingston Communications, NTL, Thus, Vodafone and Wanadoo UK.

Ofcom will monitor the new body’s work closely to make sure that the industry’s commercial priorities inform future regulation.

Wholesale and large business markets

Network charge controls

After consultations earlier in the year, Ofcom announced details in August 2005 of network charge controls for BT narrowband products, for the four years from 1 October 2005.

The new controls will limit BT Group plc’s prices for a specific set of wholesale telecoms charges. When combined with effective retail competition, the move could mean a saving for UK business and consumer users totalling £350-400m over the four-year period. At the same time, regulations were relaxed into two wholesale markets where competition is emerging.

Ofcom also stated that, although the same broad approach to regulating BT Group plc’s narrowband services had applied since 1997, changes may be needed in the future as Next Generation Networks, including BT Group plc’s 21st Century Network, are developed.

Wholesale Line Rental (WLR)

WLR allows consumers to choose from a range of competing providers for both their voice calls and line rental, all paid via a single bill. There are now nearly three million WLR lines in the market, increasing at a rate of over 160,000 every month.

In November, Ofcom proposed a reduction in the annual rental charges that telecoms companies pay for WLR. This meant that monthly rental charges would fall by 9 per cent (or 85 pence a month) to a proposed ceiling of £8.39 a month. Business WLR would fall by 8 per cent (78 pence) to a proposed ceiling of £9.17 a month. After a consultation, these charges were confirmed in January and introduced on 1 March.

The calendar year closed with Ofcom confirming that, after two years of development, the WLR product met a series of agreed criteria (subject to specific conditions). These requirements, first agreed in 2003, covered service standards, functionality and market impact. Ofcom’s assessment meant that the existing retail price controls on BT Group plc were relaxed to a safeguard cap (RPI-zero) on 1 January 2006.

Large business pricing

In September, Ofcom announced proposals to remove certain rules governing the amount BT Group plc charges large businesses for telecoms services. Currently, BT Group plc must offer all large organisations the same published call and line prices. Under new proposals, which were subject to consultation, BT Group plc would be able to agree individual terms with customers that spend more than £1m a year on telecoms, without having to publish its prices. Ofcom believes that this will stimulate more competition in the fixed-line market, and open up the possibility of lower prices for large organisations.

The changes are contingent on the availability and replicability of wholesale services that enable competitors to replicate BT Group plc’s services on an equal footing. A statement on large business pricing was published after the reporting period.

Consumer policy

Challenging mis-selling, slamming and poor complaints handling

The number and range of fixed-line telecoms providers is greater today that ever before, with increased competition driving down prices and encouraging the introduction of new services. However, with increased choice and competition there is a greater potential for service failure or, in the worst cases, deliberate corporate malpractice. Abuses include ‘slamming’, where customers are switched from one supplier to another without their knowledge and consent, and mis-selling, where the service offered to the consumer does not match the service described at the point of sale.

In April 2005, Ofcom introduced an obligation on companies selling services in the fixed-line telecoms market to establish and comply with Codes of Practice on sales and marketing practice, in accordance with published guidelines. This obligation came into effect in May, and will remain in place for two years, at which point sales and marketing standards and abuses will again be reviewed. Meanwhile, Ofcom said it would investigate allegations of non-compliance on a case-by-case basis, with powers to impose fines of up to 10 per cent of relevant turnover if sufficient steps to remedy the behaviour were not taken.

Ofcom also published best-practice recommendations for providers on how their Complaints Codes of Practice must address the handling of complaints and resolution of disputes.

There are two approved alternative dispute resolution (ADR) schemes: the Office of the Telecommunications Ombudsman (OTELO) and the Communications and Internet Services Adjudication Scheme (CISAS). In July 2005, Ofcom published a consultation reviewing the ADR schemes and found that the majority of the major providers were members: CISAS’ membership had grown from 49 to 144, and OTELO’s from seven to 165. Research also showed that:

In December 2005, Ofcom finalised its recommendations to ensure that providers deal with customer complaints more effectively. As well as confirming its approval for OTELO and CISAS, Ofcom identified three key priorities: that both ADR schemes should publish key performance indicators on how quickly complaints are dealt with; whether customers are satisfied; and that Ofcom should be notified promptly of any serious breach of scheme rules by a member company.

In August, Ofcom also approved an amendment to the Code of Practice of the premium rate regulator ICSTIS. The revision meant that network companies that connect premium rate calls will be prevented from sharing call revenues with providers who offer premium rate services for at least 30 calendar days. This gives ICSTIS important additional time to assess complaints and detect misleading or fraudulent activity, and revenues may be frozen in the event of investigations being necessary.

In February 2006, Ofcom launched a consultation on proposals addressing four key areas:

A statement on consumer issues was published after the reporting period.

Further details of complaints received by the Ofcom Contact Centre can be found on page 60.

Universal Service Obligations

The Communications Act 2003 requires Ofcom to ensure that all consumers are able to benefit from basic fixed-line telecoms services. The obligations upon BT Group plc (and, in Hull, Kingston Communications) to meet this demand are described as Universal Service Obligations (USO). In June 2005, Ofcom launched a consultation on its approach to this important area of consumer protection. In March 2006, Ofcom published a statement on five principal proposals:

  1. Low-cost schemes. BT Group plc and Kingston Communications will offer a new low-user scheme which will target people who receive Income Support, income-based Job Seeker’s Allowance and Pension Credit.
  2. Phone boxes. Although phone boxes can represent a lifeline to certain customers, some are expensive to run and very rarely used. Where BT Group plc or Kingston Communications seek to remove a phone box, local communities have a ‘local veto’ which will be available to unitary, metropolitan, district and equivalent councils. This will apply to the last phone box within a 400-metre area, and the consultation period for proposals will be extended from 42 days to 90 days. There will also be more freedom to use cashless phone boxes where vandalism is a persistent problem, or where phone boxes are needed mainly for emergency calls.
  3. Customers with disabilities. Ofcom announced the establishment of a Stakeholder Advisory Panel to monitor the delivery and performance of text and voice services. These include text relay, a service which translates voice calls into text and is a vital communications aid for many people with disabilities.
  4. Phone lines for all. From 1 March 2006, BT Group plc and Kingston Communications were required to install new phone lines at a standard cost of £99.99, regardless of the location. However, if the actual cost to those companies is more than £3,400 the customer may be charged for the difference above this threshold.
  5. Funding USO. This is met by BT Group plc and Kingston Communications, and Ofcom did not propose to change this arrangement.

Action against silent calls

Silent calls are generated by call centres in industries including telemarketing, market research and debt collection. Many call centres set up outbound phone calls to consumers; however, if those systems establish more outbound calls than there are agents available the result is silence on the line when a person being called picks up the phone. These abandoned calls can cause significant anxiety and annoyance.

