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Soction A: Introduction Chairman`s Message 2
Chief Executive`s Report !
Annual Report of the Content Boaro 10
Soction B: Coro Arons oI Activity Telecommunications 18
Spectrum 30
Broaocasting Cross-Sector 38
Broaocasting Television !!
Broaocasting Raoio 2
International o
Investigations Frogramme 8
Supporting Stakeholoers o0
Support Services o2
Soction C: Opornting nnd Finnncinl Roviow Ferformance ano Evaluation oo
Iinancial Ferformance 7!
Statistical Data 78
Soction D: Stntonont oI Accounts nnd Corpornto Govornnnco Ioreworo 90
The Ofcom Boaro 9!
Corporate Governance 9o
Boaro Committees 98
Non-Boaro Committees 102
Fublic ano Farliamentary Accountability 10o
Impact Assessments Unoertaken 108
Statement of Responsibilities 110
Statement on Internal Control 112
Remuneration Report 11o
Soction E: Accounts Ior tho Poriod April 2005 Mnrch 2006 Certincate ano Report of the
Comptroller ano Auoitor General 12o
Income ano Expenoiture Account 128
Statement of Total Recogniseo Gains ano Losses 129
Balance Sheet 130
Cash Ilow Statement 131
Notes to the Accounts 132
Fresenteo to the House of Commons pursuant to the
Ofnce of Communications Act 2002, Scheoule 1 ,Sections 11 ano 12,.
Oroereo by the House of Commons to be printeo 20 July 200o.
HC 1280
Lonoon: The Stationery Ofnce
Frice _2!.00
Olcon Annual keporL and AccounLs lor Lhe perod Aprl Lo March
ChaIrmah's Message
Ofcon vos cstohIishcd os o convcrgcd rcguIotor,
in signincont port to hcIp stcvord thc tronsition hy
Britoin`s cIcctronic connunicotions industrics fron
onoIoguc to digitoI, hringing ncv scrviccs ond cnhoncing
quoIity ond choicc for consuncrs ond citizcns.
In the four years since I was nrst appointeo as Chairman
of Ofcom, that transition has accelerateo rapioly: at the
beginning of 2003 nearly one in three homes ano businesses
were still not connecteo to broaobano-enableo exchanges,
ano the consensus was that one megabit per secono
was likely to be the maximum speeo achievable. Tooay
broaobano availability is close to universal ano consumers
can get broaobano speeos 2! times as fast as the 2003
consensus. Over the same perioo, oigital television take-up
has risen from ! per cent to over 70 per cent of homes, ano
there is now a clear region-by-region programme of oigital
switchover, which will give all householos a choice of at least
two means by which to receive oigital television. In raoio,
the DAB market has grown from a few thousano sets to
more than three million tooay. Ano, in mobile, 3G services
which hao not then launcheo are now useo by more
than four million customers.
These are all signs of a healthy, innovative market meeting
consumer neeos. Effective regulation has an important part
to play in unoerpinning the oynamism of the sector, ano
Ofcom has sought to assist the market to function effectively
by promoting competition ano protecting consumers from
oemonstrable abuses of the market. Equally, however,
regulation that is past its sell-by oate can oistort the market
ano prevent innovation. Ofcom has therefore continueo its
programme of targeteo oeregulation, for example, towaros
the eno of 200/o we consulteo on proposals to remove retail
price controls in the nxeo-line telecommunications market.
Competition ano choice are generally better safeguaros of
the consumer interest than regulation. Tooay almost nine
million householos make their phone calls via provioers
other than the incumbent ano more than four million
resioential users ano one ano a half million small
businesses also rent their phone lines from competing
operators. At the same time, Ofcom has taken nrm action
against mis-selling by a small minority of operators to
ensure that consumers can have connoence in the integrity
of a competitive market.
During the year Ofcom completeo its four strategic reviews
of key component parts of the communications sector
telecommunications, raoio spectrum, raoio ano public service
broaocast television ano the focus has moveo on to oelivery
against the main challenges ioentineo in those reviews.
|Ofcom AnnuaI Report www.ofcom.org.uk
Introduction Section A
www.ofcom.org.uk Ofcom AnnuaI Report |
The BBC, with its new Charter ano signincant changes to
governance ano regulation, will remain central to provioing
auoiences with high quality, oistinctive content in this new
worlo. In the coming year Ofcom looks forwaro to builoing an
effective co-regulatory relationship with the new BBC Trust.
This will incluoe the new role given to Ofcom by Government
of conoucting rigorous ano inoepenoent Market Impact
Assessments of BBC new service proposals as part of the
BBC Trust`s Fublic Value Test.
A theme consistent to all of our strategic reviews is the arrival
of true convergence in the communications sector
at the corporate level with mergers ano acquisitions between
formerly oifferent parts of the sector ano in the convergence
of platforms, of oevices ano of content ano services.
That convergence is rightly acknowleogeo by the European
Commission in its oraft Auoiovisual Meoia Services Directive,
which contains many sensible ano forwaro-looking proposals
to liberalise aspects of broaocasting regulation, that renect the
changing nature of television. However, the Commission also
proposes to exteno state regulation beyono broaocasting into
a whole range of new meoia services. Ofcom has, ano will
continue to argue, alongsioe the UK Government ano many
in the sector, that in this area European Union-wioe regulation
is unoesirable in its oamaging effect on innovation. We also
believe that these proposals are almost certainly unworkable
in extenoing regulation beyono a manageable ano limiteo
number of broaocasters to thousanos of services, ano inoeeo
inoiviouals, creating content on new meoia platforms. We
have maoe clear our view that the application of criminal law
in response to key public concerns, such as the protection of
chiloren, backeo by effective self-regulation ano co-regulation,
is a much better way forwaro. The UK has a strong traoition
in this regaro with booies such as the Internet Watch Iounoation
ano the Aovertising Stanoaros Authority, the co-regulatory
booy for broaocast aovertising, whose Broaocast Committee
of Aovertising Fractice has, for example, proposeo new
restrictions on the content of television aovertisements for
fooo ano orink prooucts in response to important public
concerns about oietary imbalance in chiloren.
As foreshaooweo in our last annual report, international
events have taken greater prominence this year. In aooition
to the Auoiovisual Meoia Services Directive, the European
Commission has embarkeo on a review of the EU Iramework
for Electronic Communications, with signincant input from
the European Regulators Group ,ERG,, chaireo this year by
my executive Boaro colleague, Kip Meek. The ERG has also
been working with the Commission to nno a practical solution
to excessive wholesale ano retail prices for international mobile
roaming across Europe. On the wioer international stage,
Ofcom is representing the UK`s interests at the International
Telecommunication Union`s Regional Raoio Conference
the largest ano most signincant international negotiation
about the allocation of raoio spectrum in more than
!0 years.
In unoertaking its work the Ofcom Boaro is assisteo by a
number of committees ano aovisory booies. Fhilip Graf `s
message, later in this Annual Report, gives an overview of the
valuable work which the Content Boaro ,itself a committee of
the main Boaro with oelegateo powers, has unoertaken this year.
The inoepenoent Ofcom Consumer Fanel continues to
provioe thoughtful ano constructive aovice on issues of
importance to the resioential ano small business consumer.
We welcome the Government`s recognition of the Consumer
Fanel`s oistinctive ano strategic role in the Government`s
wioer proposals on consumer representation. The Aovisory
Committee for Oloer ano Disableo Feople, the Aovisory
Committees for the Nations ano Regions ano the Ofcom
Spectrum Aovisory Boaro have all provioeo gooo counsel
ano maoe signincant input to Ofcom`s policy-making.
I woulo like to express the Ofcom Boaro`s appreciation to the
Chairs ano Members of these booies for their time ano aovice.
While Ofcom is statutorily an inoepenoent regulator, we are
also accountable to Farliament. In aooition to the series of
brienngs to MFs ano appearances before Select Committees,
set out on pages 10o-107, we warmly welcome the initiative
taken by the Chairmen of the Culture, Meoia ano Sport
ano Traoe ano Inoustry Select Committees to holo a joint
hearing into Ofcom`s work. Convergent accountability for
a convergeo regulator seems to us both sensible ano forwaro-
looking. The nrst such joint hearing took place just after
the eno of the 200/o nnancial year. We look forwaro to
appearing at such joint hearings in the years to come.
As I enter into my nfth year as Ofcom Chairman ano the
organisation continues to mature, we are seeing a healthy
ano appropriate oegree of change arouno the Boaro table.
Last year our nrst Deputy Chairman Richaro Hooper stooo
oown. Richaro was a critical member of the Ofcom Boaro
ano we greatly appreciateo his wealth of experience ano
wisoom. In January 200o Fhilip Graf joineo as the new
Deputy Chairman ano Chairman of the Content Boaro.
We also welcomeo Stephanie Liston as a Non-Executive
Member in September 200 ano Sean Williams as an
Executive Member in January 200o ano the terms of
Non-Executive Members Ian Hargreaves ano Sara Nathan
were also extenoeo. Iinally, as Stephen mentions later in
this Report, he intenos to stano oown as Ofcom Chief
Executive this autumn. On behalf of the Boaro I woulo
like to express our thanks to Stephen for all his haro work
ano achievements.
Dovid Curric, Chairman
Our oin for thc nnoncioI ycor 2005/6 vos to drivc
dcIivcry: ctcrnoIIy, of positivc chongcs for thc
scctor, ond intcrnoIIy, of ncv voys of vorking
vhich copitoIiscd on thc post-ncrgcr cfncicncics
goincd in prcvious ycors.
During the year, our main focus lay in four areas:
implementation of the outcomes of the strategic sectoral
reviews, in telecommunications, in television public service
broaocasting, in raoio ano in spectrum, particularly
traoing ano auction preparation,
the establishment of new approaches to two
increasingly critical challenges: consumer policy
ano international engagement,
removal of unnecessary regulatory obligations upon
inoustry, ano the continueo imposition of a high hurole
to challenge calls for the aooition of new regulations, ano
internal simplincation, greater operational efnciency ano
cost reouction, for the thiro year running, Ofcom operateo
unoer an RFI minus buoget, yieloing lower regulatory fees
to inoustry.
1he secLor and Olcon
The conclusion of the Strategic Review of Telecommunications
in September 200 markeo the beginning of a perioo of
signincant change in the traoitional nxeo-line inoustry ano,
over time, potentially across the wioer communications
sector as a whole.
The prospect, for the nrst time, of access to BT`s local access
infrastructure on terms ioentical to those previously only
offereo to BT`s own retail activities has stimulateo broao
interest in the potential for new services over the local loop.
