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Home > About Ofcom > Accountability > Annual Reports and Plans > Ofcom Annual Report 2005 - 06 > Operating and Financial Review


Operating and Financial Review

Operating and Financial Review

Performance and evaluation

In 2005/6 Ofcom continued to focus on delivering operating savings and improving internal efficiency. By delivering projects below our planned operating budget and rationalising the property portfolio we were able to reduce the overall cost of regulation to the sector, fund part of our inherited pension fund deficits and invest in the organisation’s long-term IS needs.

Key operating and financial highlights

  • 115 key policy consultations and statements delivered, against 76 planned.
  • Ofcom decisions reduced or targeted regulation more often than they increased it.
  • Two consultations received approximately 2,400 responses, with the remaining 46 consultations receiving 1,015 responses.
  • Impact assessments carried out in 40 consultation documents.
  • Operating costs for 2005/6: £129.0m.
  • £4.0m returned to stakeholders from savings in operating expenditure.
  • Repaid £17.8m of DTI loan.
  • Disposal of legacy property for £2.9m.

Evaluating Ofcom

Ofcom’s Annual Plan consultation for 2005/6 illustrated the framework for evaluating our performance. See Figure 1.

Figure 1: Ofcom's framework for evaluation

Figure 1: Ofcom's framework for evaluation

Measuring the performance of a regulator is not straightforward. Whereas private companies create value for their shareholders by maximising profits, Ofcom, as a public corporation, must serve the public interest by meeting our twin duties to the consumer and the citizen. This is not always easy to measure. For example:

Nonetheless, Ofcom believes it is important to develop ways of assessing performance, using metrics where appropriate. Ofcom will continue to develop its metrics over time.

In this report we focus on the top half of the framework in Figure 1, namely:

We assess and report on the equally important areas of market development and stakeholder perceptions separately during the year.

Market development: Ofcom believes that our performance should ultimately be judged by the outcomes we deliver to citizens and consumers in the markets which we regulate. Ways in which we judge this include:

Stakeholder perceptions: Ofcom continually engages with stakeholders and seeks their views on a wide range of issues including the quality of our outputs and how well we have consulted.

The remainder of this section looks more closely at:

Achieving objectives and key regulatory principles

The principles of better regulation are integral to the way Ofcom works. The Communications Act 2003 incorporated the better regulation principles developed by the Better Regulation Task Force (BRTF). When Ofcom was established, it translated these high-level principles into detailed regulatory principles to inform its day-to-day work. See Figure 2.

Figure 2: Ofcom’s regulatory principles

When we regulate

  • Ofcom will operate with a bias against intervention, but with a willingness to intervene promptly and effectively where required.
  • Ofcom will intervene where there is a specific statutory duty to work towards a public policy goal that markets alone cannot achieve.

How we regulate

  • Ofcom will always seek the least intrusive regulatory methods of achieving our policy objectives.
  • Ofcom will strive to ensure that our interventions are evidence-based, proportionate, consistent, accountable and transparent in both deliberation and outcome.

How we support regulation

  • Ofcom will research markets constantly and will aim to remain at the forefront of technological understanding.
  • Ofcom will consult widely with all relevant stakeholders and assess the impact of regulatory action before imposing regulation on the market.

Regulatory thinking has evolved since 2003. We therefore also seek to implement more recent principles representing best regulatory practice. We have paid close attention to the recommendations of Philip Hampton’s report Reducing Administrative Burdens: Effective Inspection and Enforcement and the BRTF report Less is More.

While the key themes arising out of the Hampton and BRTF reports are consistent with our existing principles, the reports imply a change in emphasis that we have sought to reflect in our work this year. We have therefore adopted the following additional principles:

The Hampton report emphasised the need to target universal inspection and enforcement activity on the basis of an assessment of risk. Areas where we have implemented a more targeted, risk-based approach include:

The BRTF report focused on a methodology for first quantifying, and then targeting, reductions in the administrative costs of regulation. Ofcom recognises that regulation imposes a cost on our stakeholders. The area where Ofcom imposes administrative burdens on the largest number of stakeholders (many of whom are small businesses or individuals) is in spectrum licensing.

Over the year Ofcom has actively sought to reduce the administrative cost of licensing activity: for example, we have decided to move from annual to lifetime licences for ships’ radio and amateur radio. Our 2006/7 Annual Plan included a Simplification Plan, which lists other areas where we will focus on reducing and better targeting regulation in the coming year.

However, in considering Hampton and the BRTF reports it is important to understand the ways in which Ofcom may be different from other regulators:

Taking account of both the principles set out in Figure 2 and the change in emphasis implied by the more recent debate on better regulation, we have focused on our performance assessment in four key areas:

2005/6 Annual Plan outputs

If Ofcom is to be able to respond to the key issues facing citizens, consumers and industry it is essential that we:

Each year we therefore run a consultation process to help us develop our Annual Plan, which includes a number of stakeholder meetings held in different parts of the UK.