In October, Ofcom consulted on a revised policy, and in March announced a new approach to deal with the persistent misuse of electronic communications networks or services, under sections 128-130 of the Communications Act.

The new guidelines include three key requirements:

Separately, the Government confirmed it had increased at Ofcom’s request the maximum fine Ofcom may impose on offenders, from £5,000 to £50,000.

Action against rogue internet diallers

During the previous year Ofcom received an increased number of complaints about rogue diallers, malign software which can become installed on a computer within a dial-up connection when a user opens spam email or visits certain websites. Without the user’s knowledge, the diallers transfer existing dial-up connections from freephone or low-cost numbers to more expensive numbers.

In November, Ofcom proposed to extend the reach of Premium Rate Services requirements, which currently govern 09 premium or international numbers, to enable the premium rate regulator ICSTIS to take action against those linked to rogue dialler use – regardless of the number used or the call charges involved.

A statement was published after this reporting period.

Voice over Internet Protocol services

At the close of this reporting year it was estimated that there were more than 500,000 active residential users of Voice over Internet Protocol (VoIP) services in the UK. These services offer customers the prospect of lower-priced calls – particularly calls from one VoIP service to another – as well as services such as call handling and unified messaging.

In February 2006, Ofcom proposed a code for VoIP service providers to ensure that key information about the capabilities of their services is made available to consumers. Ofcom also proposed other steps to encourage providers to offer 999 emergency calls, and to help them comply with regulations associated with Publicly Available Telephone Services.

Hospital calls

As a result of complaints from consumers concerning the cost of calling hospital patients, in July 2005 Ofcom launched an investigation into two providers, Patientline and Premier. Ofcom found that high call prices (up to 49 pence per minute peak and 39 pence per minute off-peak) were the result of a complex web of Government policy and agreements between the providers, the NHS and individual NHS Trusts. The investigation also focused on a recorded message at the start of these calls, and the exclusivity and length of agreements between NHS Trusts, Patientline and Premier.

In line with the Office of Fair Trading’s guidelines, Ofcom set out its concerns and recommendations in January to the Secretary of State for Health. It also recommended that the Department of Health should review all aspects of bedside telephone services (and entertainment systems) in hospitals, the cost of which seemed to be borne disproportionately by friends and family calling patients.

Further details of Ofcom’s investigations programme can be found on pages 58 to 59.

Numbering

Numbering review

Telephone numbers are a vital – and finite – national resource. They underpin all telecoms services and play a key role in how UK households and businesses access and pay for £34bn-worth of services every year. Under the Communications Act 2003, Ofcom is responsible for managing the UK National Telephone Numbering Plan, and published a review of the Plan in February.

Ofcom identified six key proposals, designed to encourage greater innovation, support the creation of new services, increase consumer awareness and strengthen consumer protection. They were:

Separately, Ofcom launched a public awareness campaign to highlight London’s new (020) 3 number range. The first of these new numbers were released to providers in summer 2005.

For information on the number of numbering applications processed by Ofcom, see page 78 of Section C.

0870/1 and 0844/5 numbers

Introduced in 1996, 0870/1 and 0844/5 numbers (Number Translation Services or NTS) enable access to a range of services, from pay-as-you-go internet access and travel enquiries to tele-voting and phone banking. However, the growth of these non-geographic calls has led to high levels of concern among consumers that services based on NTS are not clearly priced and marketed.

Ofcom’s initial proposals for NTS in October 2004 led to a range of responses from consumers and providers, and some marked disagreements. In September, Ofcom consulted on revised proposals including:

A statement on NTS numbers was published after the reporting period.

A non-emergency ‘101’ number

In response to a request from the Home Office, Ofcom consulted in October on proposals to make the phone number ‘101’ available as a single non-emergency number in the UK. As part of the Home Office’s wider police reform proposals, 101 would give the public a number they could use to report criminal or antisocial behaviour that was not considered an emergency. Ofcom confirmed the 101 number in a statement published in March.

Ofcom did not offer any view on a call charge for the service. The Home Office confirmed its plans to charge the service at a common rate of 10 pence per call across all networks. This was subject to discussions with network providers.

Mobile telecoms

The UK mobile sector is highly competitive, with five network operators and a number of virtual network operators in the market. In line with a review carried out by Ofcom’s predecessor Oftel, which found that no one company had significant market power, Ofcom’s intervention in the market is limited and focused on specific consumer protection or market growth issues.

International roaming

International roaming is a service offered by mobile operators that allows consumers to use their mobile phone abroad. To provide this service, UK mobile operators need to make use of foreign mobile networks for which they incur a wholesale charge. Similarly, UK mobile operators provide wholesale services to foreign operators to enable visitors to use their mobile phone when in the UK.

During the year Ofcom undertook preliminary work to assess the wholesale international roaming market in the UK. This included a significant contribution to the work of the European Regulators Group on international roaming issues and, in particular, in response to the European Commission’s proposals for regulation announced in February 2006.

Separately, in January 2006, Ofcom published a guide to help travellers and holidaymakers reduce their costs when using a mobile abroad. The guide also listed the most commonly available roaming tariffs from each of the UK’s five mobile network operators.

Further details of Ofcom’s international work can be found on page 56.

Mobile call termination charge controls extended

Consumers have no control over the amount mobile network operators charge other operators to connect a call to a mobile phone. To protect consumers, in June 2004, Ofcom imposed direct charge controls upon the 2G mobile operators, Vodafone, Orange, T-Mobile and O2. In June 2005, Ofcom proposed to extend these controls, due to expire in March 2006, for a further 12 months. The charge controls, which reflect the differences in spectrum used for 2G services, were proposed to remain as follows:

The proposals were implemented in December.

In March 2006, Ofcom published a second consultation document proposing to control wholesale mobile call termination charges – where there is evidence of market dominance – when the current regulation expires in March 2007.

Ofcom also proposed that price controls should be imposed on dominant operators connecting calls to 3G networks (as well as 2G) because of the increasing volume of calls.

New spectrum for mobile services

In 2005/6 Ofcom made the preparations for its first spectrum auction, which took place in April. Ofcom awarded 12 Wireless Telegraphy Act licences for the spectrum band 1781.7-1785 MHz, paired with 1876.7-1880 MHz. The licences were awarded on a technology and application-neutral basis. A number of licensees expressed an interest in offering private GSM networks in office buildings and campuses using the spectrum.

For details of Ofcom’s spectrum awards programme see page 31.

Spectrum

In November 2004, Ofcom published its Spectrum Framework Review. This set out Ofcom’s intention to enable market forces to play a greater role in determining how spectrum is used, maximising the use of this valuable resource by ensuring a greater degree of flexibility. Radio spectrum is an important – and finite – national asset, upon which numerous services, such as aviation, emergency services, mobile phones, television and radio, defence and utilities, depend.

