Ref: 05/03
Date: 10 February 2003

Proposals on how Oftel will raise money from the communications industry to fund its work for the year 2003-2004 have been published today by the regulator.

These take into account the new regulatory regime that will come into force on 25 July under the EU communications directives. This means that there will need to be separate regimes for before and after 25 July.

Up until 25 July, Oftel proposes to continue with existing funding arrangements, whereby it charges a fee to operators that hold a licence under the Telecommunications Act 1984.

But under the EU Directives all individual licences will be revoked and replaced with general authorisations and conditions imposed where necessary. These will apply not only to operators, as at present, but also to service providers.

After 25 July Oftel proposes that all companies in the electronic communications sector with an annual turnover of £5 million or more should contribute to the regulator’s running costs through an administrative charge. These proposals would mean that a number of service providers – most obviously the larger internet service providers (ISPs) - will be required to pay a fee for the first time. But the proposed turnover limit would also mean that approximately 100 companies who currently pay fees will no longer have to do so after 25 July.

David Edmonds, Director General of Telecommunications said:

"Oftel’s existing funding arrangements have worked well. They are based on the principle that those companies who are subject to regulation should pay the costs of that regulation.

"That principle will continue under the new Directives. But the new Directives apply not just to operators but also to service providers. It is, therefore, appropriates that major service providers – for example the ISPs – should be asked to pay towards the costs of regulation, alongside operators.

At the same time, I have no wish to impose unnecessary burdens on the smaller companies in the industry while they are striving to develop their businesses. After 25 July, therefore, we propose only those service providers and operators with an annual turnover of £5 million or more to contribute to Oftel’s funding. These proposals will take about 100 existing small companies out of the fee paying net.

"Before the year is out, of course, we expect Oftel’s functions as a regualotr to have passed to Ofcom. Ofcom will thus inherit the arrangements I am proposing today but it will tbe for them to decide how to develop them in future within the requirements of the EU directives.

The closing date for comments is the 11^th March 2003.

Notes to editors

1.The consultation document on notification and fees is available on Oftel's website at www.oftel.gov.uk/publications/licensing/2003/fees0203.htm Hard copies are available to the media from Oftel's Press Office, telephone 020 7634 8991, and to the public from Oftel's Research and Information Unit, telephone 020 7634 8761.

2. The 'statement of the revised licence fee regime' published in August 1999 outlining the collection of fees in for the first period and in previous years is available on Oftel's website at http://www.oftel.gov.uk/publications/1999/licensing/fees0899.htm

3. Oftel’s budget for 2002 – 2003 is £19.5 million which is funded by the collection of licence fees from operators. The budget for 2003 – 2004 has yet to be set.

4.Those liable to pay the fixed licence fee for this period will be expected to pay £945.21 for 115 days out of 365