In parallel, our work to stimulate ano support wholesale
competition in nxeo-line telecoms markets has brought
about real benents to consumers ano businesses, average
call costs have fallen by 2 per cent since 2003, ano average
broaobano costs have fallen by over 0 per cent while
typical connection speeos have quaorupleo. By the eno of
the reporting perioo, more than 10 million householos ano
small businesses hao broaobano connections ,compareo
to 1.8 million at the start of 2003,, with more than 80,000
householos a week signing up to broaobano for the nrst time.
Ofcom`s Spectrum Iramework Review ano its associateo
release to the market of !00 MHz of prime spectrum over
the next few years has begun to open up the potential for
innovative new broaocasting ano wireless communications
ChIeI ExecuIIve's ReporI
|Ofcom AnnuaI Report www.ofcom.org.uk
Introduction Section A
www.ofcom.org.uk Ofcom AnnuaI Report |
services. Many of these services will oepeno on the re-use
of spectrum releaseo when analogue television broaocasting
ceases as a result of oigital switchover between 2008
ano 2012. In 200/o we starteo the preparatory work
for Ofcom`s Digital Divioeno Review, which will assess
how this nnite ano valuable national resource shoulo be
maoe available. During the year, wireless communications
provioers began to experience the benents of Ofcom`s
oeregulation, traoing ano liberalisation policy in
spectrum management, with the removal of unnecessary
aoministrative processes ano restrictions in maritime,
amateur ano citizens` bano raoio.
In 200/o Ofcom authoriseo the transfer of rights to use
1 Wireless Telegraphy Act licences, allowing market forces
rather than the regulator to oictate the optimal use of this
valuable resource. In April 200o, shortly after the perioo
unoer review, Ofcom helo its nrst auction of spectrum in
which, for the nrst time, winning biooers were free to oecioe
how best to use the spectrum maoe available to them.
During the year, television broaocasters began to respono
more rapioly to the emerging changes in UK viewing
habits, erooing historical assumptions about the scope ano
role of television public service broaocasting ,FSB,. As of
April 200o, more than 70 per cent of all UK television
householoers were watching oigital television, ano the UK
now has the highest oigital television penetration of any
country in the worlo.
As ioentineo in Ofcom`s FSB Review, oigital switchover will
not be the only challenge to the regulatory agreement which
for half a century has manoateo that programmes shoulo
be maoe for the public gooo in return for access to scarce
spectrum ano large ,ano therefore lucrative, auoiences.
Just as analogue is giving way to oigital multichannel, for
a new generation of viewers, traoitional linear broaocasting
is being succeeoeo by mobile, internet ano on-oemano
content, in the process raising new challenges over rights
ownership, questions which lay at the heart of our review
of the television proouction sector.
The BBC unoerpinneo by a new Charter will be in
a uniquely powerful position to meet these new auoience
neeos. During the year, Farliament oecioeo there neeoeo to
be an objective counterbalance to assess the point at which
public value enos ano market foreclosure begins. In future,
Ofcom will unoertake Market Impact Assessments to assess
whether the BBC`s proposeo new services or changes
to existing services woulo function to the oetriment of
others in the market who provioe the welcome stimulus
of competition.
In raoio, where 3 per cent of aoults have listeneo through
their oigital television sets, 20 per cent over the internet
ano a large proportion of major raoio networks now offer
poocasts as stanoaro, Ofcom completeo its review of the
sector with a commitment to grow the meoium further by
expanoing the range of services available over DAB oigital
networks. Cumulative sales of DAB raoio sets has now
passeo the three million mark ano the number of people
listening to oigital raoio has nearly ooubleo in 12 months.
As a result of the expansion in DAB services set out in
Ofcom`s Raoio Review, over the next few years local DAB
multiplexes will be aovertiseo to bring the benents of local
oigital raoio to those areas currently unable to receive
these services, ano new national services will be available
on a secono national commercial multiplex, signincantly
expanoing listener choice ano consolioating DAB`s role
as the home platform of oigital raoio in the UK. Unlike
television, analogue remains a signincant ano relevant
platform in raoio, with an estimateo 10 million IM/AM
raoios still in use in the UK alone. Demano for analogue
licences remains high, ouring the nnancial year Ofcom
awaroeo 1 local commercial raoio licences, 92 community
raoio licences, four long-term restricteo service licences
ano !9 short-term restricteo service licences.
Over the coming years, consumers will benent from an
even greater choice of higher-speeo broaobano, internet
voice, television ano vioeo-on-oemano services, new oigital
television channels, oigital raoio stations ano oevices which
move seamlessly from home to mobile networks while
offering television, raoio, oigital oownloaos ano more.
Ior provioers, as for consumers, traoitional bounoaries
between communications inoustries are becoming
increasingly blurreo. Carphone Warehouse`s entry into the
broaobano market, BSkyB`s acquisition of Easynet, ITV`s
acquisition of Irienos Reuniteo ano various trials of mobile
television services by BT, Virgin Mobile, O2 ano Arqiva are
just some of the examples of collaboration ano consolioation
which bring together broaobano, broaocasting, mobile
ano nxeo-line services to shape new kinos of businesses.
Convergence of companies, of inoustries, of content,
of platforms ano of oevices has been much-heraloeo but
often, at best, incompletely oelivereo over the last 20 years.
However, in future, 200/o may come to be seen as the year
when the term began the nnal phase of its passage from
1990`s think-tank concept, through millennial legislative
foresight in the Communications Act to tooay`s inoustrial
reality, with oigital networks ano oigital meoia approaching
ubiquity in millions of UK homes ano workplaces.
|Ofcom AnnuaI Report www.ofcom.org.uk
Ofcom also began work to contribute to the European
Commission`s review of the EU Iramework for Electronic
Communications, which sets out a harmoniseo approach
to telecommunications regulation across the EU, ano
to the Regional Raoio Conference of the International
Telecommunication Union, helo in May/June 200o to
co-oroinate international oecisions on raoio spectrum
management which will have an important bearing on
oigital switchover ano the oigital oivioeno.
DeregulaLon
As a comparatively new institution, Ofcom is, I think,
unusual among UK regulators in that the contemporary
principles of better regulation are incorporateo into our
statutory rule-book, the Communications Act 2003.
A commitment to reoucing the regulatory buroen upon
inoustry unoerpins all of our work, both in seeking to
remove existing rules which have been overtaken by market
oevelopments ano are past the point of usefulness, ano by
resisting, through vigorous internal challenge at Executive
ano Boaro level, all attempts to establish new regulation
where the case for such an imposition is anything less than
crystal clear ano unambiguous.
During the year we took substantial steps to remove, reouce
or simplify regulation, see Iigure 1 for some examples.
The Government`s response to the Better Regulation Task
Iorce ,BRTI, report, Lc t Motc, committeo all Government
oepartments to publishing rolling programmes of
simplincation. These shoulo ioentify regulations that can be
simplineo, repealeo, reformeo or consolioateo, ano shoulo
bring forwaro proposals to reouce aoministrative buroens.
While Ofcom is an inoepenoent statutory corporation rather
than a Government oepartment or non-oepartmental public
booy, we fully support both the principle ano practice of the
BRTI proposals, together with Fhilip Hampton`s report,
Rcooctrg Aomtrtttottcc Botocr: Effccttcc Irpccttor oro Erfotccmcrt.
During the reporting perioo, Ofcom publisheo its own
Simplincation Flan. This oescribes our approach to
regulation, highlights our planneo oeregulatory activities,
provioes further information about the aoministrative
buroens we believe we place on our stakeholoers, ano
explains how we inteno to reouce those buroens.
Consuner polcy
With those new opportunities comes greater complexity, for
inoustry, in managing the transition from analogue to oigital
ano from switcheo to next-generation networks, ano for
consumers, for whom informeo choice may require greater
unoerstanoing, ano who will continue to be the target of
scams oesigneo to exploit that complexity.
The oevelopment of Ofcom`s consumer policy with the
appointment of a new Director ano establishment of a
oeoicateo team was an important oevelopment in the year.
Ofcom`s Consumer Folicy review aooresseo two main areas,
the neeo to ensure consumers are properly informeo, ano so
are able to play a part in a well-functioning market, ano the
neeo to take action against emerging consumer oetriment
from unfair or ineffective market structures ano corporate
malpractice or frauo.
nLernaLonal
As in much of UK public policy, oevelopments within
the European Commission ano across the EU have an
increasingly signincant bearing on Ofcom`s work. There
are also important lessons to be learneo from other markets
beyono the EU which can have a oirect innuence over
the oevelopment of the sector in the UK, for example
in the nelo of international technical stanoaros or in
spectrum management.
International engagement was a key priority for Ofcom
throughout the year ano will continue to be so in the future.
We have benenteo in this work from the insights gaineo
by my Executive Boaro colleague Kip Meek in his role as
Chairman of the European Regulators Group, a role he
took up in January 200o.
During the year Ofcom workeo with the Department for
Culture, Meoia ano Sport to raise its concerns about changes
to the Television Without Irontiers Directive proposeo by the
European Commission. These incluoe a proposal to exteno
the scope of statutory regulation to incluoe auoio-visual
content on the internet, a move which both Ofcom ano
the UK Government consioer to be inappropriate.
ChIeI ExecuIIve's ReporI
Introduction | Section A
www.ofcom.org.uk Ofcom AnnuaI Report |
1eIecoms
RetaiI price controIs
Proposals Lo allow reLal prce conLrols
on 81 lne renLal and call charges Lo
lapse lollowng Olcon's SLraLegc
kevew ol 1eleconnuncaLons.
Large business pricing
Proposals Lo deregulaLe rules governng
Lhe anounL 81 charges large busnesses
lor Lelecons servces.
InternationaI voice markets
kenoval ol regulaLons on nLernaLonal
drecL dal voce calls narkeL.
WhoIesaIe narrowband markets
kelaxed regulaLons on Lhe way
calls are conveyed n Lwo wholesale
Lelecons narkeLs.
Spectrum
1rading
nLroduced specLrun lcence Lradng
beLween conpanes.
Spectrum reIease
keleased specLrun Lo Lhe narkeL,
allowng new lcence holders Lo
decde how besL Lo use Lhe specLrun.
Amateur radio
nLroduced lleLne anaLeur rado
lcences, renovng Lhe requrenenL
lor regular renewal.
Ships' radio
kenoved annual lcensng process
lor narLne users, replaced wLh
a snpler, cheaper process.
Radio frequency Identihcation (RfID)
Allowed kD Lechnology Lo be used
wLhouL Lhe need lor a lcence.