In January 2005, Ofcom published its Implementation Plan for the Spectrum Framework Review. This focused on:

In 2005/6, Ofcom made significant progress in realising both parts of the Implementation Plan.

Spectrum release

In July 2005, Ofcom published proposals to award a number of low-power Wireless Telegraphy Act licences, by means of its first-ever spectrum auction. The spectrum band 1781.7-1785 MHz, paired with 1876.7-1880 MHz, would be awarded on a technology and application-neutral basis in 2005/6.

A number of organisations expressed interest in these bands, for uses such as private GSM networks in office buildings or campuses. In November, Ofcom published a policy statement, Information Memorandum and draft regulations required to hold the auction. In February, it confirmed the regulations and these came into force in March. The auction began later in the same month when 16 companies made applications for the seven to 12 licences on offer. The auction was completed after the reporting period and 12 licences were awarded.

In October, a second auction was announced: the 412-414 MHz band, paired with 422-424 MHz. The wide range of potential uses identified for this band included private mobile radio, public access mobile radio, programme-making and special events. Ofcom published a policy statement, Information Memorandum and draft regulations in April 2006 and the consultation on the proposed regulations ended in May 2006.

In December 2005, Ofcom announced a third spectrum auction in Northern Ireland with the Commission for Communication Regulation in the Republic of Ireland (ComReg). The two regulators proposed that licences would be offered by auction for frequencies in the 1785-1805 MHz band, with its potential for innovative services such as broadband wireless access, digital video links, CCTV, mobile technologies and wireless microphones throughout Ireland. After the reporting period, Ofcom and ComReg published an Information Memorandum with details of the award procedure, rules and licence conditions.

In March 2006, Ofcom announced a fourth auction of licences, for frequencies between 1452-1492 MHz (40 MHz), on a technology and application-neutral basis with a target of making awards by March 2007. A number of possible uses for the spectrum were suggested including mobile television, broadband wireless access, satellite digital radio, programme-making and special events. The deadline for responses to these proposals was set for June 2006, ahead of a possible auction in early 2007.

During the year, Ofcom also prepared detailed proposals for consultation on an award of the frequencies 872-876 MHz paired with 917-921 MHz, in line with initial proposals made in the Spectrum Framework Review Implementation Plan. The consultation document was published after the reporting period.

Ofcom was also involved in discussions at a European level on spectrum identified for award, with a particular focus by the Radio Spectrum Committee on the 2.6 GHz band. These discussions are ongoing. Ofcom is aiming to make an award in 2007 and Ofcom appointed external consultants in March 2006 to assist with analysing the technical and economic issues relating to this spectrum.

Progress on spectrum release 2005/6

1781.7-1785 MHz, paired with 1876.7-1880 MHz
  • Published Information Memorandum and regulations
  • Held auction: one round of sealed bids*
  • Issued 12 Wireless Telegraphy Act licences*
412-414 MHz, paired with 422-424 MHz
  • Published proposals for the award
  • Published policy statement on proposed auction*
  • Issued an Information Memorandum*
  • Published draft regulations*
1785-1805 MHz (Northern Ireland)
  • Published proposals for the award by auction in conjunction with ComReg
1452-1492 MHz (40 MHz)
  • Published proposals for the auction
872-876 MHz band paired with 917-921 MHz
  • Published proposals for the award by auction*
2.6 GHz
  • Discussions at a European level
  • Appointed consultants to assist in analysing technical and economic issues

(* After reporting period)

Spectrum trading and liberalisation

2005/6 saw the first instances of spectrum trading in the UK. Spectrum trading allows the holder of certain categories of Wireless Telegraphy Act licences to transfer all or part of their rights and obligations under a licence to another party. In the year to 31 March 2006, Ofcom authorised the transfer of rights to use 15 licences.

Ofcom also undertook further work on how the technical conditions in spectrum licences could be refined to provide greater certainty, and at the same time allow greater flexibility of use. The proposed Spectrum Usage Rights would give spectrum users greater freedom to decide how to use the spectrum they hold, while limiting the levels of interference to neighbouring users. A consultation document was published after the reporting period.

Digital switchover

Over the last three years, consumer take-up of digital broadcasting in all its forms has increased substantially; Ofcom’s research shows that the UK has the highest digital television penetration of any country in the world. By March 2006, 72.5 per cent of television households were viewing digital television across a variety of platforms: digital satellite, digital cable, digital terrestrial and broadband.

The Government announced in September 2005 that analogue television broadcasting would be phased out between 2008 and 2012, starting in the Border region and rolling out across the UK. A new organisation, Digital UK, was created to manage the transition. These decisions were informed in part by research and consultation carried out by Ofcom. Ofcom is working with Digital UK, the Government, broadcasters and other stakeholders to implement the switchover programme.

Ofcom announced its coverage plans in June 2005 for Digital Terrestrial Television (DTT). A range of options were considered relating to the technical conditions for DTT such as power levels, transmission mode and the number of transmitters to be used. Ofcom’s favoured option, which was accepted by the Government, will require that the three public service multiplexes will provide DTT coverage to at least the same proportion of households (98.5 per cent) that are currently reached by analogue public service broadcasts. This will ensure that, after switchover, UK households will have access to BBC1, BBC2, ITV1 and Channel 4/S4C as well as to new channels on terrestrial television. Ofcom is also researching ways to provide better advice on options for digital television reception to all UK households, working in conjunction with Digital UK, the Department of Trade and Industry and the BBC.

The digital dividend

The switchover to digital will deliver a significant spectrum dividend as frequencies used for analogue broadcasting are released for other uses. The five terrestrial analogue channels currently use just over one-third of the most valuable bands of spectrum below 1 GHz. Digital broadcasting is six times more efficient than analogue, opening up the potential to release up to 112 MHz of spectrum in the UHF band for new uses.

The UHF band is prime spectrum; it offers a valuable balance between capacity (bandwidth) and range. It is sought-after for a wide range of services likely to be used by millions of people every day.

In November, Ofcom announced a Digital Dividend Review to examine the opportunities for innovation which switchover and the release of valuable spectrum will provide. Historically, all uses of spectrum were decided by the Government or a government agency. However, this command-and-control approach proved inflexible to changes in technology and markets.

Ofcom’s starting assumption for this release of spectrum will be a market-led approach to ensure that this resource goes to the people and organisations who have the most valuable use for it. However, Ofcom will also consider whether there are circumstances where a market-led approach may not necessarily lead to an optimal outcome for the UK as a whole. If relevant, Ofcom will identify appropriate means which may be used to rectify any market failures revealed by the Review.

Effective exploitation of the digital dividend could enable the launch of a wide range of different services. These could include:

Ofcom will launch a consultation on the DDR in the final quarter of 2006.

Deregulation and licence exemption

Amateur radio licensing reform

With more than 63,000 amateur radio users in the UK, there is a significant administrative burden – for both licensees and Ofcom – in renewing paper-based licences every year.