Our Annual Plan for 2005/6 listed 76 key policy outputs (consultation documents and statements) that we expected to deliver during 2005/6. The number of outputs actually delivered was 115. The reasons for the increased number of documents delivered include:

However, not all of the original planned documents have been delivered because:

We believe these figures illustrate:

Ofcom also provides key services to stakeholders, such as licensing access to spectrum and providing advice via our Contact Centre. These activities are detailed later in this section.

Ofcom has a number of projects that will help us operate more effectively including re-organising our business processes and systems to achieve the most efficient and integrated use of resources. It is important to recognise that given the fast-moving nature of the sectors that we regulate, external events are likely to continue to limit our ability to plan ahead with complete accuracy.

Reducing regulation

A key element of better regulation is ensuring that regulation is properly targeted and does not impose undue burdens on business. This has been an important theme in the ongoing Better Regulation debate.

Ofcom’s statutory remit includes a wide range of areas. There is therefore no simple answer to the question of whether on balance we have increased or reduced the overall level of regulation.

Figure 3 summarises Ofcom’s policy statements published during 2005/6. In this figure:

The figure is intended to be illustrative; while it is necessarily subjective in some respects, it provides an overview of Ofcom’s regulatory decisions. From this we conclude:

In some cases it is not possible to draw single conclusions about the overall direction of regulation. The Strategic Review of Telecommunications concluded that existing regulation should be more focused and needed to be made more effective, and that this would provide scope for deregulation elsewhere. The Undertakings that Ofcom accepted from BT Group plc in September 2005 were designed to achieve this result. Although the effect of the Undertakings is to increase the regulation in specific areas, this targeted intervention will enable much broader deregulation in the future, for example in retail telecoms markets.

Figure 3 also illustrates our commitment to reducing regulation in a range of areas, including:

Figure 3 also demonstrates that Ofcom is prepared to take firm and effective action to protect citizens and consumers. For example, in order to address the serious issue of mis-selling in telecoms we imposed requirements upon all relevant communication providers to establish, and comply with, codes of practice on sales and marketing, in accordance with published guidelines.

Figure 3: Ofcom's key decisions - direction of regulatory change
Increase/new - Ofcom has increased regulation or has introduced new regulation
Mix/No change - Ofcom has not significantly changed the existing level of regulation, or the decision contains several elements which taken together do not significantly change the existing level
Streamline/Co-reg - Ofcom has improved the process and clarity of the regulation, or has included greater responsibility for stakeholders, but the underlying policy remains essentially the same
Dereg/Forebear - Ofcom has reduced the overall amount of regulation, or has decided not to introduce new regulation
n/a

Consultation periods and responses

Consultations are one of the key ways in which we engage with stakeholders and allow them to influence the direction of our policies. It is essential that we achieve a balance between:

Ofcom’s consultation guidelines state that we will generally allow ten weeks for consultation on complex policy issues. This is shorter than the Cabinet Office guidelines on consultation. However, we think this is appropriate given the speed with which the communications industry changes.

Sometimes we will need to move more quickly, and the consultation period will be less than ten weeks. When we decide to do this, our guidelines say that we will explain why. Where formal consultations need to be shorter than ten weeks, we will usually aim to allow five weeks, however, the time may vary depending on the issue.

Reasons why the appropriate consultation period may be shorter than ten weeks include:

Figure 4 shows an analysis of Ofcom consultation durations by sector. We believe this demonstrates a high level of adherence to our guidelines. We have looked on a case-by-case basis at those consultation documents where we had a shorter consultation period and did not explicitly explain why, to verify that there were valid reasons for the period chosen.

Ofcom also collects statistics on the number of responses to consultations. This is shown in Figure 5. Consultation responses are an important way in which Ofcom’s stakeholders engage with Ofcom’s decision-making process. The chart illustrates the large number of responses we have had over the year (based on consultations where we have subsequently published a statement). Two consultations had an unusually high level of responses (of approximately 950 and 1,500). The total number of responses to the remaining 46 consultations was 1,015. A small number of consultations have attracted a very wide range of responses, while most of the issues Ofcom consults on are narrower in scope and of interest to a smaller constituency of stakeholders. All consultations have had at least one response.

Impact Assessments

Impact Assessments (IAs) are a critical component of better regulation. They ensure that for any policy decision:

Ofcom has a statutory duty to publish a list of the impact assessments carried out over the year. This can be found in Section D.

Ofcom published its IA guidelines in July 2005, which emphasised Ofcom’s commitment to conducting assessments as a fundamental component of policy-making and which stated that we expect to carry out IAs in the great majority of our policy decisions. An analysis of where Ofcom’s consultation documents contained an explicitly labelled IA is shown in Figure 6.

Approximately 63 per cent of consultation documents contained an explicitly labelled IA. We have analysed the cases where there is no IA section. The reasons for this include:

We believe we are meeting the commitment in our guidelines, and will continue to ensure that IAs are carried out and properly presented in all cases where they are applicable.