Interference
Moved lron rouLne nLerlerence
nspecLons Lo ones locusng on cases
where Lhere s Lhe greaLesL rsk ol
serous nLerlerence.
roadcasting
roadcasting Code
Publshed a shorLer, snpler Code whch
reduces resLrcLons on conLenL so long
as L s properly labelled.
Cross-promotion
Proposals Lo relax Lhe rules governng Lhe
crosspronoLon ol Lelevson channels.
Product pIacement
Proposals Lo relax Lhe rules on producL
placenenL on Lelevson.
1eIevision sponsorship
Proposals Lo exLend Lhe sponsorshp ol
connercal Lelevson and rado channels.
Radio Review
kenoved regulaLon on npuLs, nsLead
locusng on ouLpuLs, allowng rado sLaLons
greaLer fexblLy n sLudo locaLon.
furopean engagement
HghlghLed Lhe cosLs ol exLendng Lhe
exsLng Luropean 1elevson WLhouL
ronLers DrecLve Lo nclude vdeo conLenL
over Lhe nLerneL.
figure OIcom deregulaIIoh
|Ofcom AnnuaI Report www.ofcom.org.uk
During the perioo unoer review, we also began a major
overhaul of all information services ,IS, systems. When
Ofcom was establisheo, we inheriteo some ! oifferent IS
systems from the nve legacy organisations who preceoeo
us. During the nrst two years of operations it woulo have
been unwise to have maoe oecisions about the organisation`s
long-term IS neeos, amio all of our early work to builo the
organisation`s capabilities ano assess priorities for action,
those neeos were unlikely to be clearly ioentineo. The legacy
systems were therefore incorporateo as a stop-gap penoing
a thorough review.
That review was unoertaken ouring the year, ano the
outcome a signincant multi-year programme calleo
Froject Unify to enhance capabilities in areas as varieo as
licensing, nelo operations, nnance, human resources, project
management, the Ofcom Contact Centre ano more was
put into motion in Iebruary 200o, together with Ofcom`s
new IS partner, Capgemini.
We have also continueo to rationalise our portfolio of
properties which, as a smaller organisation, are surplus to
our requirements. When Ofcom was createo it inheriteo
! properties from the nve previous regulators, 21 properties
have now been oisposeo of or surrenoereo to the lanoloro.
In 200/o this incluoeo the oisposal of our ofnce in
Whyteleafe, Surrey, which raiseo _2.9m. In aooition, three
noors of Ofcom`s Lonoon heaoquarters at Riversioe House
were let to new tenants ano a fourth noor is on the market.
During the year we also implementeo an organisational
restructure to increase our internal operating effectiveness.
This involveo a number of changes in executive
responsibilities incluoing the appointment of Senior
Fartner Eo Richaros as Chief Operating Ofncer to
target skills ano resource at Ofcom`s main areas of focus.
Ofcom has oevelopeo a oetaileo process to evaluate its own
performance, both for the purpose of internal aoministrative
simplicity ano to ensure appropriate external accountability.
Our evaluation framework measures outputs achieveo
against a broao range of specinc criteria. In this report,
for the nrst time, an analysis of our performance is set out
in full within the Operating ano Iinancial Review, oetails
can be founo on page oo.
keducng cosLs and nprovng elfcency
Ofcom is preoominantly funoeo by inoustry. Our operating
buoget is a net cost to the bottom line of companies who
are at the heart of a sector of growing national importance.
The knowleoge of that fact informs our constant oesire to
minimise operating costs ano increase internal efnciency.
Three years ago we committeo the organisation to a year-
on-year operating buoget reouction, in the best regulatory
nnance traoition, of RFI minus x, in other woros, a real-
worlo reouction in our spenoing that woulo oeliver, over
time, a oemonstrable reouction in the cost of regulation
to our stakeholoers.
We have oelivereo on that commitment each year since, our
operating buoget for 200/o was 8 per cent lower than that
for 200!/ in real terms. We also strive to achieve greater
savings ouring the course of the nnancial year, at the eno
of the reporting perioo, we oelivereo our work for the year
_ . m unoer buoget, ano remitteo this sum back to inoustry
in the form of lower average regulatory fees. The RFI minus
x commitment continues going forwaro, the operating
buoget for 200o/7 is per cent lower than the previous
year ano 12.o per cent lower than the operating buoget
for 200!/.
Ofcom`s heaocount as of 31 March 200o was 77o, for
context, the nve organisations we replaceo hao a combineo
heaocount of 1,12.
Ofcom`s approach to pension provision continues to yielo a
long-term benent to our nnancial liabilities. Colleagues who
join Ofcom oirectly ,as opposeo to those who joineo from the
legacy organisations, are offereo a pension allowance, which
may be contributeo to a oenneo contribution stakeholoer
scheme, rather than membership of a oenneo benent ,or
nnal salary, pension scheme, which remains the public sector
norm. Unlike oenneo contribution pension schemes where
funo growth is oeriveo from the capital markets oenneo
benent pension schemes expose the provioer to signincant
nnancial risk in later years. As of 31 March 200o, 7 per
cent of Ofcom colleagues were employeo on terms with a
pensions allowance, up from 72 per cent as of March 200.
ChIeI ExecuIIve's ReporI
! 0
Introduction Section A
www.ofcom.org.uk Ofcom AnnuaI Report |
Lookng ahead
The year aheao holos the prospect of a number of
signincant oevelopments in the sector, which Ofcom
will seek to renect in its work.
In telecoms we will seek to promote competition ano
innovation in voice ano broaobano services by ensuring
effective implementation of BT Group plc`s Enterprise
Act Unoertakings. We will also oevelop our unoerstanoing
of the evolution of next-generation networks ano services
ano will consioer the implications of these for the future
of regulation, particularly as new nbre optic-baseo access
networks begin to move from concept to construction.
We will continue our programme to release new raoio
spectrum to the market with a further six awaros to
take place in 200o/7 while oeregulating ano liberalising
wherever possible to maximise innovation in the use of
this vital national asset. We will also publish proposals
on how we inteno to reap the greatest benents for
consumers ano auoiences from the oigital oivioeno
releaseo by oigital switchover.
In television we will unoertake further work to unoerpin
the future of public service broaocasting in an era when
oigital television ano broaobano-enableo homes oominate
ano householos watching analogue television only represent
a rapioly owinoling minority. This will incluoe a nnancial
review of Channel ! to help ensure the broaocaster is
effectively placeo to oeliver its FSB obligations in future, the
conclusion of work to resolve the rights ownership questions
which are central to the television proouction sector, further
oevelopment of the Fublic Service Fublisher concept to
exteno public service content beyono its traoitional analogue
heartlano, ano further research on local television.
During 200o/7 we will increase the choice ano range of
oigital raoio services with the awaro of new multiplexes.
More broaoly, we will consioer the long-term oirection of
the raoio inoustry, incluoing an analysis of the future of the
AM ano IM banos ano of emerging oigital raoio technical
stanoaros which may offer the prospect of enhanceo services.
With effect from 1 October, I will be stanoing oown as
Ofcom Chief Executive. As I saio when my oecision was
announceo by the Boaro in May, there is never a gooo time
to leave a great job, but with Ofcom now nrmly establisheo
ano the communications inoustries oelivering real results,
it is now time for someone else to leao the organisation
through its next phase of oevelopment.
I woulo like to thank my colleagues for their haro work,
ano I woulo like to thank our many stakeholoers for their
rigorous scrutiny, constructive challenge ano positive
engagement throughout the year. Their contributions have
leo to what are, I hope, better-informeo oecisions about
the right approach to this most oynamic ano fascinating
of sectors.
Stcphcn A. Cortcr, Chief Executive
Thc guiding principIc of thc Contcnt Boord is
to idcntify vhcrc thc justincd intcrcsts of UK
citizcns Iic in rcIotion to hroodcost contcnt
ond to intcrvcnc to thc nininun ctcnt ncccssory
in thc frccdon of opcrotion ond of cprcssion
hy thc hroodcostcrs.
The most signincant event in the Content Boaro`s year
was the publication of Ofcom`s nrst Broaocasting Cooe
a major project, which orew upon but signincantly reshapeo
the previous programme content cooes of the Broaocasting
Stanoaros Commission, Inoepenoent Television Commission
ano the Raoio Authority. The Content Boaro`s overall aim
was to ensure that freeoom of expression coulo nourish
while maintaining the importance of protecting chiloren.
The Content Boaro`s challenge was to oo this against a
backorop of an ever-changing meoia environment, where
the availability of auoio-visual material is increasing.
In its nrst eight months of operation the new Cooe has
hao an encouraging start. It offers simpler ano clearer rules,
supporteo by crisp guioance on how to avoio contravention
ano Ofcom looks forwaro to continuing to work with
broaocasters in implementing the Cooe.
Two juogements maoe by the Content Boaro unoerscoreo
the approach to broaocast stanoaros that the new
Cooe establishes. Iirst, the Content Boaro, unoer the
chairmanship of my preoecessor Richaro Hooper, noteo
that the BBC`s broaocast of }ctt, Spttrgct tlc Opcto
hao generateo an unpreceoenteo number of complaints
to Ofcom. The Content Boaro acknowleogeo that
complainants clearly felt that the show oenigrateo the
Christian religion ano the representation of religious
ngures was offensive to some. However, in reaching its
conclusion that the programme oio not contravene the
Cooe, the Content Boaro took into account the importance
attacheo to freeoom of expression, particularly in the
context of artistic works, beliefs, philosophy ano argument.
}ctt, Spttrgct tlc Opcto was also seen as an important work
ano commentary on mooern television ano crucially
the BBC hao gone to consioerable lengths to provioe
potential viewers with information to enable them to
make an informeo juogement on whether to watch.
The secono signincant oecision the Content Boaro
consioereo was whether to allow the more explicit form
Ahhual ReporI oI
Ihe CohIehI 8oard
|Ofcom AnnuaI Report www.ofcom.org.uk
Introduction Section A
www.ofcom.org.uk Ofcom AnnuaI Report |
of aoult` content, known by the BBIC classincation as R18,
on cable ano satellite television. This oecision centreo on
whether protection mechanisms FIN numbers ano so forth
provioeo aoequate security to prevent access by chiloren.
The Boaro concluoeo that, currently, for the strongest sexual
material they oo not, ano therefore recommenoeo to the
main Ofcom Boaro that the restriction shoulo remain.
As technology oevelops, the juogement may change.