Ofcom therefore announced proposals in May 2005 to reform the licensing system by replacing existing licences with a new low-cost licence which is both electronic and valid for life.

Ofcom augmented the formal consultation process by commissioning MORI to canvass the views of amateur radio licence holders. When specifically asked about Ofcom’s proposals to issue lifetime licences, 58 per cent of respondents supported the idea.

In February, Ofcom concluded that it would:

Ships’ radio licensing simplified

In December 2005, Ofcom announced a simpler and modernised approach to the licensing of ships’ radio, which is used for safe navigation and distress calls in emergencies. Licences would be granted for the lifetime of a particular vessel under the same owner and would be issued online free of charge, with a postal option also available. Licensees will also be asked to confirm their details at least once every ten years.

Ofcom believes that this will reduce the administrative burden on the UK’s 68,900 maritime licensees.

Both ships’ radio and amateur radio licences are currently processed by the Radio Licensing Centre, a wholly-owned subsidiary of Royal Mail Group. During 2005/6, Ofcom gave notice that it intends to administer this function directly in the future, led by the Ofcom Licensing Centre (OLC).

For information on the number and type of spectrum licences issued, see pages 78-82 of Section C; for details of licensing key performance indicators, see page 83 of Section C. For information about spectrum licensing cases and complaints handled by the Ofcom Contact Centre, see page 60 of this section.

Radio Frequency Identification

Radio Frequency Identification (RFID) is a generic term for technologies that use radio waves to identify objects. Unlike barcodes or magnetic strips, they do not need to be in the line of sight of a reader, making them ideal for applications as diverse as laundry tags, toll road payment systems and theft protection in shops. Advanced uses are also in prospect: in supply chains, for example, greater efficiencies through RFID tags could mean lower costs for industry and consumers. RFID can also be used to carry personal ownership information and deter theft.

The European Conference of Postal and Telecommunications Administrations (CEPT) responded to this growing use of RFID technologies by recommending that more spectrum be made available at 865-868 MHz. In August 2005, Ofcom proposed to implement the recommendation and, in line with its statutory duties, exempt RFID equipment from Wireless Telegraphy Act licensing since it was unlikely to interfere with other users of the spectrum.

Ofcom announced in November regulations governing power levels, frequency bands and antenna that would make interference unlikely. An impact assessment also suggested that potential net benefits to businesses and consumers could range between £100m and £200m over ten years. The RFID Exemption Regulations came into force on 31 January 2006, allowing RFID tags to be used without a licence.

Spectrum enforcement

Illegal broadcasting

Illegal broadcasting causes serious safety issues due to interference with the communications systems used by safety-of-life services such as the fire brigade and air traffic control. The problem is most acute in large towns and cities; more than 50 per cent of the estimated 150 illegal broadcasters (so-called ‘pirate’ radio stations) are located in London.

During 2005/6 Ofcom carried out two major operations against the illegal broadcasters.

In November, Ofcom announced the results of an operation in Greater London to take illegal broadcasters off-air. Some 53 illegal transmitters were seized; 17 transmitters and aerials disabled; and 44 illegal broadcasters ceased transmitting. The operation involved 18 Ofcom field operations colleagues working with 32 Metropolitan Police officers.

In December, Ofcom announced a similar operation in the West Midlands. Six studios used by illegal broadcasters were raided and equipment seized; ten transmitters were removed and three people were arrested. The operation involved 12 Ofcom field operations colleagues working with seven West Midlands Police officers.

In the year to 31 March 2006, Ofcom conducted 845 separate operations against 181 illegal broadcasters in the UK. Ofcom investigations led to the prosecution of 52 people.

Illegal equipment

Ofcom is responsible for taking action against the sale and manufacture of equipment that is not compliant with the European Radio and Telecommunications Terminal Equipment Directive, or the Wireless Telegraphy Act 1949. Non-compliant equipment can cause interference and nuisance to legitimate radio users.

During 2005/6 Ofcom carried our raids and seizures of illegal equipment including mobile phone and CCTV jamming devices, and bugging equipment.

For details of Ofcom’s Spectrum Operations work programme and key performance indicators, see page 84 of Section C.

Broadcasting: cross-sector

Broadcasting Code

Audiences rightly demand high standards from television and radio broadcasters licensed by Ofcom. Historically, the broadcasting rules were covered in six separate codes set by the previous regulators. However, the codes were out of step with changes in modern society; too complex for broadcasters and the public to use; and, in many cases, rendered obsolete by changes in legislation.

Section 319 of the Communications Act 2003 and Sections 107 and 130 of the Broadcasting Act 1996 require Ofcom to create a Code to set standards for broadcasters to observe. This Code should cover areas such as harm and offence, accuracy and impartiality and fairness and privacy.

In May 2005, Ofcom published its Broadcasting Code – a single, simplified framework of rules and principles for broadcasters. The Code was developed at a time of change in the distribution of content: the majority of households now have access to digital television and radio, and programming is increasingly being delivered over the internet. These developments, changing patterns of use and wider developments in social attitudes to broadcasting have changed audience expectations.

While audiences may welcome challenging and creative content, they also want standards to be maintained and, in particular, children to be protected from unsuitable material. Ofcom’s duty is to protect the under-18s, a responsibility that is shared with parents, those who look after children and young people, and the broadcasters.

The key points of the new Code, which came into effect on 25 July 2005, include:

For details on programme complaints, fairness and privacy, and content and standards cases, see page 85 of Section C. For cases and complaints handled by the Ofcom Contact Centre, see page 60 of this section.

Media literacy

The Communications Act 2003 requires Ofcom to promote media literacy, which Ofcom defines as ‘the ability to access, understand and create communications in a variety of contexts’ and it is specifically referenced in the new Ofcom Broadcasting Code.

In 2004/5 Ofcom published its plans for meeting this duty, with a media literacy audit as a key priority. In March 2006, Ofcom published results of this research, which sought the views of 3,224 people from across the UK, focusing on the four main digital platforms (and, where relevant, analogue TV and radio).

The audit identified a number of themes, including concern about content on different platforms; different age groups’ ability to access media and communications services; and awareness of digital services.

Specific reports on media literacy among children, minority ethnic groups, older people, people with disabilities and those in the devolved Nations and the English regions were published between March and May 2006.

Television channel and radio station sponsorship

Sponsorship of commercial television and radio programmes is now a familiar part of the broadcasting landscape, having been permitted for more than 15 years. In February 2006, Ofcom consulted on proposals to allow sponsorship of commercial television channels and radio stations. The consultation proposed that channel and station sponsorship be permitted subject to the following restrictions:

The consultation closed in April 2006.

Broadcast training and equal opportunities

The Communications Act requires Ofcom to promote training and development across the broadcasting industry, and in May 2005 Ofcom appointed Ralph Tabberer, Chief Executive of the Teacher Training Agency, as the first Chairman of the Broadcasting Training and Skills Regulator (BTSR).