Figure 4: Analysis of consultation duration
  Consultation period at least 10 weeks Consultation period less than 10 weeks and explanation given Consultation period less than 10 weeks and no explanation given
Telecoms 16 15 3
Broadcasting 11 1 2
Spectrum 5 7 0
Other 2 1 0
Total 34
(54%)		 24
(38%)		 5
(8%)

Figure 5: Responses to consultations

Figure 6: Analysis of impact assessments carried out
  Number of consultation documents
Total IA explicit in published document
Telecoms 34 19
Broadcasting 14 10
Spectrum 12 11
Other 3 0
Total 63 40 (=63%)

Financial performance

Ofcom’s statutory framework

Ofcom’s duties and powers are derived principally from the Communications Act 2003, which received Royal Assent on 17 July 2003.(-1-)

Ofcom is an independent statutory corporation accountable to Parliament. Its specific duties under the Communications Act 2003 fall into six areas:

  1. ensuring the optimal use of the electro-magnetic spectrum;
  2. ensuring that a wide range of electronic communications services – including high-speed data services – are available throughout the UK;
  3. ensuring a wide range of television and radio services of high quality and wide appeal;
  4. maintaining plurality in the provision of broadcasting;
  5. applying adequate protection for audiences against offensive or harmful material; and
  6. applying adequate protection for audiences against unfairness or the infringement of privacy.

The Communications Act also incorporated principles relating to how we should undertake our duties, requiring us to act in a way which is transparent, accountable, proportionate, consistent and targeted.

Financial framework

Under Paragraph 8(1) of the Schedule to the Office of Communications Act 2002, Ofcom is required to balance its expenditure with its income in each financial year. Sections 38 and 347 of the Communications Act 2003 also require Ofcom to raise income from each of the sectors it regulates such that it covers the costs to be incurred by Ofcom in regulating that sector. Ofcom must also apportion its common operating costs – those which do not relate directly to any one sector – in a proportionate manner across each of those sectors.

Ofcom raises its funds from a number of sources including:

Grant-in-aid covers the costs of regulating and managing the UK radio spectrum. It also covers those statutory functions and duties which Ofcom must discharge under the Communications Act but for which the Act provided no matching revenue stream. Examples include the statutory public interest test for media mergers and ex post Competition Act investigations in relation to networks and services.

Operating results

Ofcom’s actual operating costs for 2005/6 were £129.0m, £4.0m lower than budget.

Within its financial budget Ofcom delivered the majority of the policy outputs planned in the 2005/6 Annual Plan, as well a number of additional outputs. Ofcom continued to deliver services, such as spectrum licensing to stakeholders and to carry out enforcement activities.

The underspend against the operating budget reflects a number of items, the largest of which include savings in operating expenditure through insourcing desktop support functions in IS, savings due to operating below the budgeted headcount chiefly in policy production and taking opportunities to rationalise the property portfolio as these arose.

The £129.0m of actual operating costs for 2005/6 compares favourably with £142.0m which was the predicted sum of the cost of the legacy regulators after including the financial impact of additional statutory duties, annual inflation and VAT.

In addition to Ofcom’s own expenditure, the income and expenditure account also includes £6.7m for spectrum efficiency projects (2004/5: £ 3.1m) which are funded by grant-in-aid from the Treasury and £1.1m of expenditure for the programme of spectrum auctions. Spectrum efficiency projects are recorded within technological research in Note 6 to the financial statements and the initial work on the programme of spectrum auctions is represented under professional fees. These items and a further increase in professional fees, offset by a reduction in the seconded staff, are the principal contributors to the increase in operating expenditure presented in the income and expenditure report. The additional professional advice commissioned included advice on the transfers of pension liabilities from the principal civil service pension scheme, work in licensing deregulation, and a number of significant telecoms projects including mobile call termination.

A reconciliation is set out below which highlights the differences between the total operating expenditure as presented in the income and expenditure account and Ofcom’s actual out-turn of £129.0m.

Note 2 to the financial statements also presents, Ofcom’s actual out-turn for 2005/6, by sector.

Reconciliation from the income and expenditure account to Ofcom budget out-turn £’000
Operating expenditure- income and expenditure account 124,406
Spectrum Efficiency Scheme grant-in-aid (6,675)
Grant-in-aid expenditure on the programme of spectrum auctions (1,117)
Capital expenditure less depreciation 547
Vacant property costs 4,855
Pension contributions versus service costs 8,958
Actual rent payments 2,784
Non-operating income less non-cash provisions (1,280)
Proceeds from fixed assets (3,492)
Total Actual Operating Costs Out-turn 128,986

Ofcom calculates its operating revenue on the basis of its statement of charging principles taking into account the actual funds that it needs to collect to discharge its cash liabilities during the year. This treatment gives rise to an accounting surplus only. Ofcom returns the majority of actual surplus funds to stakeholders through the annual tariffs raised in the next financial year.

The operating surplus for the year under review was recorded as £31.6m compared with a surplus of £22.5m in 2004/5.The operating surplus is required, primarily, to repay the DTI loan; cover the rental and operating payments relating to vacant property inherited from the legacy regulators (which were charged via the vacant property provision to the income and expenditure account in 2003/4); pay for any investment in fixed assets; and fund the two defined benefit pension plans which were inherited as a result of the merger of the five legacy bodies.(-2-) The special contributions made by Ofcom in 2005/6 to address the actuarial deficit in the inherited defined benefit pension schemes are the principal components of the increased surplus. Full details of the pension plan are described in a subsequent section of this review. The utilisation of the surplus is also described in Note 2 to the financial statements.

