Annual Report and Accounts 2000-2001

Chief Executive's Review

It has been an eventful year. It began with the celebration of the 10th birthday of the creation of the Agency as a "next steps" agency of the DTI. But in the fast-moving world of communications, regulators are by no means immune from change and, by the end of the year, we were looking forward to an exciting but different future as part of a powerful new independent regulator, the Office of Communications or Ofcom. The year was also notable for the announcement of an independent review of the principles governing spectrum management under Professor Martin Cave, on which I say more below.

The continuing buoyant demand for spectrum is indicative of the vigorous growth of spectrum-based industries. Meeting that demand is a challenge, although one I welcome as it is a by-product of past and current success. Equally, unless we continue to meet that challenge, future prosperity and quality of life will be diminished.

The tenth anniversary of the creation of the Agency was an opportunity to look back over how much has been achieved as well as to look ahead. The world of radio has changed immensely over the decade. Radio is once again an emerging technology, providing as it does the freedom to communicate without the shackles of physical connections and the capability to roll out new networks quickly and cost-effectively. Research commissioned by the Agency has confirmed that radio makes a substantial contribution to the economy, estimated to amount to some £20bn a year in terms of benefits generated for consumers and businesses.

Of course, the credit for this belongs primarily to the entrepreneurs and businesses that have developed new products and services. But they depend for their success on gaining access to the radio frequencies they need when they need them. The Agency has played an important facilitating role by making spectrum available for innovation and growth. It has had considerable success in this and enjoys an international reputation as an effective and innovative spectrum manager. However, the task has become increasingly complex and we cannot afford to rest on our laurels.

Spectrum is a valuable and increasingly important resource, crucial to the success of many industries. How we manage the spectrum matters. It is because of this that I warmly welcome the review into the principles of spectrum management that was announced by the Chancellor in his pre-Budget report. As the Chancellor said, we have been successful in making spectrum available for new services. It is essential that the framework for spectrum management keeps up with the pace of change if the UK is to remain at the forefront of the information revolution. The Review will consider what further steps may be necessary, following the 1998 reforms, to make sure that all spectrum users, both commercial and non-commercial, have effective incentives for greater spectrum efficiency.

As a distinguished economist and member of the Spectrum Management Advisory Group, Professor Martin Cave is eminently well-qualified to lead the Review and I look forward with keen interest to his report later this year.

The single event that continued to generate most media interest in the Agency during the year under review was undoubtedly the auction of licences for Third Generation (3G) mobile services. The primary aim of the auction was to assign licences to those who could make best use of them. Despite subsequent changes in investor sentiment towards the technology sector and teething problems with 3G equipment, there can be little doubt that the auction delivered licences to those who valued them most, that the companies have a powerful incentive to roll out networks quickly and that the auction boosted competition by introducing a new entrant to the UK mobile communications market. Moreover, the complex logistics of the auction process worked faultlessly, a notable achievement that reflected the considerable effort and consultation that went into the auction design.

The Agency also auctioned licences for Broadband Fixed Wireless Access services, which will provide broadband and high-speed internet access to homes, businesses and offices. This was a lower profile exercise that raised less than some journalists had expected. Not all licences were sold. But it opened up important new market opportunities and increased competition in the supply of broadband services to over half the population and businesses in the UK. This result should not be underestimated. We are currently considering a proposal for an innovative extended auction that will enable operators to bid for unsold licences as market conditions change and provide further opportunities to roll out broadband.

The year has seen a number of other important initiatives and developments in spectrum management in all sectors of spectrum use - mobile and fixed services; public and private systems; terrestrial and satellite networks; telecommunications, broadcasting and other non-communications applications. These include progress in planning spectrum for radio local area networks, on which we have consulted extensively, re-aligning private business radio bands to reduce interference from continental Europe and the continuing roll-out of administrative incentive pricing to promote spectrum efficiency. We also made good progress on the survey of emissions from cellular base stations, following the report by the Independent Group of Experts on Mobile Phones. All this work is essential to ensuring that optimal use is made of spectrum to promote enterprise, innovation and competitiveness.