The BTSR is a new joint initiative between Ofcom and Skillset (the Sector Skills Council for the Audio Visual Industries) to create a co-regulatory system for training and development.

In July, six new members of the BTSR were announced, to serve alongside Ralph Tabberer and bring experience in training, business, education, public service and various broadcasting sectors.

The BTSR has:

Ofcom also published its equal opportunities ‘toolkit’ for broadcasters. It contains practical advice, examples of best practice and other suggestions designed to help broadcasters benefit from the experiences of others. The Communications Act requires Ofcom to promote the importance of equal opportunities and ensure that every licensed broadcasting organisation has formal arrangements in place.

Broadcasting: television

Public service television broadcasting

The future of the BBC

Ofcom completed its review of public service broadcasting (PSB) in 2004/5. It concluded that there were three overarching themes of PSB: a competitive marketplace; a plurality of PSB commissioning and production; and a sufficiently flexible system for the provision of PSB to change over time as the needs of citizens evolve.

The review said that the BBC should remain at the heart of PSB, funded by the licence fee model. It should also have a special responsibility to invest in distinctive content which strives to meet public service purposes and characteristics.

In June 2005, Ofcom also published its response to the Government’s Green Paper on the Review of the BBC Royal Charter. The submission said that the Government should assure the future of PSB, with the BBC as the cornerstone of the system, but with a range of other competing suppliers of programming and content able to prosper through the transition to digital television. Ofcom said that it is essential that the BBC is not allowed to become isolated in a growing – and exclusively commercially-focused – sector.

Ofcom also recommended that the Government should:

In March 2006, the Government published its White Paper on the future of the BBC. It said that the BBC will be overseen by a new Trust, separate from the BBC management. The White paper also said that:

Ofcom has started work with the BBC Governance Unit on the practical implementation of the new arrangements.

The White Paper also expressed support for continued plurality in the provision of PSB to and through digital switchover, and committed the Government to a review within the next Charter period of the wider use of public money – including licence fee money – to support PSB beyond the BBC. In addition, the White Paper welcomed Ofcom’s further work in this area – namely, more detailed work on the Public Service Publisher and the financial review of Channel 4. Ofcom committed to further work on these issues in its Annual Plan for 2006/7. The work will seek to define how the Public Service Publisher could operate in practice, and on the future prospects for Channel 4 as a PSB.

Television production

The UK has some of the highest levels of ‘home-grown’ television in the world. UK television producers made more than 27,000 hours of programmes during 2004, with broadcasters spending more than £2.6 bn (excluding news) on programming specifically created and broadcast by them.

Under the Communications Act, Ofcom is required to ensure a diversity of programme supply and a broad representation of the communities and cultures of the UK.

In January 2006, Ofcom published a review of the UK’s television production sector. Its main proposals were to:

The consultation closed in March 2006.

Programming for the Nations and Regions

The Communications Act also requires Ofcom to report on the effectiveness of the existing television public service broadcasters – the BBC, ITV, Channel 4, S4C, Five and Teletext – in the delivery of their PSB obligations. It also requires Ofcom to make recommendations for maintaining and strengthening the quality of PSB in the future. Regional programming is one of the core PSB requirements set out in the Act.

In June 2005, Ofcom published the conclusions of its consultation on the provision of dedicated programming for the Nations and Regions as part of the final Phase 3 report of Ofcom’s Review of Public Service Television.

Decisions and recommendations included:

Recommendations for indigenous language broadcasting in the Nations included:

Financial terms of Channel 3 and Channel 5 licences

In June 2005, Ofcom published its conclusions after its review of the financial terms of the licences held by ITV, SMG, Ulster Television and GMTV, and the Channel 5 licence.

This decision was the last in a series made by Ofcom over the previous two years; taken together, they allow commercially funded public service broadcasters the scope to plan with certainty for all-digital services across the UK.

Annual payments received by HM Treasury for all Channel 3 and Channel 5 licences have fallen steadily. In 2003, under existing licence terms, they totalled approximately £270m. In 2004, the total was £230m, mainly due to the growth of digital households. In 2005, with further digital multi-channel growth, this would have amounted to £180m under existing terms.

The new terms offered to the licensees, and accepted in July, were backdated to 1 January 2005 and run until 31 December 2014. Ofcom estimated that total payments for all Channel 3 and Channel 5 licences in 2005 would be £90m.

Access to TV

The Communications Act requires Ofcom to ensure that broadcasters cater for people who are deaf or hard-of-hearing, blind or partially sighted, or who have a dual sensory impairment. The Act says that Ofcom must publish and review a code setting out how broadcasters should promote television that is accessible and enjoyable for people with these needs.

Since the Code on Television Access Services was published in July 2004, there has been a significant increase in the number of channels meeting and, in many cases exceeding, their obligations to provide access services.

In March 2006, Ofcom launched a consultation reviewing the Code. It concluded that although the basic structure remains appropriate, further work was required to make sure that the provision of signing services meets the needs of viewers who depend on it.

Television advertising

The Contracts Rights Renewal remedy

In its Annual Plan 2005/6, Ofcom proposed a review of the UK advertising sales market, as originally suggested by the Competition Commission at the time of the Carlton/Granada merger.

However, after a preliminary assessment of the market, Ofcom announced in December 2005 that it did not see the need for a full review at this stage. Ofcom had received no complaints over the running of the advertising sales market, or calls from the advertising or broadcasting industries for a review; there was no strong evidence of the market working to the detriment of consumers; and the Contracts Rights Renewal remedy (CRR) had had a significant effect on the market.

The CRR remedy, put in place in 2003 in the light of the merger, imposed conditions on ITV intended to make sure that advertisers and media buyers would not be worse off after the merger than before. The Office of Fair Trading is responsible for the CRR remedy, and any decision to review the remedy would rest with it. Ofcom will, however, continue in its role to monitor the remedy – and the operation of the Independent Adjudicator – to assess its wider impact.

Advertising of food and drink products to children

There has been growing public concern about the increase in childhood obesity in recent years. This increase has been driven by a number of factors including changes in lifestyle and diet, and in the way food is advertised and promoted.

Ofcom was asked by the Department of Health and the Department for Culture, Media and Sport to examine the case – and the options – for restricting television advertising of foods and drinks to children. In particular, this focused on the over-consumption of ‘HFSS’ food and drinks – those that are high in fat, salt or sugar.

Ofcom first published wide-ranging research into the subject in July 2004. This showed that advertising had a small direct effect on children’s food preferences, as well as indirect effects which were difficult to quantify but likely to be larger. Ofcom continued to work with consumer bodies, broadcasters and its co-regulatory partner the Broadcast Committee of Advertising Practice. It also consulted the Food Standards Agency, which provided a possible model that could be used to differentiate between different types of food and drink products.