On 31 March 2006, Ofcom published the Tariff Table for 2006/7, which was based on an estimated out-turn for 2005/6 of £129.5m.

A total of £3.5m – the difference between the original budget of £133m and the forecast out-turn – is already being passed back to stakeholders in 2006/7 as part of the current regulatory tariffs or reimbursement of grant-in-aid claims.

The sum of £0.5m, which represents the difference between the final out-turn and the forecast out-turn, will be returned to stakeholders in 2007/8 as a credit against 2007/8 licence and administration fees.

These sums have been deferred on Ofcom’s balance sheet at 31 March 2006.

Ofcom’s operating budget for 2006/7 is five per cent lower in real terms than the 2005/6 operating budget. Ofcom believes that the operating budget is a prudent figure after taking into consideration its work programme and the first stages of implementation of Project Unify, Ofcom’s long-term IS infrastructure project.

Taking into account this reduced operating budget and the significant returns to stakeholders in 2005/6, this will mean that regulatory fees for 2006/7:

People

At 31 March 2006, Ofcom had 776 (2005: 753) employees and two (2005: 30) secondees.The headcount figure is significantly below the 850-plus headcount at Ofcom’s launch in 2003 and the estimated 1,152 roles of the combined legacy regulators.

Pensions

Ofcom’s primary means of providing pension benefits is through a defined contribution pension allowance provided to all external recruits to Ofcom and to those colleagues from the legacy regulators who have chosen this option. This allowance may be used to make contributions to the Ofcom defined contribution stakeholder pension plan. Other colleagues from the legacy regulators are provided with membership of the defined benefit pension schemes.

Ofcom has reduced its exposure to the greater financial risk associated with defined benefit pension schemes by introducing the pension allowance and limiting the potential growth of pensionable salary under defined benefit commitments.

Ofcom’s approach has proved to be successful in minimising liability while also ensuring colleagues are able to set aside funds for retirement. In total, 75 per cent of Ofcom colleagues are employed on terms with access to a stakeholder pension plan; 21 per cent are on Ofcom terms with a defined benefit pension with restricted pensionable salary growth; and just 4 per cent remain on the existing terms inherited from legacy organisations.

For those colleagues who joined Ofcom from the legacy regulators and who elected to retain membership of a defined benefit pension scheme, Ofcom operates two such schemes, which are closed to new entrants:

The accounting treatment of these defined benefit schemes is set out in Notes 13 and 26 of the notes to the financial statements. These show that Ofcom has a pension asset as of 31 March 2006 of £10.2m as measured by Financial Reporting Standard 17 (FRS 17), of which £8m relates to the former ITC Plan.

During the year, 83 colleagues transferred their deferred pension provision from the Principal Civil Service Pension Scheme (PCSPS) to the Ofcom scheme, as did 45 colleagues who were members of the former ITC Plan. Ofcom expects to receive assets of around £6m (measured at 31 March 2006) from the PCSPS in relation to this transfer. The latest actuarial valuation of the Ofcom Plan is currently being prepared as of 31 March 2006 and will be finalised later in 2007.

The ITC scheme is a relatively mature scheme, compared to many similar schemes, in that more than 85 per cent of the liability relates to pensioners or deferred pensioners. The use of the discounting assumptions stipulated by FRS 17 gives rise to an accounting asset. By contrast, the assumptions used by the actuary for the actuarial valuation give rise to a net deficit in the plan at 1 January 2004 of £6.0m and this forms the basis of the recommended annual contributions to the scheme. The next actuarial valuation will be carried out at 1 January 2007.

Ofcom made (and continues to make) cash contributions to the former ITC Plan on the basis of the actuarial valuation. These cash contributions, rather than the amount charged to operating surplus (as calculated under FRS 17), are included in the expenditure used to calculate the tariffs charged to stakeholders each year.

During the year, Ofcom made defined benefit contributions of £9.6m to the two defined benefit pension schemes. Separately, Ofcom colleagues in receipt of the pension allowance elected to pay a total of £2.0m into the Ofcom defined contribution stakeholder pension scheme. The contributions to the defined benefit schemes included £1.9m paid in advance and a special contribution of £4m to the Ofcom Plan to fund the deficit arising as a result of the bulk transfers.

Additional funds collected on behalf of HM Treasury

Ofcom’s funding for spectrum management activities is ultimately derived from the fees paid by licensees to the UK Exchequer. In addition, Ofcom is responsible for determining and collecting Additional Payments made by certain broadcast licensees using valuable spectrum. In total, those monies, collected by Ofcom on the Government’s behalf, represent a significant contribution to the public purse. In 2005/6, in accordance with Section 400 of the Communications Act, Ofcom invoiced and collected £281.3m (£52.9m of which was refunded to licensees following a revision of licence terms) from wireless communications and broadcasting companies in spectrum revenues and licence receipts.