Radio waves do not stop at frontiers and the Agency's activities have a considerable international dimension. Decisions by bodies such as the International Telecommunication Union have a crucial bearing on future prospects for new services. The Agency aims to play a leading role internationally and invests considerable effort in pursuing UK interests. Agency staff are fully engaged in this work and chair a number of influential committees. It is indicative of the Agency's international reputation that, last June, the UK was chosen as the managing administration of CEPT, an important grouping that comprises 44 European administrations. I would make special mention of the World Radio Conference (WRC 2000) held in Istanbul, where, thanks to the efforts of the UK delegation led by Mike Goddard, we were successful in securing outcomes of considerable importance to the UK. Planning is now under way for WRC 2003.

Looking further ahead, strategic planning is essential to effective spectrum management. The Agency has produced several editions of its Spectrum Strategy both to inform business about future plans for spectrum management and to elicit feedback that we can use to anticipate future demand. The fifth edition of the Strategy was published in March 2000 and may be found on our website.

I am aware of no other spectrum administration that publishes a similar plan. I am not complacent, however, and we are continuing to develop and improve the Strategy to take greater account of the complex interaction between technical developments, market forces and social trends. Instead of basing our long-term planning on single forecasts, we are using scenarios to take a ten-year forward look at the future of convergence. These scenarios, which we published in June, are not predictions. Nor do they represent choices for the Agency. But they offer a range of alternative visions of the future that we are using as a strategic planning tool.

Looking at developments inside the Agency, we have maintained our modernisation drive to improve efficiency and our business processes. The Agency is wholly committed to delivering the Modernising Government objectives of improving standards of service and the Government's e-business targets. Together with our partner, Radio Spectrum International (RSI), we are undertaking a major programme of investment in new IT systems to enhance customer service and progress with electronic licensing. The overall effectiveness and value for money delivered by the partnership was identified in an NAO report published in December 2000 and subsequently endorsed by a Public Accounts Committee hearing in March.

The Agency's success in meeting the challenges it faces depends critically on the dedication, skills and abilities of colleagues at all levels. The Agency is committed to developing their careers and enabling them to realise their full potential. To this end, we have introduced career development programmes for a range of senior and middle managers, both technical and non-technical, and reinforced our policies on equal opportunities and diversity, issues in which I take a close personal interest. The strength of this commitment has been recognised by our re-accreditation to the Investors in People standard last May. The assessor praised the Agency's dedication to continuous improvement, a comment that for me sums up the whole ethos of what we are trying to achieve in the Agency.

Finally, I would like to return briefly to the subject of Ofcom.

The White Paper A New Future for Communications announced the Government's intention to replace the present patchwork of communications regulators by a single body, Ofcom, that will be responsible for regulating the converging telecommunications and broadcasting sectors. The White Paper also announced that all the Agency's spectrum management functions would be transferred to Ofcom.

The creation of Ofcom will require primary legislation, and the timing and content of this legislation will depend on decisions by Ministers and Parliament. However, the White Paper gave an important assurance that Ofcom will be required to manage the spectrum in the interests of all users, both inside and outside the telecommunications and broadcast sectors. I hope this will allay any concerns our customers might feel about the transfer of spectrum management to the new body.

Whether as part of the DTI or Ofcom, spectrum management plays a key part in creating a successful and competitive knowledge economy and an inclusive information society. It is impossible in this brief foreword to do justice to the full scope of the Agency's activities and achievements, which range over research, strategic planning, spectrum licensing, customer service, interference investigation and enforcement. The rest of this report contains much additional information, which I hope you will find of interest, and there is a wealth of further material about the Agency on its website www.radio.gov.uk

DAVID HENDON

The RA Management Board: back, l-r, Chris de Grouchy, Director of Corporate Services and Facilities; David Hendon, Chief Executive; Hazel Canter, Director of Spectrum Services; Front, seated, Barry Maxwell, Director of Customer Services; Mike Goddard, Director of Spectrum and International Policy

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