In March 2006, Ofcom concluded that there was a case for tightening the rules on advertising food and drink to children. It set out four alternative proposals:

  1. timing restrictions on advertising specific food and drink products;
  2. timing restrictions on advertising all food and drink products;
  3. a limit to the amount of food and drink advertising per hour allowable during children’s and family viewing times; and
  4. an open invitation to advance a new proposal, either drawing from elements above or suggesting a completely fresh approach.

Ofcom believes that the proposals strike a balance between having a positive effect on children’s attitudes and behaviour, without disproportionately affecting the funding of children’s programmes or the legitimate activities of food manufacturers and retailers.

The consultation ran until June 2006.

Future funding of commercial television

Product Placement

The principle of separation between advertising and editorial material on television has been present in regulation since the first commercial appeared on the UK’s television screens in 1955.

The way in which the ‘separation principle’ has been interpreted and applied has evolved over time to keep pace with commercial developments and audience expectations. Advertising is no longer limited to spot advertising; sponsorship, for example, is now a well-regarded feature of commercial television, generating revenues for broadcasters.

The separation principle is enshrined in the European Commission’s Television Without Frontiers Directive, which governs audio-visual content regulation in Europe. Therefore, product placement – which involves including, or referring to, a product or service in return for payment or some other valuable consideration – is prohibited.

In December 2005, the Commission published a proposed draft revision to the Directive which proposed to liberalise the rules governing television advertising which would allow certain forms of product placement on television.

Ofcom believes that there is merit in a cautious approach to introducing product placement in the UK because new technologies such as personal video recorders, as well as audience fragmentation and video-on-demand, pose challenges to the value of traditional spot advertising. Commercial broadcasters, and particularly free-to-air broadcasters with no revenue from subscription channels, have legitimate concerns over future programme funding.

In December, Ofcom launched a consultation on a restricted set of uses for product placement. A statement on product placement was published after the reporting period.

Commercial television appeals for donations

The Ofcom Broadcasting Code currently prevents commercial television broadcasters from appealing for donations to help make their programmes. Radio broadcasters are not subject to the same restrictions, therefore Ofcom believes that it is appropriate to consider whether in future there should be a uniform approach to regulating this form of funding so it is applied equally across all platforms.

Ofcom has not formed a view on whether the advantages of lifting the current restrictions outweigh any disadvantages. Research carried out by Ofcom suggested that viewers are concerned about various aspects of appeals on television. However, in 2005/6 Ofcom prepared a consultation document, published outside the reporting period, which set out a number of safeguards that would need to be considered in the event that the current restrictions were lifted.

The potential safeguards included:

Competition issues in television broadcasting

Technical platform services

Since 1997, BSkyB has been subject to regulation over the amount it charges (and the terms it offers) broadcasters and operators of interactive television who wish to make their content available on the satellite platform. This regulation of technical platform services (TPS) was established under Ofcom’s predecessor, Oftel.

In November 2005, Ofcom consulted on proposals to revise the guidelines. Ofcom believed that the previous approach adopted by Oftel did not provide sufficient clarity or certainty for broadcasters. In the absence of transparent guidelines on TPS charging, it is difficult for customers to plan for these charges.

The consultation closed in February 2006. In April, Ofcom published a draft explanatory statement and revised guidelines. These were subject to further consultation.

Cross-promotional activities

Cross-promotion is the practice of using one television channel to promote another: for example, ITV1 promoting programmes for ITV3, or Channel 4 promoting E4 and its availability on cable, satellite and Freeview.

Ofcom inherited the current rules from the Independent Television Commission and has a duty to review them and make sure that they remain relevant and appropriate.

In December, Ofcom published proposals for the future regulation of cross-promotion. It proposed to remove the requirement that a broadcaster must have a 30 per cent shareholding in a channel or service it promotes, and to replace it with more flexible guidance. It also proposed to use the Broadcasting Code wherever appropriate, rather than separate dedicated rules, in relation to the content of cross-promotions. However, Ofcom proposed two rules:

A statement on cross-promotion was published after the reporting period.

Broadcasting: radio

Radio Review

In October, Ofcom published its Radio Review consultation document. Its aim was to enhance choice, diversity and innovation for consumers at UK, national, regional, local and community levels; and allow radio to grow in a digital age.

The Review set out proposals on the future regulation of UK commercial radio and asked for further views on plans to encourage the development of DAB digital radio, locally and nationally. Ofcom proposed that DAB was the only platform bringing the benefits of digital listening to both home and portable radios, and to guarantee a range of free-to-air services to the majority of the UK.

In December, Ofcom published two main statements in response to the Radio Review. First, it announced that it would allocate:

Second, Ofcom announced a consultation to seek views on the licensing process for this additional local and national DAB capacity.

In February, Ofcom announced its approach to the regulation of commercial radio, including:

Radio mergers

In 2005/6, Ofcom undertook a statutory assessment of Emap’s acquisition of Scottish Radio Holdings (SRH).

Ofcom concluded that no changes would be needed to any of SRH’s 21 local analogue licences to protect the provision of services after the acquisition. However, Ofcom added that if the acquisition went ahead as envisaged, it would breach certain rules governing ownership of local digital multiplexes and local digital sound programme services.

Ofcom therefore issued a direction to Emap to ensure it complied with these rules.

FM and community radio licensing

In 2005/6, Ofcom continued with its programme of FM commercial radio licensing under a new streamlined process. Ofcom advertised one smaller (non-metropolitan) licence every month and one larger (metropolitan or regional) licence every two or three months. The licence awards were made by the Radio Licensing Committee, a sub-committee of the main Ofcom Board. In the year to 31 March 2006, Ofcom awarded 15 FM commercial radio licences.

Ofcom completed the first round of community radio licensing for not-for-profit services, focused on delivering specific social benefits. These licences use relatively low-powered transmitters to cover a small geographical area. In the year to 31 March 2006, Ofcom issued 92 community radio licences (see table overleaf).

In 2005/6, Ofcom also announced the membership of its Community Radio Fund Panel. The three-member panel was established by the Government to provide financial support to community radio broadcasters.