At 31 March 2006, £39.8m (2005: £35.3m) of spectrum fees were uncollected. Most of these debts were not due for payment and will be recovered in the ordinary course of business. No debts may be written off without authorisation from the DTI, and HM Treasury is also consulted in respect of write-off requests for significant balances. At the balance sheet date, the following significant amounts had been outstanding for more than 12 months:

  • £1.5m owed by Inquam Telecom (Holdings) Limited – a legal agreement between Ofcom and Inquam has agreed a future repayment plan; and
  • £0.2m owed by Quiktrak (UK) Limited, a company in liquidation. At the date of this report, Ofcom does not expect to recover this debt.

Investments in fixed assets

During the full-year period under review, Ofcom invested a total of £6.6m (2005: £5.6m) in tangible fixed assets and £0.9m in intangible fixed assets. Ofcom’s investment in information systems and equipment, which relates primarily to Project Unify – a multi-year programme to replace 45 different IS systems – accounted for £4.6m of assets under construction.

On 31 March 2006 Ofcom sold its investment in Whyteleafe Hall for £2.9m after disposal costs.

DTI loan

Ofcom’s establishment and restructuring loan of £52.3m is repayable to the DTI in the period from March 2004 to March 2008. The repayment of the loan capital and interest is funded from the main sources of income for Ofcom. The phasing of repayments is determined under the loan agreement with the DTI. Ofcom has allocated the launch costs for the complete repayment period until March 2008 on a proportionate basis, using the amount of expenditure incurred by the legacy organisations in each sector as the basis for allocation.

During the year under review, Ofcom repaid £17.8m of the loan and at 31 March 2006, the loan balance outstanding was £10.4m.

Property management

As in 2005/6, Ofcom has adopted a prudent approach in providing against all future vacant property costs that are surplus to requirements. The provision is based on all future premises cash flows up to the earlier of either the first lease break, or the end of the lease, discounted by the Treasury recommended cost of capital. While it is probable that the longer leasehold properties will be disposed of at some stage, it is not possible to estimate the associated income reliably. Ofcom has therefore taken the prudent approach of not recognising any future income unless commitments are already in place or reasonably certain.

During the year ended 31 March 2006, £4.9m of the vacant property provision was utilised and, after taking into account the unwinding of the 2005/6 element of the discount on the provision of £0.3m, the provision at 31 March 2006 was £10.7m (2005: £15.2m).

Statistical data

Service delivery and enforcement

As well as developing policy, Ofcom provides services to stakeholders and undertakes enforcement activity. Ofcom has a range of Key Performance Indicators (KPIs) to measure how we are delivering these services. Together with financial performance, they provide a measure of our internal efficiency and effectiveness.

The data in this section relates to the following areas:

In most areas Ofcom is operating on – or close to – the targets we believe are required in order to meet stakeholder needs.

Numbering

Ofcom is responsible for managing telephone numbers in the UK. As part of this we process applications for blocks of telephone numbers from communications providers.

Ofcom is required to make a determination on applications for telephone numbers within three weeks of receipt of all relevant information. During the period under review, that requirement was met in 97 per cent of cases. Of the remaining three per cent, the extended period was agreed with the applicant in all but one case.

Wireless Telegraphy Act licensing

Issuing licences

Ofcom issues around 30 different kinds of non-discretionary WT Act licence. These are generally referred to by the name of the equipment they licence, such as Ships’ Radio Licence and Satellite Network Licence.

The non-discretionary licence types are divided into three larger categories: A, B and C.

Ofcom is required to report on its spectrum management activity in detail; the tables which follow set out the non-discretionary and discretionary WT Act licensing activity undertaken during the period under review.

Spectrum (WT Act) Licences (1 April 2005 – 31 March 2006)

Category A
Licences that involve no frequency assignment, site clearance or international co-ordination  
  Licences issued April 05 – March 06 Licences issued April 04 – March 05 Total on issue as at 31 March 06
PBR UK General 957 799 4,206
Fixed Wireless Access (5.8 GHz) formerly 5.8 Ghz 62 95 182
Business Radio (Self-Select) formerly Self-Select (One-way Paging) 641 568 6,945
Business Radio (Suppliers) formerly PBR Suppliers 33 40 420
Police and Fire 11 0 123
Subtotal for Business Radio products 1,704 1,502 11,876
Radar Level Gauge 21 23 431
Total for Category A 1,725 1,525 12,307

