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The interests of citizens and consumers are at the heart of everything we do at Ofcom. Whether it is technical spectrum policy or a decision concerning the Broadcasting Code, all of our work is driven by seeking to meet the interests of the UK’s citizens and consumers.

In what is now a £50bn market, promoting competition and protecting the citizens interest has delivered tangible benefits – lower prices, greater choice, new services and the introduction of innovative technologies. In the future we face major new challenges with next generation networks and digital convergence affecting so much of what we do.

Citizens and consumers are already reaping the benefits of competition.

Over half of all households have broadband from one of more than 500 different providers. There are 22 million UK households with digital television, whether it is terrestrial through their aerials, satellite or cable. Today, there are more mobile phones than there are people in the UK, with services offered by five network operators and many more retail-only providers. And one in five adults now owns a digital radio set, offering listeners a choice of up to 60 stations.

In last year’s report I talked about how convergence had begun to come of age, with consumers being able to buy a bundle of different services from a single provider.

Our research this year has highlighted how convergence is benefiting people, with the UK having some of the lowest average prices of communications services and bundled products offering significant discounts for consumers.

Promoting competition

There is far more that can be done and over the last year we have taken a range of further steps to promote competition.

We have laid the foundations to enable viewers to receive high definition channels on digital terrestrial television, starting in the Granada region next year. This will mean that consumers will be able to choose between terrestrial, cable and satellite television to watch the ultra-clear pictures offered on HD.

We released new radio spectrum to the market, including the frequencies known as L-Band, with a larger amount planned for release over the next two years. In particular, we plan to release the highly sought-after spectrum that will be freed-up through the switch to all-digital television in the UK. This spectrum, and other bands we will release over the next few years, will further enrich competition in the provision of the wireless services that people are today demanding.

We have continued work on a significant project to promote investment in the next generation of super-fast broadband networks, while promoting and sustaining competition in the telecoms sector. At the same time we have continued to promote competition through the Undertakings by giving BT’s competitors equivalent access to the wholesale products they need to provide services to end-users.

And we have reshaped the regulation of the radio sector, to help commercial radio and smaller stations remain competitive.

Section B of this Report highlights further projects we undertook in 2007/8 to promote competition.

Securing the public interest

We recognise that the market is not perfect – this is why regulators exist. Take public service broadcasting (PSB), for example. We believe that there are many very good programmes made by purely commercial broadcasters; programmes that are made in the UK, that reflect the culture and diversity of the UK and help to inform us about the world in which we live. We also recognise that the market alone will not provide enough of this type of programming and our review of PSB, which we began in 2007/8, will consider this issue.

Empowering consumers

We have also proposed new guidance to require communications providers to disclose the true cost of their services and to make sure that any additional charges on consumers’ bills reflect the providers’ direct costs.

In broadcasting, the year was dominated by the issue of trust, following what our Content Board member Richard Ayre identified in a report as a “systemic failure” in the responsible use of premium rate telephone services by broadcasters.

During the year we moved to restore trust by introducing a series of new regulations to make broadcasters directly responsible for consumer protection, particularly in relation to the use of premium rate telephone services. We took enforcement action against a number of broadcasters for breaching that trust and imposed the biggest fines in broadcasting history.

In our investigations into broadcasting standards, we issued sanctions against television and radio companies who had breached our Broadcasting Code, which is designed to protect consumers. The most high profile was our sanction against Channel 4 over Celebrity Big Brother, which we felt was mishandled by the broadcaster.

During 2007/8 we also defended challenging programmes that were, in our view, in the public interest. One example was our ruling on Channel 4’s Dispatches programme, Undercover Mosque. We found that there was no evidence that this programme had misled viewers and that in fact it was well-produced journalism that served the public interest.

With competition comes risk; in particular, the risk of companies engaging in overzealous or sometimes unacceptable practices to win or retain customers. In 2007/8 we significantly increased our efforts to protect consumers and empower them to take full advantage of competition.

In mobile telecoms, we published a proposed new mandatory code of practice to stamp out misleading sales and marketing practices. This followed a warning that if the sector didn’t clean up its act then we would issue tough new regulations.

We have made it easier for people to switch mobile phone provider, with the mobile telephone number transfer process (known as ‘porting’) cut from five days to two, with plans to bring this down to two hours next year.

In fixed-line telecoms, we have extended new rules to prevent ‘slamming’, when a customer’s telephone account is moved to another provider without their apparent consent. To ensure that the rules are being adhered to we launched a widespread investigation into slamming and have taken enforcement action against a number of companies that have engaged in this practice.

Section B of this Report outlines further projects where we have improved compliance and empowered citizens and consumers.