FM radio licence awards 2005/6

Durham
Banbury
Manchester
Norwich
Ballymena
Torbay
Swindon
Solent
Barrow-in-Furness
Swansea
Northallerton
Ipswich
Warwick
Shrewsbury
Plymouth

 

Community radio licence awards 2005/6

Havant
Stoke on Trent
Pontypridd
Neath and Port Talbot
Central Southampton
Hedge End, Botley and West End, Hampshire
Portsmouth
Newport, Isle of White
Glasgow (three services)
Cumbernauld
Nottingham (three services)
Normanton, Derby
Leicester
Market Harborough
Vale of Belvoir
Bradford
Halifax
Ardwick, Longsight, Levenshulme, Manchester
Wythenshawe
Chorley
Rochdale
Norwich
Aberdeen
Orkney Islands
Isles of Scilly
Leeds
Oldham
Tameside
Stockport
Salford
North-east Birmingham
Winson Green, Birmingham
Aston, Birmingham
Small Heath, Birmingham
West Bromwich
Stourbridge
Wolverhampton
Belfast (two services)
Lisburn
Newry
Downpatrick
Banbridge
Alnwick

 Newcastle upon Tyne
Kirky Lonsdale
Withernsea
Gloucester
Worcester
Pontypool
Central and East Brighton
Colchester
Plymouth
West Hull
Bankside, central London
Hackney
Southall
Verwood, East Dorset
Brentwood, Essex
Harold Hill, Essex
Forest Gate, London
Stratford, London
Manor Park, London
Bexleyheath, Kent
Slough
Hayes, Middlesex
Southall, Middlesex
Hammersmith, London
Stonebridge, London
Edinburgh
Leith
Dalkeith, east and central Midlothian
Barnard Castle, County Durham
Wetherby
Sheffield
Burngreave, Sheffield
Harlow, Essex
Bristol
Canterbury
Bournemouth
Dewsbury
Ipswich
Lincoln
Luton
Salisbury Plain (two services)
St Albans
Wrexham, Wales

International

Ofcom’s activities – and those of the companies it regulates – are increasingly influenced by international developments. Much of telecommunications regulation, and an increasing proportion of our activities in the spectrum and broadcasting areas, is directly affected by EU legislation.

In 2005/6 Ofcom played a key role in the European Regulators Group (ERG), which seeks to achieve consistent application, in all Member States, of the provisions set out in the Directives of the new regulatory framework. In January 2006 Ofcom Senior Partner Kip Meek was appointed as chair of the ERG for 2006.

Ofcom identified three international priorities to engage on:

Regulatory Framework For Electronic Communications

Ofcom’s regulation of the telecoms sector is mainly derived from the European Common Regulatory Framework. This imposes a range of obligations on the authorisation of services, general conditions which are applied to communications providers, and the analysis of telecommunications markets when imposing specific conditions on companies with market power. The Framework also sets out rules on the authorisation of radio spectrum use.

The European Commission announced in November a consultation on the operation of the European Framework. Ofcom contributed both to the ERG and the UK’s response to that consultation, arguing that the existing Framework is essentially sound, but requires more rigorous implementation in many Member States. Ofcom also worked with the ERG and UK Government to identify specific improvements to the Framework which should be considered during the course of the Review.

Spectrum management

Spectrum does not respect national boundaries; so in meeting its spectrum management duties, Ofcom takes an active role on behalf of the UK in debates about international spectrum co-ordination, policy and legislation.

In the year to November 2005, Ofcom held the chairmanship of the EU’s Radio Spectrum Policy Group (RSPG). During this time, the RSPG called for a more flexible approach to spectrum management; a significant step forward in developing a market-based approach to spectrum management across the EU.

Delivering the UK’s objectives on digital switchover, the digital dividend and the Radio Review are dependent on securing international agreement over the use of the VHF and UHF broadcasting spectrum. Ofcom led discussions at bilateral, European and international levels ahead of the Regional Radio Conference in May/June 2006 to co-ordinate international decisions on radio spectrum management.

Audiovisual Media Services Directive

The existing Television Without Frontiers Directive sets EU-wide rules for trans-border broadcasting. It includes restrictions on television advertising, obligations for broadcast channels to include a certain proportion of European-made productions, and minimum standards on protection of minors and incitement to hatred. Ofcom implements and enforces the Directive in the UK.

In September, the EC announced it would revise the Directive, and published its proposed text for a new Audiovisual Media Services directive in December. The changes included a proposal to extend the scope of statutory regulation to include non-broadcast audio-visual content on the internet – a move which both Ofcom and the UK Government consider to be inappropriate. Throughout the process Ofcom has analysed and advised the Commission and the UK Government on the possible effects of the proposals.

Ofcom agreed that there was a sound case for reforming the existing Directive as it applied to broadcast services. However, Ofcom and the UK Government have significant concerns about extending the scope of content regulation from traditional television broadcasting to areas such as online video content, including personal video blogs. It also warned that the costs of extending the scope of the Directive could be significant to the point where the new media industry could suffer detriment. Ofcom has continued to contribute technical advice to the UK Government, informing its position in the Council Working Group negotiations.

Ofcom also provided the EC with research and evidence as part of the Commission’s investigation into the collective sales agreement operated by the FA Premier League.

Investigations programme

Investigations and disputes

Ofcom has a number of roles and duties relating to identifying and responding to conduct which is unlawful or anti-competitive, and in resolving disputes. In responding to complaints or disputes filed by market participants – or, in some instances, by consumers – Ofcom’s investigations programme ensures that the organisation responds quickly and firmly to breaches of regulatory rules or relevant law, and is able to act effectively in resolving disputes.

As a sectoral regulator under the Communications Act, Ofcom has responsibilities to enforce ex ante rules such as rules imposed on providers with significant market power, and rules imposed on all providers as general conditions. Ofcom also determines disputes between providers of electronic communications networks and services, and has responsibilities under the Broadcasting Act to enforce ex ante powers.

As a national competition authority, Ofcom is empowered to enforce competition law concurrently with the Office of Fair Trading (OFT), and acts as the competition enforcement agency for the communications sector. Ofcom’s role under competition law includes:

Within the investigations programme, Ofcom also considers consumer complaints under the Unfair Terms in Consumer Contracts Regulations 1999 and under Part 8 of the Enterprise Act 2002 for the communications sector.

In the previous reporting period, Ofcom published guidelines setting out its approach when investigating competition complaints and resolving disputes between companies. The guidelines provide companies with a clear, easy-to-follow toolkit explaining how both small and large companies should prepare the evidence required before Ofcom will take forward a formal investigation.

Since the guidelines were issued, Ofcom has carried out a full review of its investigations function and, as a result, has refined its approach. This led to Ofcom issuing revised guidelines for consultation after the reporting period. They reflect the outcome of the review and Ofcom’s growing body of practice and established decisions in this area, and the developing jurisprudence of the Competition Appeals Tribunal.

Ofcom continues to seek to reduce the costs to industry of its work, and to gain the best value from limited resources to deliver the best outcomes for consumers. Unsubstantiated complaints, or those which could be better resolved elsewhere, are dealt with quickly and at an early stage. This allows Ofcom to focus on the most serious allegations inhibiting fair and effective competition in the sector, and the most serious cases of harm to consumers.

Ofcom has continued to publish six-monthly reports, setting out in detail the work of the investigations programme. The third of these reports was published in November 2005 and covered the period from April to the end of September. After the reporting period Ofcom published its fourth report, covering the period from October 2005 to the end of March 2006.