Also in the stanoaros area, Ofcom hao alreaoy contracteo
out broaocast aovertising to a co-regulatory booy, the
Aovertising Stanoaros Authority. The Content Boaro
receiveo reports on the operation of the new system which
appeareo, in its nrst full year of operation, to have leo to no
reouction in aovertising broaocast stanoaros. The Content
Boaro also contributeo to the policy options ano in particular
to the oesign of the research for the consultation on new
restrictions on the aovertising to chiloren of fooo ano orink
prooucts which are high in fat, salt ano sugar content.
A vital, statutory, role for the Content Boaro is to renect to
Ofcom the interests of the nations ano regions of the UK,
in relation to oecisions about content. The Content Boaro
gave a strong steer to the Ofcom television proouction sector
review, concerning proouction outsioe Lonoon. The Content
Boaro also emphasiseo the importance, in the future, of new
television oistribution mechanisms as part of Ofcom`s report
on oigital local content.
Ofcom publisheo its strategic review of the raoio sector
ano, orawing on aovice from the Content Boaro, aovocateo
the long-term withorawal from intrusive input` regulation,
focusing insteao on the formats ano actual content. At the
same time, the Content Boaro reafnrmeo the importance
of local content in local raoio, ano connrmeo the guioance
for stations in how to achieve the necessary engagement
with their communities.
I have been fortunate in inheriting the Content Boaro that
Richaro Hooper ano Sara Nathan recruiteo ano shapeo.
The Content Boaro has alreaoy establisheo a strong
ano consistent approach to our regulation of content.
Maintaining this will be essential as we move swiftly into
a new regulatory environment, as the communications
sector rapioly evolves ano as consumer attituoes ano
preferences change. In the future it is likely that there
will be less emphasis on external regulation of content
ano more emphasis on enabling auoiences to make informeo
choices, through clear labelling ano improveo means of
navigation among new ano newly convergeo forms of meoia.
Above all, as the content inoustries continue to evolve, the
primary justincation for restriction of freeoom of expression
by broaocasters will relate to the protection of chiloren ano
young people.
Closely linkeo to this is the Content Boaro`s role in
supervising Ofcom`s continuing Meoia Literacy project.
During the perioo unoer review, this leo to the publication
of important research into current levels of access to the
full range of meoia, ano oiffering abilities to unoerstano
ano to create content.
The Content Boaro also gives aovice to both the Executive
ano the main Ofcom Boaro on projects that are shaping
future content provision. This will incluoe further
oevelopment of the Fublic Service Fublisher concept as a
way of sustaining public service broaocasting, work to ensure
that Ofcom maximises the oigital oivioeno that will result
from oigital television switchover, ano the convergent meoia
project to oevelop a regulatory mooel that is appropriate
for future meoia content.
I look forwaro to leaoing the Content Boaro in aooressing
these challenges.
Ior oetails of the work of the Iairness ano Content
Sanctions committees, see pages 8 to 8o of Section C.
PhiIip Grof CBE, Chairman, Content Boaro
|Ofcom AnnuaI Report www.ofcom.org.uk
'1ier ' - standards and
other industry codes
- Approved Lhe fnal dralL ol Olcon's
8roadcasLng Code, publshed n May
- Agreed changes Lo Lhe AdverLsng Code
n relaLon Lo alcohol and healLh clans
- Consdered changes Lo Lhe process
lor handlng conplanLs abouL unlar
LreaLnenL and nlrngenenLs ol prvacy
n rado and 1V progrannes
- Ad|udcaLed on Lhe conplanLs
abouL 88C 1wo's |erry Spriner -the
Operc, concludng LhaL Lhe relevanL
broadcasLng code had noL been
conLravened
- 1urned down an appeal lron Lhe
88C agansL Lhe LxecuLve's decson
Lo record a conLravenLon ol Lhe
sLandards requrenenLs ol Lhe relevanL
broadcasLng code lor LransnLLng
u|p |iction Loo early n Lhe evenng
- Approved proposed relorn ol rules
governng crosspronoLon beLween
broadcasLng servces
- Approved new Olcon gudance on
accepLable sLandards n lve news
progrannng and n broadcasL Lralers
1he Content oard made the foIIowing
decisions and recommendations
to the main Ofcom oard or Radio
Licensing Committee:
'1iers and ' -
pubIic service teIevision
- Approved proposals lor research and
sLakeholder sennars' Lo assess Lhe
ellecLveness ol delvery ol Publc
Servce 8roadcasLng, Lhe Lopc ol Lhe
frsL such sennar was currenL allars
progrannng
- Consdered annual sLaLenenLs ol polcy
and revews by connercal Publc
Servce 8roadcasLers, and agreed LhaL
Lhese conlorned Lo Lhe Olcon NoLe
ol Cudance
- Approved Olcon's revson ol quoLas
lor nonnews progrannes on 1V1 n
ScoLland, Wales and NorLhern reland
- Agreed Lo dsconLnue Lhe upward
raLcheL' ol ve's orgnal producLon
quoLa, buL fxed L aL a hgher level -
per cenL - Lhan Lhe broadcasLer
had requesLed
figure
Ahhual ReporI oI
Ihe CohIehI 8oard
Introduction Section A
www.ofcom.org.uk Ofcom AnnuaI Report |
Radio formats
- Agreed Lo aspecLs ol lornaL changes
proposed by Classc Cold AM and SLar
kado, buL declned oLhers
- Declned Lo agree Lo a change n lornaL
lor Lhe Kx rado sLaLon n CovenLry
Media Iiteracy
- Agreed plans lor an audL ol neda
lLeracy n Lhe K and seL Olcon's polcy
n relaLon Lo neda lLeracy lor Lhe
conng year
- Agreed LhaL Olcon should supporL
Lhe ndusLry Meda LLeracy 1ask orce,
buL should noL becone a sgnaLory
Lo Ls CharLer
Major reviews
- Approved Lhe polcy proposals and LexL
ol Lhe Olcon kado kevew
- Supervsed Lhe desgn ol Lhe 1elevson
ProducLon SecLor kevew, and agreed
polcy opLons and LexL ol Lhe reporL
- Provded npuL Lo polcy opLons and
LexL lor Olcon's consulLaLon, 1elevson
AdverLsng ol ood and Drnk ProducLs
Lo Chldren
- Supervsed desgn ol Lhe pro|ecL
on regulaLon ol ConvergenL Meda
- LsLablshed Lhe approach lollowed n a
publshed reporL on Lhe luLure ol DgLal
Local ConLenL, and approved Lhe LexL ol
Lhe reporL
|Ofcom AnnuaI Report www.ofcom.org.uk
1he ConnuncaLons AcL seLs
down sLaLuLory duLes whch
Olcon nusL lulfl n Ls work across
Lhe LeleconnuncaLons, Lelevson,
rado and wreless connuncaLons
secLors. Olcon also has a broad
range ol duLes and powers under
Lhe nonconsoldaLed parLs ol
Lhe 8roadcasLng AcLs and oLher
broadcasLng legslaLon and
under Lhe Wreless 1elegraphy
AcLs (W1 AcLs) and oLher wreless
connuncaLons legslaLon.
1he ConnuncaLons AcL
also requres Olcon Lo acL as
Lhe conpeLLon auLhorLy lor
Lhe connuncaLons secLor.
www.ofcom.org.uk Ofcom AnnuaI Report |
1elecommuhIcaIIohs
SpecIrum
8roadcasIIhg: cross-secIor
8roadcasIIhg: IelevIsIoh
8roadcasIIhg: radIo
IhIerhaIIohal
IhvesIIgaIIohs programme
SupporIIhg sIakeholders
SupporI servIces
Core Areas of Activity | Section
1elecommuhIcaIIohs
HeadIhg 1elecommuhIcaIIohs
SLraLegc kevew ol
1eleconnuncaLons
During 200/o, Ofcom concluoeo its wioe-ranging Strategic
Review of Telecommunications, some 22 years after the
UK telecoms market was nrst openeo up to competition.
In concluoing its Review, Ofcom set out a new regulatory
approach for nxeo-line telecommunications oesigneo to
benent both consumers ano the communications sector
as a whole.
Genuine competition in the nxeo-line telecoms markets, at
the oeepest levels of infrastructure, creates a virtuous circle
of new investment in emerging technologies ano innovation
in services ano price competition. This benents consumers
ano helps to maintain the competitiveness of the UK
economy as a whole.
At the heart of Ofcom`s review is a oesire to bring about
real equality of access to those parts of the telecoms network
that BT Group plc`s competitors cannot viably replicate, ano
so promote competition between networks. In June 200,
Ofcom ioentineo six objectives unoerlying its new approach:
to orive oown the price of calls, connections ano services
for consumers ano businesses,
to support more innovation such as faster broaobano,
vioeo-on-oemano ano voice over the internet,
to provioe regulatory certainty for provioers ano investors,
to refocus regulation where it is neeoeo, with swifter
remeoies ano a structureo timetable oesigneo to oeliver
equivalence through incentives ano penalties,
to remove regulation where competition is effective, ano
to ensure the necessary level of consumer protection
through a combination of cooes, sanctions ano effective
information.
In June 200, the boaro of BT Group plc agreeo in principle
to offer the Ofcom Boaro legally binoing Unoertakings.
These were subject to further consultation ouring the
summer ano were accepteo by Ofcom in September:
EnforccohiIity. BT Group plc agreeo to offer
Unoertakings in lieu of a reference to the Competition
Commission unoer Section 1,1, of the Enterprise
Act 2002. These legally-binoing Unoertakings mean
that, in the event of a breach, Ofcom coulo commence
|Ofcom AnnuaI Report www.ofcom.org.uk
Core Areas of Activity Section
www.ofcom.org.uk Ofcom AnnuaI Report |
proceeoings in the High Court to enforce them.
Any affecteo thiro-parties coulo also seek oamages
in the same way to recover losses they incurreo.
The Unoertakings sit alongsioe Ofcom`s existing
competition ano regulatory powers.
Bronding ond idcntity. BT Group plc agreeo to set
up a new ano operationally separate business unit, with
a oistinct brano ioentity, responsible for the local access
ano backhaul network. The new unit, which BT Group
plc later unveileo as Openreach`, has its own employees,
separate bonus schemes, separate operating ano traoing
systems, ano new branoing on uniforms ano vehicles.
Product cquivoIcncc. The new business unit will
support all communication provioers` activities, incluoing
those of BT, on an exactly equivalent basis ,termeo by
Ofcom as equivalence of input`,. This means that all
companies will benent equally from the same prooucts,
prices ano processes when they oroer, install, maintain ano
migrate connections for their customers.
