Radiocommunications Agency Annual Report and Accounts 95/96

Chief Executive's Statement

The publication of our annual report is an appropriate point at which to step back and to assess how effectively our organisational performance is measured. Are the measures relevant to the needs of our customers? Do they reflect all the areas of our business, or do they focus only on a select few? Are we improving performance across the board or sub-optimising to meet specific targets? These questions are no less relevant to a public sector Executive Agency then to a private sector company. Indeed, the monopoly nature of our core role provides added impetus.

Balanced Scorecard
The so called 'Balanced Scorecard' is a technique being used with increasing success in the private sector to ensure a holistic approach to both performance measurement and to the incentives for performance improvement. The scorecard examines performance from four perspectives:

i) Financial:
are we making appropriate and efficient use of our financial resources?

ii) Customers:
are we meeting customers' expectations and needs?

iii) Internal process improvement:
are we seeking to simplify, to deregulate where appropriate, to focus our resources for greatest value?

iv) Innovation and learning:
are we investing in the development of our staff and our systems, in understanding the dynamics of spectrum demand, in facilitating new services?

I will use this template to provide an overview of our performance in the 1995/96 Financial Year.

Financial Perspective

Our challenging target of improving financial efficiency by 5% was achieved. We generated a cash surplus of £4,751,000, £1,473,000 in excess of our public expenditure survey (PES) target of £3,278,000. Our aim is to hit the PES target precisely, neither exceeding nor falling short of it. We came much closer to doing this in 1995/96 than in 1994/95.

We also aim for accruals (commercial) accounts break-even, so that our charges equal our costs rather than generating a surplus. The accruals result for 1995/96 was a surplus of £2,981,000 down from £3,390,000 in 1994/95. This surplus was a consequence of investment - well above the annual depreciation charge - in business process re-engineering and in information systems, computer equipment and networks and new offices - all vital to secure future efficiency improvements .

In considering the accruals result, it should also be noted that the accounts of the last two years have been significantly affected by exceptional items. Before exceptionals, the accruals surplus of £5,378,000 is down on the comparable results of the past three years. This trend is expected to continue.

Customer Perspective
Our MORI annual customer surveys continue to show an improvement in customer perceptions of our service. However it is clear that there is a difference between the response times customers perceive for many of our licensing activities and those we measure ourselves. We will continue to work with our customers to ensure that our response times are consistent with their business needs. Similarly we will work to keep customers fully informed where difficulties in site clearance or international co-ordination introduce delays. We will also continue with our programme of devolving certain types of licensing to our regional offices where local knowledge adds value.

Our customers have clearly indicated that they appreciate the annual programme of regional customer seminars throughout the UK which both communicate our plans on key issues and provide direct access to the Agency's Management Board. These will continue with twelve meetings being held each year.

Our major role in international negotiations on access to radio spectrum continues to bring major benefits to the UK. I would highlight in particular the agreement achieved to make new spectrum (in the band 380-400 Mhz) available for a new integrated network for the emergency services both in the UK and throughout Europe.

Internal Process Improvement Perspective
The particular pleasure - and challenge - of the radio sector is the continuous growth in demand for new services. From cellular phones to radio fixed access, from fixed links to digital broadcasting, exceptional growth rates are the norm. In responding to this demand it is vital that we focus our Agency's resources to the maximum effect. We are working to:

i) simplify our processes and procedures in spectrum management and licensing;

ii) deregulate, through licence exemption of approved equipment, wherever prudent;

iii) hasten the shutdown of obsolescent products or services and the refarming of associated spectrum.

Much of this work is focused in our RA Unified Licensing Executive Systems (RULES) business process and information systems projects. We are also implementing a new accounting and resource management system (ALPACA). This both complements RULES in providing timely access to the detailed financial information on business performance and provides a full accruals basis for our accounting. These projects represent an exceptional investment, in both human resource and financial terms, in the future of our Agency.
We have also implemented a major re-structuring of our Local Customer Services operations throughout the UK. Whilst preserving the number of technical staff delivering service on the ground, we have consolidated the regional structure to give a smaller number of better resourced regional centres.

Innovation and Learning Perspective

We have identified four key areas of priority in enhancing the capabilities of our Agency.

Economic and Market Analysis
It is not widely appreciated just how much radio contributes to the UK economy. In October 1995, we published a study by NERA and Smith System Engineering Ltd that, for the first time, evaluated the economic benefits derived from radio. These were estimated at more than £10bn a year (1% of UK GDP). Consumer economic surplus and efficiency gains were assessed to be in the region of £7-£11bn per year. When linked to the exceptional growth and dynamism of this sector, its importance to the economy is clear. We plan a continuing programme both of economic analysis, to assist in key spectrum allocation decisions and more detailed service by service demand analysis to underpin spectrum planning.

Published Annual Spectrum Strategy
The second edition of our 'Strategy for the Future use of the Radio Spectrum in the UK' was published in May. We will continue to publish this each year. We aim to build a seamless document starting from predictions of market demand and development, through the assessment by our business units of the implications for spectrum requirements in each class of service, into our plans to meet this demand in a timely manner.

New Legislation
It is clear that in responding to the demand for spectrum we face significant congestion in certain frequency bands and geographical areas, notably the major cities and the corridors between them. So far the Agency has managed within a statutory framework that has survived relatively unchanged since 1904. This has served remarkably well but we are rapidly approaching the limits of its potential. Under present legislation, we have to rely exclusively on regulation. Licence fees are pegged to our costs and there is little scope to give spectrum users economic incentives to improve spectrum efficiency. Reform is now essential in order to provide the wider range of complementary market based tools needed to meet the challenges of the next century.

As I reported last year, consultation in 1994 showed a widespread agreement in principle that the present regime should be reformed - to allow licence fees to reflect more closely the economic value of spectrum. During 1995/96 a great deal of work was carried out to produce initial proposals, including a study into the effective use of spectrum pricing. I am delighted to report this year that the case for reform has been accepted by the Government in a White Paper, 'Spectrum Management into the 21st Century' published in June 1996. I am very grateful to all those individuals and organisations who have commented on the White Paper and the associated pricing study. Your views are vital as we move forward to legislation once Parliamentary time is available.
The White Paper marks a watershed for our Agency. I look forward to being able to report next year on both the outcome of the latest consultation and the progress towards legislation.

Investors in People
The core of our organisation is in the knowledge and skill of our staff. In a sector as fast moving as ours training and staff development play an essential role. Whether it be in the administrative challenge of managing spectrum pricing, or the engineering challenge of the transition to digital radio technologies such investment is vital. I'm pleased to report that we have given a formal commitment to the Investors in People process and are on the path to full accreditation.

Disaster Recovery
Whilst I have dwelt in this statement on the positive aspects of the growth and development of our Agency it would be wrong not to mark the exceptional shock of the damage to our South Quay headquarters in the IRA bombing on the evening of 9 February 1996. I would like to record my gratitude and relief that none of our staff were seriously physically injured, though the psychological and emotional scars remain. I also record our sorrow at the loss of life in South Quay Plaza where many of us knew, at least in passing, those who died. I can only pay tribute to the exceptional efforts of my Directors and staff at all levels throughout our Agency, which saw computer systems restored, an emergency HQ established at Buckingham Palace Road and City Road, and finally relocation to New King's Beam House whilst South Quay is repaired. That customer service continuity was very largely maintained is evident in the figures in this Report and it remains a remarkable achievement. It should also be remembered that our relocation from Waterloo Bridge House to South Quay in October 1995 was a great success. Our move over a single weekend was a major challenge - successfully delivered again by a team from all levels across the Agency.

M.J. Norton

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