Summary of complaint and dispute activity during the period under review

Between 1 April 2005 and 31 March 2006, Ofcom received 301 complaints or dispute referrals. In addition, Ofcom identified 18 issues for possible investigation on its own initiative. In total, 247 of these cases were rejected or redirected (either within Ofcom or to another organisation) upon receipt. Of the remaining 72, Ofcom moved 67 into its enquiry phase (during which Ofcom decides whether to launch a full investigation into a complaint or to resolve a dispute) and five were moved directly to a full investigation. Of the 67 cases considered in enquiry phase, 33 resulted in full investigations being opened by the end of the reporting period, with three cases still in the enquiry phase.

Taking all requests received (including issues identified at Ofcom’s own initiative), 38 cases (or 12 per cent) were found to warrant full investigation with a further three cases awaiting a decision.

Ofcom opened a further three investigations during the reporting period. These resulted from enquiries that had been opened before the reporting period began.

A total of 41 full investigations were opened during the reporting period of which 22 were closed by 31 March 2006. Ofcom closed a further 17 investigations that had been opened in the previous reporting period. For details of investigations key performance indicators, see page 87 of Section C.

Supporting stakeholders

The Ofcom Contact Centre

The Ofcom Contact Centre (OCC) deals with questions and complaints from a broad range of viewers, listeners, customers of telecoms companies and users of wireless communications services.

During the period under review, the OCC answered more than 176,250 telephone enquiries and received more than 54,550 completed internet forms, emails, letters and faxes. The OCC was asked by callers or correspondents to deal with around 212,900 separate cases and complaints. Of these:

During the reporting period, the OCC focused on recording consumer complaints and enquiries in more detail, in order to improve Ofcom’s ability to monitor and investigate the issues they raised. The overall number of complaints about broadcasting reduced significantly as a result of fewer single programmes generating high volumes of complaints from viewers and listeners.

The OCC uses an interactive voice response system to offer recorded advice, which can direct callers to the help they need without holding on to speak to Ofcom staff. Some 90,700 callers listened to this recorded advice.

Colleagues within the OCC resolved 93 per cent of all calls, internet forms, emails, letters and faxes without escalating the issue to other parts of Ofcom. The remaining 7 per cent were resolved within other functions across Ofcom, with these cases being tracked by the OCC through to an ultimate resolution.

Telecommunications

Some 32 per cent of all customer complaints in telecommunications were about:

Other customer complaints in telecommunications included:

Where appropriate, the OCC meets with companies to discuss ways in which their service to customers can be improved. Details of companies which demonstrate persistent problems are passed to colleagues in Ofcom’s Competition Group for potential formal investigation.

Spectrum

The OCC spectrum licensing team dealt with more than 28,700 enquiries from users and providers of radiocommunications services, as well as other members of the public. These related to:

The team was also responsible for the issuing of 1,244 licences to customers.

Broadcasting

The OCC broadcasting team logged 13,300 complaints from the public. Any complaints not resolved by the team were passed to the Content and Standards Group for further investigation.

The greatest cause for complaint about television and radio programmes was material which viewers and listeners believed was harmful or offensive, including strong language, sexual portrayal and religious offence.

Programmes generating the most complaints were:

A number of complaints were also received about the amount of advertising on some channels.

For OCC key performance indicators, see page 87 of Section C.

Political, national and regional engagement

Ofcom is committed to ensuring its policy development and regulatory actions are informed by the views of everyone with an interest in the outcome. To achieve this, there are Ofcom offices in Wales, Northern Ireland, Scotland and the English regions; a number of advisory bodies; and a team responsible for the management of public and political relationships throughout the UK and abroad.

Nations and Regions

Ofcom has three national offices, led by a senior director in Glasgow, Cardiff and Belfast, as well as other regional offices for its spectrum management Field Operations teams.

Together with the England Directorate (based in Riverside House in London), the National and Regional functions help ensure sufficient attention is given to important localised issues. These include the availability of broadband and digital television in regional and remote communities, and issues concerning telecommunications and spectrum use.

Advisory bodies

Details of the work of the Consumer Panel are given on page 102.
Details of the work of the Ofcom Spectrum Advisory Board are given on page 103.
Details of the work of the Advisory Committee for Older and Disabled People are given on page 103.
Details of the work of the Committees for the Nations and Regions are given on page 104.

Public and political relations

Ofcom is a statutory organisation, independent of Government but accountable to Parliament. To ensure Parliament is kept fully informed about Ofcom’s work, the Public and Political Relations team acts as an interface between parliamentarians and Ofcom’s regulatory announcements and decisions.

The team also links, as appropriate, with Ofcom’s Directors in the Nations and co-ordinates Ofcom’s European and international relationships and related activities. This work extends to European and international stakeholder relations.

Support services

Supporting Ofcom

Ofcom’s work depends on the support of colleagues from a range of professional functions and disciplines.

Finance

The Finance Group is required to identify the financial resources needed for each aspect of Ofcom’s activities and ensure the organisation has the funding required. Its role includes:

Secretariat

The Secretariat provides administrative and governance support to the organisation, led by the Secretary to the Corporation. Its role includes:

Human Resources

The Human Resources team provides specialist advice and support to the organisation on a range of people-management matters. Its role includes:

Communications

The Communications team is responsible for:

During the period under review, Ofcom issued many major publications in print; around 67,000 copies of these were distributed to industry and members of the public. Around 1,000 Ofcom documents were published on the website in 2005/6.

Research commissioned from independent media evaluation analysts demonstrated that, on average, 60 per cent of UK adults encountered newspaper or magazine reports on Ofcom’s activities each month. Average monthly exposures per adult were 9.1. Of these articles, on average 37 per cent were in national newspapers, 31 per cent were in UK regional and local newspapers, 13 per cent were in specialist or trade journals, 17 per cent were in non-industry sector trade journals and two per cent were in consumer/leisure magazines.

Information Services (IS)

The Ofcom IS team and its contractors are responsible for managing Ofcom’s needs in:

When Ofcom was created, it inherited a joint venture between the Radiocommunications Agency and LogicaCMG for the provision of information services support. In September, Ofcom brought these desktop and infrastructure services in-house, extending support hours, improving quality and reducing costs.

In December, Ofcom selected Capgemini UK as its preferred bidder for an IS contract for running Ofcom systems and integrating or replacing the organisation’s legacy systems. The systems replacement programme, called Project Unify, will involve replacing around 50 individual IT applications with new integrated technology across the organisation in areas such as licensing, field operations, finance, HR, project management, document creation, management and publishing, and the Ofcom Contact Centre.

Directorate of Planning and Development

The Planning and Development team aims to ensure Ofcom’s workload is delivered within resource and time constraints. Its role includes:

Facilities

The Facilities team is responsible for the overall management of Ofcom’s working environment, including:

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