Products ond scrviccs. The new unit will offer
universally available proouct ano services. This incluoes
use of BT Group plc`s access network, the ability to offer
line rental on an unbranoeo basis ,wholesale line rental
ano unbunoleo local loops, ano the use of transmission
capacity from BT Group plc`s exchanges to competitors`
own networks ,backhaul,. Equivalence of Input will also
apply to BT Group plc`s wholesale internet service.
Nct Gcncrotion Nctvorks. BT Group plc will follow
a clear set of principles in oeveloping its next-generation
21st Century Network, ensuring that other provioers oo
not suffer any competitive oisaovantage.
Boord ond govcrnoncc. Compliance, by both BT
Group plc ano Openreach, is monitoreo by a new
Equality of Access Boaro.
Ofcom believes the Unoertakings will oeliver real equality
of access to all provioers, encouraging investment ano
innovation, reoucing prices ano expanoing choice for
consumers ano businesses, while unoerpinning the UK`s
inoustrial ano economic competitiveness.
Ofcom committeo to the publication of a quarterly
Implementation Report intenoeo to track BT Group
plc`s progress in complying with the Unoertakings.
Ofcom also committeo to monitor the impact of the
Unoertakings, incluoing:
the extent to which BT Group plc is meeting both the
letter ano the spirit of its Unoertakings,
results as they affect wholesale customers, incluoing local
loop unbunoling ano wholesale line rental investment,
ano proouct take-up, ano
results affecting retail customers both consumer ano
business in terms of retail prices, service quality ano
proouct ranges.
Openreach was launcheo on 21 January with its own senior
management team, its own heaoquarters in Mayfair ano a
nelo-force of arouno 30,000 people assigneo to work for it.
Openreach
The Unoertakings requireo BT Group plc to set up a
new ano operationally separate business unit, which
it branoeo Openreach, to be responsible for BT`s
local access ano backhaul network.
The role of Openreach is to support all
communication provioers` retail activities ,incluoing
those of BT Wholesale ano BT Retail, on an exactly
equivalent basis, known as Equivalence of Input.
Openreach was launcheo with a oistinct brano ano
ioentity, ano staffeo by arouno 30,000 employees
responsible for the operation ano oevelopment of BT
Group plc`s local access networks. Openreach has:
separate bonus ano incentive schemes,
separate operating ano traoing systems,
begun to introouce its own branoing on uniforms,
ID caros ano vehicles, ano
establisheo Chinese walls` to restrict information-
sharing between Openreach ano BT Group plc.
|Ofcom AnnuaI Report www.ofcom.org.uk
1elecommuhIcaIIohs
fquivaIence of Input
Equivalence of Input is the mooel where all
communication provioers incluoing BT Group plc
itself purchase exactly the same wholesale prooucts
through exactly the same systems. Equivalence of
Input applies to:
access to unbunoleo local loops, incluoing fully
unbunoleo loops ,where a provioer takes full
responsibility for all of the customer`s voice ano
broaobano services, ano shareo loops ,where BT
Wholesale continues to provioe voice services while
another provioer is responsible for broaobano,,
wholesale line rental, where a provioer takes
responsibility for line rental ano typically provioes
a single bill for both line rental ano calls,
backhaul prooucts, which are useo to connect
the local access network to the core network.
Some provioers have built out their own backhaul
networks, but many others are oepenoent on BT
Group plc for wholesale backhaul services, ano
BT Group plc`s wholesale broaobano access
services, useo by many internet service provioers to
offer broaobano connections for their customers.
The Unoertakings also set out a number of principles
which BT Group plc must follow in the oesign,
procurement ano builo of its 21st Century Network
to ensure that other provioers who will oepeno on
interconnection with this network oo not suffer
competitive oisaovantage.
fquaIity of Access oard
Compliance with the Unoertakings by Openreach
ano other BT Group plc business units is monitoreo
by the Equality of Access Boaro ,EAB,. The
Unoertakings require BT Group plc to act swiftly on
the recommenoations of the EAB.
Key characteristics of the EAB:
it is a compliance boaro, not an operating
management boaro,
it is chaireo by a non-executive oirector on the
Boaro of BT Group plc ano is compriseo of four
other members, of whom three are inoepenoent,
all boaro members have been appointeo in
consultation with Ofcom,
it proouces ano publishes a regular summary
report of its activities,
it has extensive powers to seek access to
information from wherever in BT Group plc it
oeems necessary to oo its work, ano
it is obligeo to report all breaches of the
Unoertakings, material or not, to Ofcom.
Core Areas of Activity Section
www.ofcom.org.uk Ofcom AnnuaI Report |
Local Loop nbundlng
Local Loop Unbunoling ,LLU, enables provioers other than
BT Group plc to take full control of the loop connecting
homes ano businesses to the local exchange, ano provioe a
range of competitive services over that connection.
Ofcom believes that a well-functioning LLU market is an
important component of a competitive nxeo-line telecoms
market. Competition in LLU means that alternative
broaobano provioers can control their own networks ano
tailor price ano service offerings more closely to customers`
neeos, offering the potential for lower prices ano faster
broaobano speeos.
In oroer to promote competition in the broaobano market,
Ofcom set a ceiling in September 200 on the price that
BT Group plc coulo charge its competitors to rent a fully
unbunoleo local loop. The aim was to ensure that BT
Group plc`s charge is fair, reasonable ano cost-orientateo.
Ofcom set the maximum price at _81.8, this was
introouceo at the eno of October after one month of
consultation. The move followeo BT Group plc`s voluntary
price reouction in August from _10.09 to _80. However,
Ofcom also believeo that establishing a price ceiling was
important, to ensure charging transparency ano to avoio
the possibility of increaseo charges in the future.
By March 200o, there were more than 300,000 unbunoleo
lines in the UK.
keLal Prce ConLrols
A combination of new technology ano greater competition
between provioers baseo on appropriate regulateo prooucts
means that consumers tooay have wioer choice ano lower
prices than before. Ofcom publisheo proposals in March
200o to oeregulate the retail price controls on BT line rental
ano calls which have governeo the UK telecoms market
since it was liberaliseo. The proposals renect the increasing
competition in the market.
Subject to a public consultation, the proposals are intenoeo
to come into effect on 1 August 200o, when the existing
charge control is oue to lapse. Ior the nrst time all phone
companies incluoing BT Group plc woulo be free to set
their own prices ano compete for customers in the future,
with clear protections in place to protect vulnerable groups.
In the UK, average call prices have come oown by
arouno o0 per cent since 199o. The key orivers behino
this change incluoe:
grcotcr conpctition. More than 10 million householos,
incluoing more than four million cable customers, now
use provioers other than BT Group plc for their nxeo-
line telephone calls, using regulateo wholesale prooucts
,Wholesale Line Rental ano Carrier Fre-Select,,
rcductions in vhoIcsoIc chorgcs. Ofcom has effecteo
signincant reouctions in the unoerlying charges for the
use of BT`s network,
ncv tcchnoIogy. With more than 10 million homes
now connecteo to broaobano, there is signincant room
for growth in the estimateo 00,000 active users of
Voice over Internet Frotocol ,VoIF, services, ano
conpctitivc IocoI occcss invcstncnt. By Iebruary
200o, more than 300,000 lines hao been unbunoleo to
enable a range of provioers to offer voice, broaobano
ano vioeo services over existing phone lines.
Ofcom also proposeo to launch a public information
campaign to make consumers aware of the new oeregulation.
NexL CeneraLon NeLworks
The UK`s nxeo-line telecommunication networks will be
transformeo over the next three to nve years by a major
upgraoe, which will signincantly change the way they
operate. Termeo Next Generation Networks` ,NGNs,, they
will make use of oigital technology to connect telephone calls
ano other network trafnc more efnciently than traoitional
networks. Internet Frotocol ,IF, services will be oevelopeo
more quickly ano at a lower cost to communications
provioers. Over time, NGNs will offer consumers a wioer
choice of new prooucts ano more value for money.
However, the establishment of NGNs represents a signincant
technological change ano oemanos substantial investment
ano planning. As with many emerging technologies, the
provioers neeo to agree the technical ano commercial
arrangements for connecting to each other`s networks.
|Ofcom AnnuaI Report www.ofcom.org.uk
To encourage progress ano provioe a clear point of focus,
Ofcom establisheo a new inoustry booy, NGN UK, unoer
Executive Chairman, Feter Black. The purpose of this
booy is to facilitate oecision-making for the whole of the
UK telecoms inoustry on the commercial ano technical
arrangements for NGNs. At its launch in March 200o, eight
companies hao alreaoy committeo to NGN UK: BT, Cable
8 Wireless, Easynet, Kingston Communications, NTL,
Thus, Vooafone ano Wanaooo UK.
Ofcom will monitor the new booy`s work closely to make
sure that the inoustry`s commercial priorities inform
future regulation.
Wholesale and large
busness narkeLs
Network charge controIs
After consultations earlier in the year, Ofcom announceo
oetails in August 200 of network charge controls for BT
narrowbano prooucts, for the four years from 1 October 200.
The new controls will limit BT Group plc`s prices for a
specinc set of wholesale telecoms charges. When combineo
with effective retail competition, the move coulo mean
a saving for UK business ano consumer users totalling
_30-!00m over the four-year perioo. At the same time,
regulations were relaxeo into two wholesale markets where
competition is emerging.
Ofcom also stateo that, although the same broao approach
to regulating BT Group plc`s narrowbano services hao
applieo since 1997, changes may be neeoeo in the future as
Next Generation Networks, incluoing BT Group plc`s 21st
Century Network, are oevelopeo.
WhoIesaIe Line RentaI (WLR)
WLR allows consumers to choose from a range of
competing provioers for both their voice calls ano line
rental, all paio via a single bill. There are now nearly three
million WLR lines in the market, increasing at a rate of over
1o0,000 every month.
In November, Ofcom proposeo a reouction in the annual
rental charges that telecoms companies pay for WLR. This
meant that monthly rental charges woulo fall by 9 per cent
,or 8 pence a month, to a proposeo ceiling of _8.39 a
month. Business WLR woulo fall by 8 per cent ,78 pence,
to a proposeo ceiling of _9.17 a month. After a consultation,
these charges were connrmeo in January ano introouceo
on 1 March.
The calenoar year closeo with Ofcom connrming that, after
two years of oevelopment, the WLR proouct met a series
of agreeo criteria ,subject to specinc conoitions,. These
requirements, nrst agreeo in 2003, covereo service stanoaros,
functionality ano market impact. Ofcom`s assessment meant
that the existing retail price controls on BT Group plc were
relaxeo to a safeguaro cap ,RFI-zero, on 1 January 200o.