Ofcom: more efficient at a lower cost

Ofcom is predominantly funded by the companies that it regulates. We receive payments from broadcasting licensees and communications providers, as well as payments for the management of the UK radio spectrum. Because our operating costs are a net cost to our stakeholders, we are committed to improving our own efficiency.

On a like-for-like basis our budget for 2007/8 was £130.2m, lower in real terms than the budget for the previous year. In addition, our outturn for the year was £200,000 below budget and this sum will be remitted back to stakeholders in the form of lower regulatory fees.

To cover the cost of establishing the organisation Ofcom received a £52.3m loan from the Government. During the financial year we completed the repayment of the loan, together with the accumulated interest. Therefore, from 2008/9 onwards the loan will no longer be recouped through regulatory fees from stakeholders.

We are maintaining our focus on reducing costs. Our budget for 2008/9 is £133.7m, this is 1.5 per cent lower in real terms than the previous year’s budget and 17.5 per cent lower in real terms than our original full-year budget set in 2004/5.

The reduction in our operating budget is driven by a consistent desire to improve our operational efficiency. On 31 March 2008, Ofcom’s headcount was 812; this compares with 1,152 which was the combined actual headcount of the five organisations we replaced.

When Ofcom was created we inherited a variety of different information and telecoms systems. We are now part-way through a programme to integrate the IS systems, which are used in areas as diverse as licensing, field operations and human resources. During 2007/8 we made further progress in creating a single IS system operating across the organisation.

Further details of the IS project plus analysis of Ofcom’s finances can be found in Section C, with the full accounts in Section E of this Report.

As well as being committed to reducing our financial burdens on our stakeholders we are also committed to reducing our regulatory ones. Sections B and C of this Report highlight some of the areas where we have achieved this through deregulation and simplification. This is an important area of our work which we take very seriously. We always seek to take opportunities to reduce or simplify regulations that are consistent with meeting our other duties and we are always interested in hearing ideas from stakeholders on how we can achieve this.

Outlook: the year ahead

This is another very significant year for Ofcom. It promises major developments across the communications sector, in which Ofcom has an important role to play.

We set out our work for the coming year in our Annual Plan, published in April 2008.

In spectrum, we plan to release rights to use radio frequencies This spectrum has been identified for a wide range of different uses, including wireless broadband, such as the new technology known as WiMAX.

We will also conduct further work on the release of the most valuable radio spectrum that will be freed-up through the switch to digital television – the Digital Dividend. This will be released in 2009. Related to this, we will invite public service broadcasters to submit applications to use the additional capacity on digital terrestrial television that we are creating for new services such as high definition TV.

In television broadcasting, we will refine our proposals to sustain and develop public service broadcasting in the UK. We started a public debate on this shortly after the period under review with the publication of a consultation, which set out a number of future options for PSB. We will develop these proposals in autumn 2008 with a second consultation. We will also continue our investigation into the pay-television market with a second consultation due to be published later in the year.

In radio, we will implement a new regime for the regulation of analogue commercial radio stations’ formats. We will also contribute fully to the cross-industry Digital Radio Working Group, which is examining the future digital options for radio broadcasters.

In telecoms, we will continue our work to promote efficient and timely investment in super-fast fibre optic telecoms networks, while encouraging and sustaining competition. In doing so, we will work closely with Francesco Caio, who is undertaking a separate review of next generation access for the Government, considering matters that fall largely outside Ofcom’s remit.

We will continue to ensure that BT Group complies with its Undertakings – giving its competitors equivalent access to the wholesale products they need to provide services to consumers. One of the outcomes of the Undertakings was the creation of Openreach, an operationally separate business responsible for local access and backhaul telecoms network. In 2008/9 we will publish a consultation on Openreach’s financial framework to take account of changes in the market.

In the area of consumer policy, we aim to introduce a code to address the differences between headline advertised broadband speeds and the actual speeds that customers receive. We will also finalise our new rules and guidance on the mis-selling of mobile services and additional charges on consumers’ bills.

We will continue to take enforcement action against companies that do not compete fairly and we will ensure that all communications providers are members of a dispute resolution scheme to deal with customer complaints.

David Currie’s Chairman’s Message highlights some of the important work we have undertaken internationally during the financial year. In 2008/9 we will work with the Government to ensure that the interests of UK citizens and consumers are fully represented in the European Commission’s review of the European framework for electronic communications.

Ed Richards
Chief Executive

• Ofcom Annual Report 2007/08 - Section A [pdf]
• Adroddiad Blynyddol 2007-08 Ofcom - Adran A [pdf]

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