Category B
Licences that involve no frequency assignment but no site clearance or international co-ordination  
  Licences issued April 05 – March 06 Licences issued April 04 – March 05 Total on issue as at 31 March 06
Automatic Identification System 34 0 34
Coastal Station Radio (International) 29 32 507
Coastal Station Radio (UK) 31 27 457
Coastal Station Radio (Marina) 24 54 432
Coastal Station Radio (Search and Rescue) 1 0 1
Coastal Station Radio (Training School) 60 48 128
Maritime Radio (Suppliers and Demonstration) 6 26 92
Maritime Navaids and Radar 28 43 113
Differential Global Positioning System 0 0 17
Subtotal for Deregulation and Contracting-Out products 213 230 1,781
Business Radio (Standard) formerly PMR Standard – (UK General) only 0 2 186
Business Radio (IR 2008 Data) formerly Interface Requirement 2008 4 5 12
Business Radio (Speech and Data) formerly On-site PBR (Speech and Data) 2,680 2,938 23,919
Business Radio (On-Site Local Communications Systems) formerly On-site PBR (Local Communications) 70 112 1,336
Business Radio (On-Site Hospital Paging and Emergency Systems) formerly On-site PBR (Hospital Paging and Emergency Speech) 7 10 466
Business Radio (On-Site One-Way Paging and Speech Systems) formerly On-site PBR (One-way Paging and Speech) 146 151 1,793
Business Radio (Wide-Area Speech and Data Systems) formerly Wide-Area PBR (Speech and Data) 1,531 1,685 10,727
Business Radio (Wide-Area One-Way Paging and Speech Systems) formerly Wide-Area PBR (One-way Paging and Speech) 22 10 303
Business Radio (Wide-Area Distress Alarm Systems) formerly Wide-Area PBR (Distress Alarms) 40 11 60
Business Radio (National and Regional) formerly National and Regional PBR 4 1 62
Business Radio (Common Base Station) formerly Common Base Station Operator 28 39 589
Business Radio (CBS – (Band I and Sub Band I of Band III) formerly (Band I) and (Sub Band I of Band III) CBS 3 3 16
Business Radio (Public Mobile Data, Non-voice) formerly Public Mobile Data (non-voice) 0 0 4
Business Radio (Public Access Mobile Radio) formerly Public Access Mobile Radio 0 0 4
Business Radio (Public Wide-Area Paging)formerly Public Mobile Operator (for public wide-area paging) 0 0 3
Public Safety Radio 5 0 5
Remote Meter Reading 0 1 4
Scanning Telemetry 1 45 30
Subtotal for Business Radio products 4,541 5,013 39,519
Total for Category B 4,754 5,243 41,300

 

Category C
Licences that require frequency assignment and site clearance and/or international co-ordination  
  Licences issued April 05 – March 06 Licences issued April 04 – March 05 Total on issue as at 31 March 06
Fixed Links 31 50 369
Satellite (Permanent Earth Station) 16 24 112
Satellite (Transportable Earth Station) 43 47 127
Satellite (Earth Station Network) formerly Very Small Aperture Terminal 8 17 39
Total for Category C 98 138 647

Test and Development Licences
  Licences issued April 05 – March 06 Licences issued April 04 – March 05 Total on issue as at 31 March 06
Non-Operational Development Licence 247 281 255
Non-Operational Temporary Licence 31 160 31
Total for Test and Development 278 441 286

 

Mobile and Broadband Wireless
Licences issued through spectrum auction or awards  
  Licences issuedApril 05 – March 06 Licences issuedApril 04 – March 05 Total on issue as at 31 March 06
2G Cellular Telephones 0 0 4
3G Cellular Telephones 0 0 5
2G Channel Islands and Isle of Man Cellular Telephones 3 0 7
3G Channel Islands and Isle of Man Cellular Telephones 4 0 6
Fixed Wireless Access and Broadband Fixed Wireless Access 28 GHz, 3.6 GHz and 3.4 GHz 0 0 10
Fixed Wireless Access & Broadband Fixed Wireless Access Channel Islands and Isle of Man 28 GHz, 3.6 Ghz and 3.4 Ghz 2 5 7
Total for Mobile and Broadband Wireless 9 5 39

Most category A licences are dealt with by the Radio Licensing Centre (RLC), responsible for amateur, Citizen’s Band and ships’ radio licences. The Civil Aviation Authority (CAA) issues aircraft licences and the Joint Frequency Management Group (JFMG) issues licences and authorisations for outside broadcasts and programme-making and special events.

Non-discretionary Spectrum Licences
Partners’ Activity Licences issued April 05 – March 06 Licences issued April 04 – March 05 Total on issue as at 31 March 06
Radio Licencing Centre (RLC) issues licences for CB, Amateur and Maritime 157,256 167,561 150,092
JFMG issues licences for Programme-Making and Special Events 2,417 2,243 2,822
CAA issues licences for Aeronautical 14,417 11,200 12,825
Total 174,090 181,004 165,739
 
Total Number of Licences – all categories 180,954 188,356 220,318

Spectrum Licensing KPIs

Key performance indicators (KPIs) are currently in place for each category of licence. These measure the time taken by Ofcom to issue the licence and vary according to the licence type. For Category A licences the KPI is for 100 per cent of valid licence applications for new or varied services to be awarded or rejected (with explanation) within seven days of receipt by Ofcom. The KPI for Category B licences is 90 per cent of valid licence applications for new or varied services to be awarded, or rejected with explanation, within 21 days; the remainder to be awarded or rejected within 42 days of receipt by Ofcom. The Category C KPI is for 100 per cent of valid licence applications for new or varied services to be awarded or rejected (with explanation) within 42 days of receipt by Ofcom; except, where international clearance is involved, applications to be awarded or rejected within 60 days or an explanation of the delay to be given. Overall customer service satisfaction levels are at 90 per cent, with 91 per cent satisfied with the speed of receipt of licences. (Source: Ofcom survey.)