Large business pricing
In September, Ofcom announceo proposals to remove
certain rules governing the amount BT Group plc charges
large businesses for telecoms services. Currently, BT Group
plc must offer all large organisations the same publisheo call
ano line prices. Unoer new proposals, which were subject
to consultation, BT Group plc woulo be able to agree
inoivioual terms with customers that speno more than
_1m a year on telecoms, without having to publish its prices.
Ofcom believes that this will stimulate more competition in
the nxeo-line market, ano open up the possibility of lower
prices for large organisations.
The changes are contingent on the availability ano
replicability of wholesale services that enable competitors
to replicate BT Group plc`s services on an equal footing.
A statement on large business pricing was publisheo after
the reporting perioo.
Consuner polcy
ChaIIenging mis-seIIing, sIamming and poor
compIaints handIing
The number ano range of nxeo-line telecoms provioers is
greater tooay that ever before, with increaseo competition
oriving oown prices ano encouraging the introouction
of new services. However, with increaseo choice ano
1elecommuhIcaIIohs
Core Areas of Activity Section
www.ofcom.org.uk Ofcom AnnuaI Report |
competition there is a greater potential for service failure or,
in the worst cases, oeliberate corporate malpractice. Abuses
incluoe slamming`, where customers are switcheo from one
supplier to another without their knowleoge ano consent,
ano mis-selling, where the service offereo to the consumer
ooes not match the service oescribeo at the point of sale.
In April 200, Ofcom introouceo an obligation on
companies selling services in the nxeo-line telecoms market
to establish ano comply with Cooes of Fractice on sales ano
marketing practice, in accoroance with publisheo guioelines.
This obligation came into effect in May, ano will remain
in place for two years, at which point sales ano marketing
stanoaros ano abuses will again be revieweo. Meanwhile,
Ofcom saio it woulo investigate allegations of non-
compliance on a case-by-case basis, with powers to impose
nnes of up to 10 per cent of relevant turnover if sufncient
steps to remeoy the behaviour were not taken.
Ofcom also publisheo best-practice recommenoations
for provioers on how their Complaints Cooes of Fractice
must aooress the hanoling of complaints ano resolution
of oisputes.
There are two approveo alternative oispute resolution
,ADR, schemes: the Ofnce of the Telecommunications
Ombuosman ,OTELO, ano the Communications ano
Internet Services Aojuoication Scheme ,CISAS,. In July
200, Ofcom publisheo a consultation reviewing the
ADR schemes ano founo that the majority of the major
provioers were members: CISAS` membership hao grown
from !9 to 1!!, ano OTELO`s from seven to 1o. Research
also showeo that:
more than two-thiros of complainants were oissatisneo
with the way their provioers hanoleo their complaints,
awareness of the ADR process was low, with only ,000 of
some one million complaints being referreo to ADR, ano
arouno 80 per cent of complainants accepteo the oecision
of ADR schemes.
In December 200, Ofcom nnaliseo its recommenoations to
ensure that provioers oeal with customer complaints more
effectively. As well as connrming its approval for OTELO
ano CISAS, Ofcom ioentineo three key priorities: that both
ADR schemes shoulo publish key performance inoicators on
how quickly complaints are oealt with, whether customers
are satisneo, ano that Ofcom shoulo be notineo promptly of
any serious breach of scheme rules by a member company.
In August, Ofcom also approveo an amenoment to the
Cooe of Fractice of the premium rate regulator ICSTIS.
The revision meant that network companies that connect
premium rate calls will be preventeo from sharing call
revenues with provioers who offer premium rate services
for at least 30 calenoar oays. This gives ICSTIS important
aooitional time to assess complaints ano oetect misleaoing
or frauoulent activity, ano revenues may be frozen in the
event of investigations being necessary.
In Iebruary 200o, Ofcom launcheo a consultation on
proposals aooressing four key areas:
consumer protection, ano better early-warning systems
against scams ano mis-selling,
enforcement, with quicker ano more targeteo action
where it`s neeoeo,
complaint-hanoling, ano how systems for complaints
about communications provioers can be improveo, ano
consumer information ano ensuring that consumers
can make well-informeo oecisions baseo on reliable
ano useful oata.
A statement on consumer issues was publisheo after
the reporting perioo.
Iurther oetails of complaints receiveo by the
Ofcom Contact Centre can be founo on page o0.
UniversaI Service ObIigations
The Communications Act 2003 requires Ofcom to ensure
that all consumers are able to benent from basic nxeo-line
telecoms services. The obligations upon BT Group plc ,ano,
in Hull, Kingston Communications, to meet this oemano are
oescribeo as Universal Service Obligations ,USO,. In June
200, Ofcom launcheo a consultation on its approach to
this important area of consumer protection. In March 200o,
Ofcom publisheo a statement on nve principal proposals:
1. Lov-cost schcncs. BT Group plc ano Kingston
Communications will offer a new low-user scheme which
will target people who receive Income Support, income-
baseo Job Seeker`s Allowance ano Fension Creoit.
|Ofcom AnnuaI Report www.ofcom.org.uk
2. Phonc hocs. Although phone boxes can represent
a lifeline to certain customers, some are expensive to run
ano very rarely useo. Where BT Group plc or Kingston
Communications seek to remove a phone box, local
communities have a local veto` which will be available to
unitary, metropolitan, oistrict ano equivalent councils. This
will apply to the last phone box within a !00-metre area,
ano the consultation perioo for proposals will be extenoeo
from !2 oays to 90 oays. There will also be more freeoom
to use cashless phone boxes where vanoalism is a persistent
problem, or where phone boxes are neeoeo mainly for
emergency calls.
3. Custoncrs vith disohiIitics. Ofcom announceo the
establishment of a Stakeholoer Aovisory Fanel to monitor
the oelivery ano performance of text ano voice services.
These incluoe text relay, a service which translates voice calls
into text ano is a vital communications aio for many people
with oisabilities.
!. Phonc Iincs for oII. Irom 1 March 200o, BT Group
plc ano Kingston Communications were requireo to install
new phone lines at a stanoaro cost of _99.99, regaroless of
the location. However, if the actual cost to those companies
is more than _3,!00 the customer may be chargeo for the
oifference above this thresholo.
. Funding USO. This is met by BT Group plc ano
Kingston Communications, ano Ofcom oio not propose
to change this arrangement.
Action against siIent caIIs
Silent calls are generateo by call centres in inoustries
incluoing telemarketing, market research ano oebt collection.
Many call centres set up outbouno phone calls to consumers,
however, if those systems establish more outbouno calls
than there are agents available the result is silence on
the line when a person being calleo picks up the phone.
These abanooneo calls can cause signincant anxiety
ano annoyance.
In October, Ofcom consulteo on a reviseo policy, ano
in March announceo a new approach to oeal with
the persistent misuse of electronic communications
networks or services, unoer sections 128-130 of the
Communications Act.
The new guioelines incluoe three key requirements:
abanooneo call rates must be below three per cent
of all calls maoe in any 2!-hour perioo,
all abanooneo calls must carry a short recoroeo message,
ioentifying the source of the call, ano
a caller line ioentincation ,CLI, must be presenteo on
all outbouno calls that are generateo automatically. CLI
allows people to oial 1!71 ano nno out who calleo them.
Separately, the Government connrmeo it hao increaseo at
Ofcom`s request the maximum nne Ofcom may impose on
offenoers, from _,000 to _0,000.
Action against rogue internet diaIIers
During the previous year Ofcom receiveo an increaseo
number of complaints about rogue oiallers, malign software
which can become installeo on a computer within a oial-up
connection when a user opens spam email or visits certain
websites. Without the user`s knowleoge, the oiallers transfer
existing oial-up connections from freephone or low-cost
numbers to more expensive numbers.
In November, Ofcom proposeo to exteno the reach of
Fremium Rate Services requirements, which currently
govern 09 premium or international numbers, to enable the
premium rate regulator ICSTIS to take action against those
linkeo to rogue oialler use regaroless of the number useo
or the call charges involveo.
A statement was publisheo after this reporting perioo.
Voice over Internet ProtocoI services
At the close of this reporting year it was estimateo that there
were more than 00,000 active resioential users of Voice
over Internet Frotocol ,VoIF, services in the UK. These
services offer customers the prospect of lower-priceo calls
particularly calls from one VoIF service to another as
well as services such as call hanoling ano unineo messaging.
In Iebruary 200o, Ofcom proposeo a cooe for VoIF
service provioers to ensure that key information about the
capabilities of their services is maoe available to consumers.
Ofcom also proposeo other steps to encourage provioers
to offer 999 emergency calls, ano to help them comply
with regulations associateo with Fublicly Available
Telephone Services.
1elecommuhIcaIIohs
Core Areas of Activity Section
www.ofcom.org.uk Ofcom AnnuaI Report 2005]6 | 25
HospitaI caIIs
As a result of complaints from consumers concerning
the cost of calling hospital patients, in July 200 Ofcom
launcheo an investigation into two provioers, Fatientline
ano Fremier. Ofcom founo that high call prices ,up to !9
pence per minute peak ano 39 pence per minute off-peak,
were the result of a complex web of Government policy ano
agreements between the provioers, the NHS ano inoivioual
NHS Trusts. The investigation also focuseo on a recoroeo
message at the start of these calls, ano the exclusivity ano
length of agreements between NHS Trusts, Fatientline
ano Fremier.
In line with the Ofnce of Iair Traoing`s guioelines, Ofcom
set out its concerns ano recommenoations in January to the
Secretary of State for Health. It also recommenoeo that the
Department of Health shoulo review all aspects of beosioe
telephone services ,ano entertainment systems, in hospitals,
the cost of which seemeo to be borne oisproportionately
by frienos ano family calling patients.
Iurther oetails of Ofcom`s investigations programme can
be founo on pages 8 to 9.
Nunberng
Numbering review
Telephone numbers are a vital ano nnite national
resource. They unoerpin all telecoms services ano play
a key role in how UK householos ano businesses access
ano pay for _3!bn-worth of services every year. Unoer
the Communications Act 2003, Ofcom is responsible for
managing the UK National Telephone Numbering Flan,
ano publisheo a review of the Flan in Iebruary.
Ofcom ioentineo six key proposals, oesigneo to encourage
greater innovation, support the creation of new services,
increase consumer awareness ano strengthen consumer
protection. They were:
o ncv countryvidc nunhcr rongc: 03. This woulo be
chargeo to the consumer at the same rate as a geographic
number ano woulo mean organisations with a national
presence coulo be reacheo without charging consumers a
premium. Calls to 03 numbers coulo also be incluoeo in
inclusive or low-cost call packages offereo by lanoline
or mobile phone companies,
o ncv consuncr protcction tcst, oenying numbers
to provioers who have previously abuseo consumer trust,
o ncv 06 nunhcr rongc for personaliseo number
services, removing the confusion ano potential for scams
between the current personaliseo number range 070
ano 07 for mobiles,
o sinpIincd structurc of thc 08 rongc, banoing new
numbers by price. Ior example, an 082 number woulo
cost less to call than an 089 one,
o sinpIincd structurc for 09 prcniun rotc
nunhcrs, ano
o ncv oIIocotion systcn to avoio changes to
geographic numbers in the future.
Separately, Ofcom launcheo a public awareness campaign
to highlight Lonoon`s new ,020, 3 number range. The
nrst of these new numbers were releaseo to provioers
in summer 200.
Ior information on the number of numbering applications
processeo by Ofcom, see page 78 of Section C.
0870]1 and 0844]5 numbers
Introouceo in 199o, 0870/1 ano 08!!/ numbers ,Number
Translation Services or NTS, enable access to a range of
services, from pay-as-you-go internet access ano travel
enquiries to tele-voting ano phone banking. However, the
growth of these non-geographic calls has leo to high levels
of concern among consumers that services baseo on NTS
are not clearly priceo ano marketeo.
Ofcom`s initial proposals for NTS in October 200! leo to a
range of responses from consumers ano provioers, ano some
markeo oisagreements. In September, Ofcom consulteo on
reviseo proposals incluoing:
0870: an eno to revenue-sharing. Ofcom proposeo that
calls to 0870 numbers shoulo be priceo the same as
national-rate geographic numbers, effectively enoing
revenue-sharing,
0871: reclassineo as premium rate. ICSTIS to regulate
0871 numbers, with companies using them subject
to the same requirements that apply to 09 numbers,
|Ofcom AnnuaI Report www.ofcom.org.uk
0845: no changes for two years, protecting the oial-up,
pay-as-you-go internet services useo by more than nve
million UK customers,
0844: more transparency, with provioers requireo to
publish oetaileo pricing information. Ofcom also to
monitor closely services which are better suiteo to
other number ranges,
inprovcd infornotion, with provioers giving
consumers better information on the cost of calling
087/08! numbers,
Ofcon continuing to providc support to the
Aovertising Stanoaros Authority/Committee of
Aovertising Fractice with their guioance requiring
pricing information,
oII oduIt scrviccs to be connneo to 09 numbers, ano
subject to regulation by ICSTIS, ano
Ofcon rcitcrotcd its rcconncndotion that public
booies shoulo not use these numbers for people on low
incomes or other vulnerable groups, without giving
equal prominence to a geographic alternative.
A statement on NTS numbers was publisheo after the
reporting perioo.
A non-emergency '' number
In response to a request from the Home Ofnce, Ofcom
consulteo in October on proposals to make the phone
number 101` available as a single non-emergency number
in the UK. As part of the Home Ofnce`s wioer police reform
proposals, 101 woulo give the public a number they coulo
use to report criminal or antisocial behaviour that was not
consioereo an emergency. Ofcom connrmeo the 101 number
in a statement publisheo in March.
Ofcom oio not offer any view on a call charge for the service.
The Home Ofnce connrmeo its plans to charge the service
at a common rate of 10 pence per call across all networks.
This was subject to oiscussions with network provioers.
Moble Lelecons
The UK mobile sector is highly competitive, with nve
network operators ano a number of virtual network
operators in the market. In line with a review carrieo out
by Ofcom`s preoecessor Oftel, which founo that no one
company hao signincant market power, Ofcom`s intervention
in the market is limiteo ano focuseo on specinc consumer
protection or market growth issues.
InternationaI roaming
International roaming is a service offereo by mobile
operators that allows consumers to use their mobile phone
abroao. To provioe this service, UK mobile operators neeo
to make use of foreign mobile networks for which they incur
a wholesale charge. Similarly, UK mobile operators provioe
wholesale services to foreign operators to enable visitors to
use their mobile phone when in the UK.
During the year Ofcom unoertook preliminary work to assess
the wholesale international roaming market in the UK.
This incluoeo a signincant contribution to the work of the
European Regulators Group on international roaming issues
ano, in particular, in response to the European Commission`s
proposals for regulation announceo in Iebruary 200o.
Separately, in January 200o, Ofcom publisheo a guioe to
help travellers ano holioaymakers reouce their costs when
using a mobile abroao. The guioe also listeo the most
commonly available roaming tariffs from each of the UK`s
nve mobile network operators.
Iurther oetails of Ofcom`s international work can be founo
on page o.
MobiIe caII termination charge controIs extended
Consumers have no control over the amount mobile
network operators charge other operators to connect a call
to a mobile phone. To protect consumers, in June 200!,
Ofcom imposeo oirect charge controls upon the 2G mobile
operators, Vooafone, Orange, T-Mobile ano O2. In June
200, Ofcom proposeo to exteno these controls, oue to
expire in March 200o, for a further 12 months. The charge
controls, which renect the oifferences in spectrum useo for
2G services, were proposeo to remain as follows:
1elecommuhIcaIIohs
Core Areas of Activity Section
www.ofcom.org.uk Ofcom AnnuaI Report |
for Vooafone ano O2, which use both the 900 MHz ano
1800 MHz banos: .o3 pence per minute, ano
for T-Mobile ano Orange, using banos at 1800 MHz:
o.31 pence per minute.
The proposals were implementeo in December.
In March 200o, Ofcom publisheo a secono consultation
oocument proposing to control wholesale mobile call
termination charges where there is evioence of market
oominance when the current regulation expires in
March 2007.
Ofcom also proposeo that price controls shoulo be imposeo
on oominant operators connecting calls to 3G networks
,as well as 2G, because of the increasing volume of calls.
New spectrum for mobiIe services
In 200/o Ofcom maoe the preparations for its nrst
spectrum auction, which took place in April. Ofcom
awaroeo 12 Wireless Telegraphy Act licences for the
spectrum bano 1781.7-178 MHz, paireo with 187o.7-1880
MHz. The licences were awaroeo on a technology ano
application-neutral basis. A number of licensees expresseo
an interest in offering private GSM networks in ofnce
builoings ano campuses using the spectrum.
Ior oetails of Ofcom`s spectrum awaros programme see
page 31.
HeadIhg SpecIrum
In November 200!, Ofcom publisheo its Spectrum
Iramework Review. This set out Ofcom`s intention to
enable market forces to play a greater role in oetermining
how spectrum is useo, maximising the use of this valuable
resource by ensuring a greater oegree of nexibility. Raoio
spectrum is an important ano nnite national asset, upon
which numerous services, such as aviation, emergency
services, mobile phones, television ano raoio, oefence ano
utilities, oepeno.
In January 200, Ofcom publisheo its Implementation Flan
for the Spectrum Iramework Review. This focuseo on:
spectrum release, setting out a programme that will make
available !00 MHz of prime spectrum in the next few
years, ano
traoing ano liberalisation, making it possible for
organisations to buy ano sell spectrum in the market,
while reoucing or removing the restrictions that limit
the use of spectrum for a particular purpose or technology.
In 200/o, Ofcom maoe signincant progress in realising
both parts of the Implementation Flan.
SpecLrun release
In July 200, Ofcom publisheo proposals to awaro a number
of low-power Wireless Telegraphy Act licences, by means
of its nrst-ever spectrum auction. The spectrum bano
1781.7-178 MHz, paireo with 187o.7-1880 MHz, woulo
be awaroeo on a technology ano application-neutral basis
in 200/o.
A number of organisations expresseo interest in these banos,
for uses such as private GSM networks in ofnce builoings
or campuses. In November, Ofcom publisheo a policy
statement, Information Memoranoum ano oraft regulations
requireo to holo the auction. In Iebruary, it connrmeo the
regulations ano these came into force in March. The auction
began later in the same month when 1o companies maoe
applications for the seven to 12 licences on offer. The
auction was completeo after the reporting perioo ano
12 licences were awaroeo.
|Ofcom AnnuaI Report www.ofcom.org.uk
Core Areas of Activity Section
www.ofcom.org.uk Ofcom AnnuaI Report |
In October, a secono auction was announceo: the
!12-!1! MHz bano, paireo with !22-!2! MHz. The
wioe range of potential uses ioentineo for this bano
incluoeo private mobile raoio, public access mobile raoio,
programme-making ano special events. Ofcom publisheo
a policy statement, Information Memoranoum ano oraft
regulations in April 200o ano the consultation on the
proposeo regulations enoeo in May 200o.
In December 200, Ofcom announceo a thiro spectrum
auction in Northern Irelano with the Commission for
Communication Regulation in the Republic of Irelano
,ComReg,. The two regulators proposeo that licences
woulo be offereo by auction for frequencies in the
178-180 MHz bano, with its potential for innovative
services such as broaobano wireless access, oigital vioeo
links, CCTV, mobile technologies ano wireless microphones
throughout Irelano. After the reporting perioo, Ofcom ano
ComReg publisheo an Information Memoranoum with
oetails of the awaro proceoure, rules ano licence conoitions.
In March 200o, Ofcom announceo a fourth auction of
licences, for frequencies between 1!2-1!92 MHz ,!0 MHz,,
on a technology ano application-neutral basis with a target
of making awaros by March 2007. A number of possible
uses for the spectrum were suggesteo incluoing mobile
television, broaobano wireless access, satellite oigital raoio,
programme-making ano special events. The oeaoline for
responses to these proposals was set for June 200o, aheao
of a possible auction in early 2007.
During the year, Ofcom also prepareo oetaileo proposals
for consultation on an awaro of the frequencies
872-87o MHz paireo with 917-921 MHz, in line with
initial proposals maoe in the Spectrum Iramework Review
Implementation Flan. The consultation oocument was
publisheo after the reporting perioo.
Ofcom was also involveo in oiscussions at a European level
on spectrum ioentineo for awaro, with a particular focus
by the Raoio Spectrum Committee on the 2.o GHz bano.
These oiscussions are ongoing. Ofcom is aiming to make an
awaro in 2007 ano Ofcom appointeo external consultants
in March 200o to assist with analysing the technical ano
economic issues relating to this spectrum.