Key Performance Indicators
  KPI target for time to issue licence KPIs achieved April 05 – March 06 KPIs achieved April 04 – March 05
Category A Licence 100% in 7 days 94% 82%
Category B Licence 90% in 21 days 96% 92%
  100% in 42 days 100% 97%
Category C Licence 90% in 42 days (100% excluding where international clearance is involved) 94% 95%
  100% in 60 days (including where international clearance is involved) 95% 97%

 

Test and Development Key Performance Indicators
  KPI target for time to issue licence KPIs achieved April 05 – March 06 KPIs achieved April 04 – March 05
Category A Licence 100% in 7 days 92% 56%
Category B Licence 90% in 42 days 100% 100%
Category C Licence 100% in 60 days 100% 100%

 

Partners’ Performance
  KPI target for time to issue licence KPIs achieved April 05 – March 06 KPIs achieved April 04 – March 05
RLC 100% in 7 days 100% 100%
JFMG 100% in 7 days 100% 100%
CAA 100% in 7 days 100% 100%

Spectrum Operations

Field Operations activity

Ofcom’s Field Operations team is permanently on call to take action against illegal transmissions, to resolve interference and to undertake compliance audits of radiocommunications installations in every part of the UK. The following table lists our activities.

Work Programme Activity/Incident Period 2005/6 Reporting Year Period 2004/5 Reporting Year
Interference investigation requests received 2,946 3,159
Baldock: Reports received of serious spectrum interference (see note below) 2,858 2,399
Interference investigation cases closed 2,307 2,564
Spectrum assignments completed 5,656 6,619
Enforcement operations against unlicensed and criminal activity 1,588 1,534
Radio system compliance inspections completed 1,277 4,024
Successful prosecutions for criminal spectrum activity 65 50
Unsuccessful prosecutions for criminal spectrum activity 0 0

Field Operations KPIs

The Ofcom Field Operations team seeks to meet the terms of a number of key performance indicators, details of which are set out here. Customer satisfaction levels are at 79 per cent for investigations, 93 per cent for inspections and 86 per cent for enforcement. (Source: Ofcom survey.)

  Quality of Service Targets Achievement 2005/6 Reporting Year Achievement 2004/5 Reporting Year
QST 1 100% of reports of interference to safety-of-life radio systems to be investigated within 24 hours 99.26% (134 out of 135) 99.47% (189 out of 190)
QST 2 a) 98% of reports of interference to commercial/professional radio systems to be investigated within five working days 98.53% (735 out of 746) 98.30% (639 out of 650)
QST 2 b) 100% of such reports to be investigated within ten working days 99.46% (742 out of 746) 99.54% (647 out of 650)
QST 3 a) 98% of reports of interference to domestic broadcast reception to be investigated within one month 99.33% (1,919 out of 1,932) 98.40% (2,282 out of 2,319)
QST 3 b) 100% of such reports to be investigated within two months 99.90% (1,930 out of 1,932) 99.44% (2,306 out of 2,319)
QST 4 a) 90% of customers requesting interference investigation to be provided with case progress report within ten working days of start of investigation. 99.25% (2,127 out of 2,143) 99.62% (2,608 out of 2,618)
QST 4 b) 100% of such customers to be provided with case progress report within 20 working days of start of investigation 99.67% (2,136 out of 2,143) 99.96% (2,617 out of 2,618)

Broadcasting

Programme complaints

Ofcom has a statutory duty to consider and adjudicate on complaints from listeners and viewers about television and radio programmes transmitted by UK broadcast licensees, S4C and the BBC.

A total of 1,102 cases were closed.

During the period under review, Ofcom’s Content and Standards Group reached decisions on a total of 14,227 programme complaints, of which 14,025* were complaints about programme standards (including issues relating to political advertising and the amount and distribution of advertising) and 202 were complaints about alleged unfairness and/or infringements of privacy.

Of the programme standards cases closed:

  • five broadcasters were subject to statutory sanctions (single or multiple programmes/issues) (23 complaints about 16 issues)
  • 63 programmes/issues** were found to be partially in breach/in breach (494 complaints)
  • 109 programmes/issues were resolved/partially resolved (334 complaints)
  • 914 programmes/issues were not in breach (13,174 complaints*)

Number completed within target:

  • Straightforward cases – 84% closed within target of 40 days (target: 80%)
  • Complex cases – 83% closed within target of 60 days (target: 80%)

* Includes 8,860 post-transmission complaints about BBC2’s Jerry Springer – the Opera
** ‘Programme/issues’ includes cases where there may be several programmes (for example, in a series) but the same issue is subject to complaints.

Fairness and privacy

The Fairness Committee is Ofcom’s most senior decision- making body with respect to fairness and privacy cases. It is a committee of Ofcom (with delegated powers from the Ofcom Main Board) and consists of a minimum of three members, all of whom are drawn from the Content Board. It considers cases referred to it by the Executive (for example, due to their complexity). It also reviews decisions made by the Executive where either one or both of the parties have made a case for that decision to be reviewed.

Number of cases closed: 202

Of the fairness and privacy cases closed 18 were considered by the Fairness Committee (5 of which involved a Hearing).

Of these:

  • 11 were upheld (of which 9 were upheld in part); and
  • 7 were not upheld

Of the fairness and privacy cases closed 184 were considered by the Executive.

Of these:

  • 8 were upheld (of which 7 were upheld in part);
  • 44 were not upheld;
  • 7 were resolved (following appropriate action taken by the broadcaster); and
  • 125 were not entertained or discontinued after entertainment.

60% (125 cases) completed within target of 125 days. This is short of Ofcom’s target of 80%. During the period under review, Ofcom experienced an overall increase in the number of fairness and privacy complaints of 47% (in comparison to the legacy regulators). The review mechanism introduced by Ofcom has also meant that complaints are open for longer.

Content Sanctions Committee

Cases which the Executive believe may warrant the consideration of a statutory sanction are referred to the Content Sanctions Committee, comprising five members drawn from the Ofcom Board and the Content Board. The Content Sanctions Committee is quorate with three Content Board Members. The Content Sanctions Committee is chaired by either the Chairman of the Content Board or Kip Meek (member of the Ofcom Board and the Content Board).

During the period under review, five cases were referred to the Content Sanctions Committee.

The Content Sanctions Committee decided to fine*:

  • Video Interactive Television Plc in respect of its service Channel U – £18,000
  • Life TV Media Ltd in respect of its service Life TV – £12,000.

The Content Sanctions Committee decided to fine* and direct:

  • Channel 4 Television Corporation – £5,000 and a Direction to transmit Ofcom’s statement of finding
  • Piccadilly Radio, in respect of its service Key 103 FM Manchester - £125,000 and a Direction to transmit Ofcom’s statement of finding three times daily for a week.

The Content Sanctions Committee decided to direct:

  • Bloomberg LP in respect of its service Bloomberg Television – Direction to transmit Ofcom’s statement of finding on three consecutive days.

*All monies received in fines are passed to the UK Exchequer.

Investigations programme

Ofcom has an investigations programme to deal with complaints about anti-competitive behaviour, breaches of certain ex ante conditions and disputes. The following table examines Ofcom’s activities in handling enquiries and full investigations during 2005/6, including performance against published targets (incorporating statutory targets).

Category and target Achievement level (for all closed cases during the reporting period irrespective of when opened) Achievement level (for closed cases opened during the reporting period)
Decision to reject or accept enquiry within 15 working days 78% (of 67 closed, 15 exceeded target with agreement) (100% with agreement for complex cases) 77% (of 67 opened, 64 closed, 15 exceeded target with agreement) (100% with agreement for complex cases)
Resolution of disputes (four months) 100% (three cases closed, none exceeded target) 100% (of eight opened, one closed). Note: three ongoing disputes will exceed the four month target due to exceptional circumstances
Competition Act investigations (six months where ‘no grounds for action’ decision made; 12 months for an infringement decision) 40% (five cases closed, three exceeded target) Note: includes one investigation under the Competition Act that was conducted on Ofcom’s own initiative 100% (of four opened, one closed). Note: includes one investigation under the Competition Act that was conducted on Ofcom’s own initiative. One case opened prior to the reporting period remains open and has exceeded target
Part 8 of the Enterprise Act investigations (six months to obtain undertakings) N/A. Note: one investigation under the Enterprise Act was conducted on Ofcom’s own initiative and is included in the data below N/A (none opened). Note: one investigation under the Enterprise Act was conducted on Ofcom’s own initiative and is included in the data below
Investigations into breaches of ex ante conditions and unfair terms in consumer contracts (four months for a closure statement or notification that a condition has been breached) 94% (18 cases closed, one exceeded target) 100% (of 16 opened, 11 closed). Note: one case opened prior to the reporting period was closed and exceeded target
Own-initiative investigations (six months) 100% (13 cases closed, none exceeded target) 100% (of 13 opened, nine closed)
Total investigations 90% (39 cases closed, four exceeded target) 100% (of 41 opened, 22 closed). No ongoing case opened during the reporting period had exceeded its target as at 31 March 2006

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. Performance against targets for handling queries and complaints is shown here.

Answering calls Reponding to correspondence Issuing Licences

85% customers satisfied or very satisfied with ease of contacting OCC over the telephone (Source: Ofcom survey.)

90% of consumer and licensing customer enquiries resolved in single phone call

(Target: 80% in 10 working days)
  • Broadcasting 98%
  • Telecoms 90%
  • Spectrum 84%
 (Targets vary between seven and 42 days depending on complexity of licence type)
98% of licences issued within target
Footnotes:

1.- Other statutes also form part of Ofcom’s rulebook. They are the unamended parts of;

2.-These were the Broadcasting Standards Commission, the Independent Television Commission, Oftel, the Radio Authority and the Radiocommunications Agency.


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