Progress on spectrum reIease
1781.7-1785 MHz, poircd vith 1876.7-1880 MHz
Fublisheo Information Memoranoum ano
regulations
Helo auction: one rouno of sealeo bios*
Issueo 12 Wireless Telegraphy Act licences*
412-414 MHz, poircd vith 422-424 MHz
Fublisheo proposals for the awaro
Fublisheo policy statement on proposeo auction*
Issueo an Information Memoranoum*
Fublisheo oraft regulations*
1785-1805 MHz (Northcrn IrcIond)
Fublisheo proposals for the awaro by auction in
conjunction with ComReg
1452-1492 MHz (40 MHz)
Fublisheo proposals for the auction
872-876 MHz hond poircd vith 917-921 MHz
Fublisheo proposals for the awaro by auction*
2.6 GHz
Discussions at a European level
Appointeo consultants to assist in analysing
technical ano economic issues
,* After reporting perioo,
|Ofcom AnnuaI Report www.ofcom.org.uk
Spectrum trading and IiberaIisation
200/o saw the nrst instances of spectrum traoing in
the UK. Spectrum traoing allows the holoer of certain
categories of Wireless Telegraphy Act licences to transfer
all or part of their rights ano obligations unoer a licence
to another party. In the year to 31 March 200o, Ofcom
authoriseo the transfer of rights to use 1 licences.
Ofcom also unoertook further work on how the technical
conoitions in spectrum licences coulo be renneo to provioe
greater certainty, ano at the same time allow greater
nexibility of use. The proposeo Spectrum Usage Rights
woulo give spectrum users greater freeoom to oecioe how
to use the spectrum they holo, while limiting the levels
of interference to neighbouring users. A consultation
oocument was publisheo after the reporting perioo.
DgLal swLchover
Over the last three years, consumer take-up of oigital
broaocasting in all its forms has increaseo substantially,
Ofcom`s research shows that the UK has the highest oigital
television penetration of any country in the worlo. By March
200o, 72. per cent of television householos were viewing
oigital television across a variety of platforms: oigital
satellite, oigital cable, oigital terrestrial ano broaobano.
The Government announceo in September 200 that
analogue television broaocasting woulo be phaseo out
between 2008 ano 2012, starting in the Boroer region
ano rolling out across the UK. A new organisation, Digital
UK, was createo to manage the transition. These oecisions
were informeo in part by research ano consultation carrieo
out by Ofcom. Ofcom is working with Digital UK, the
Government, broaocasters ano other stakeholoers to
implement the switchover programme.
Ofcom announceo its coverage plans in June 200 for
Digital Terrestrial Television ,DTT,. A range of options
were consioereo relating to the technical conoitions for DTT
such as power levels, transmission mooe ano the number
of transmitters to be useo. Ofcom`s favoureo option, which
was accepteo by the Government, will require that the three
public service multiplexes will provioe DTT coverage to at
least the same proportion of householos ,98. per cent, that
are currently reacheo by analogue public service broaocasts.
This will ensure that, after switchover, UK householos will
have access to BBC1, BBC2, ITV1 ano Channel !/S!C as
well as to new channels on terrestrial television. Ofcom is
also researching ways to provioe better aovice on options for
oigital television reception to all UK householos, working in
conjunction with Digital UK, the Department of Traoe ano
Inoustry ano the BBC.
1he digitaI dividend
The switchover to oigital will oeliver a signincant spectrum
oivioeno as frequencies useo for analogue broaocasting are
releaseo for other uses. The nve terrestrial analogue channels
currently use just over one-thiro of the most valuable banos
of spectrum below 1 GHz. Digital broaocasting is six times
more efncient than analogue, opening up the potential to
release up to 112 MHz of spectrum in the UHI bano for
new uses.
The UHI bano is prime spectrum, it offers a valuable
balance between capacity ,banowioth, ano range. It is
sought-after for a wioe range of services likely to be useo
by millions of people every oay.
In November, Ofcom announceo a Digital Divioeno
Review to examine the opportunities for innovation which
switchover ano the release of valuable spectrum will
provioe. Historically, all uses of spectrum were oecioeo by
the Government or a government agency. However, this
commano-ano-control approach proveo innexible to changes
in technology ano markets.
Ofcom`s starting assumption for this release of spectrum will
be a market-leo approach to ensure that this resource goes
to the people ano organisations who have the most valuable
use for it. However, Ofcom will also consioer whether there
are circumstances where a market-leo approach may not
necessarily leao to an optimal outcome for the UK as a
whole. If relevant, Ofcom will ioentify appropriate means
which may be useo to rectify any market failures revealeo
by the Review.
Effective exploitation of the oigital oivioeno coulo enable
the launch of a wioe range of oifferent services. These
coulo incluoe:
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1. Other statutes also form part of Ofcom`s rulebook. They are the unamenoeo parts of:
- The Wireless Telegraphy Act 19!9 - The Wireless Telegraphy Act 1998
- The Marine Etc Broaocasting Offences Act 19o7 - The Competition Act 1998
- The Broaocasting Act 1990 - The Enterprise Act 2002
- The Broaocasting Act 199o
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Ofcom`s outies ano powers are oeriveo principally from the
Communications Act 2003, which receiveo Royal Assent on
17 July 2003.
1
Ofcom is an inoepenoent statutory corporation accountable
to Farliament. Its specinc outies unoer the Communications
Act 2003 fall into six areas:
,a, ensuring the optimal use of the electro-magnetic
spectrum,
,b, ensuring that a wioe range of electronic communications
services incluoing high-speeo oata services are
available throughout the UK,
,c, ensuring a wioe range of television ano raoio services
of high quality ano wioe appeal,
,o, maintaining plurality in the provision of broaocasting,
,e, applying aoequate protection for auoiences against
offensive or harmful material, ano
,f, applying aoequate protection for auoiences against
unfairness or the infringement of privacy.
The Communications Act also incorporateo principles
relating to how we shoulo unoertake our outies, requiring
us to act in a way which is transparent, accountable,
proportionate, consistent ano targeteo.
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Unoer Faragraph 8,1, of the Scheoule to the Ofnce of
Communications Act 2002, Ofcom is requireo to balance
its expenoiture with its income in each nnancial year.
Sections 38 ano 3!7 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 incurreo by
Ofcom in regulating that sector. Ofcom must also apportion
its common operating costs those which oo not relate
oirectly to any one sector in a proportionate manner
across each of those sectors.
Ofcom raises its funos from a number of sources incluoing:
television broaocast licence fees,
raoio broaocast licence fees,
aoministrative charges for electronic networks ano services
ano the provision of broaocasting ano associateo facilities,
ano
funoing to cover Ofcom`s operating costs for spectrum
management in the form of grant-in-aio from the
Department of Traoe ano Inoustry ,DTI,.
Grant-in-aio covers the costs of regulating ano managing
the UK raoio spectrum. It also covers those statutory
functions ano outies which Ofcom must oischarge unoer
the Communications Act but for which the Act provioeo no
matching revenue stream. Examples incluoe the statutory
public interest test for meoia mergers ano EXPOST Competition
Act investigations in relation to networks ano services.
Lmbo^qfkdobpriqp
Ofcom`s actual operating costs for 200/o were _129.0m,
_!.0m lower than buoget.
Within its nnancial buoget Ofcom oelivereo the majority of
the policy outputs planneo in the 200/o Annual Flan, as well
a number of aooitional outputs. Ofcom continueo to oeliver
services, such as spectrum licensing to stakeholoers ano to
carry out enforcement activities.
The unoerspeno against the operating buoget renects
a number of items, the largest of which incluoe savings
in operating expenoiture through insourcing oesktop
support functions in IS, savings oue to operating below
the buogeteo heaocount chieny in policy proouction ano
taking opportunities to rationalise the property portfolio
as these arose.
The _129.0m of actual operating costs for 200/o compares
favourably with _1!2.0m which was the preoicteo sum
of the cost of the legacy regulators after incluoing the
nnancial impact of aooitional statutory outies, annual
innation ano VAT.
In aooition to Ofcom`s own expenoiture, the income ano
expenoiture account also incluoes _o.7m for spectrum
efnciency projects ,200!/: _ 3.1m, which are funoeo by
grant-in-aio from the Treasury ano _1.1m of expenoiture
for the programme of spectrum auctions. Spectrum efnciency
projects are recoroeo within technological research in
Note o to the nnancial statements ano the initial work on
the programme of spectrum auctions is representeo unoer
professional fees. These items ano a further increase in
professional fees, offset by a reouction in the seconoeo staff,
are the principal contributors to the increase in operating
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expenoiture presenteo in the income ano expenoiture
report. The aooitional professional aovice commissioneo
incluoeo aovice on the transfers of pension liabilities from
the principal civil service pension scheme, work in licensing
oeregulation, ano a number of signincant telecoms projects
incluoing mobile call termination.
A reconciliation is set out below which highlights the
oifferences between the total operating expenoiture as
presenteo in the income ano expenoiture account ano
Ofcom`s actual out-turn of _129.0m.
Note 2 to the nnancial statements also presents,
Ofcom`s actual out-turn for 200/o, by sector.
in 200!/.The operating surplus is requireo, primarily, to repay
the DTI loan, cover the rental ano operating payments relating
to vacant property inheriteo from the legacy regulators ,which
were chargeo via the vacant property provision to the income
ano expenoiture account in 2003/!,, pay for any investment
in nxeo assets, ano funo the two oenneo benent pension plans
which were inheriteo as a result of the merger of the nve legacy
booies.
2
The special contributions maoe by Ofcom in 200/o
to aooress the actuarial oencit in the inheriteo oenneo benent
pension schemes are the principal components of the increaseo
surplus. Iull oetails of the pension plan are oescribeo in a
subsequent section of this review. The utilisation of the surplus
is also oescribeo in Note 2 to the nnancial statements.
On 31 March 200o, Ofcom publisheo the Tariff Table for
200o/7, which was baseo on an estimateo out-turn for 200/o
of _129.m.
A total of _3.m the oifference between the original buoget
of _133m ano the forecast out-turn is alreaoy being passeo
back to stakeholoers in 200o/7 as part of the current regulatory
tariffs or reimbursement of grant-in-aio claims.
The sum of _0.m, which represents the oifference between
the nnal out-turn ano the forecast out-turn, will be returneo
to stakeholoers in 2007/8 as a creoit against 2007/8 licence
ano aoministration fees.
These sums have been oeferreo on Ofcom`s balance sheet
at 31 March 200o.
Ofcom`s operating buoget for 200o/7 is nve per cent lower in
real terms than the 200/o operating buoget. Ofcom believes
that the operating buoget is a pruoent ngure after taking
into consioeration its work programme ano the nrst stages
of implementation of Froject Unify, Ofcom`s long-term IS
infrastructure project.
Taking into account this reouceo operating buoget ano the
signincant returns to stakeholoers in 200/o, this will mean
that regulatory fees for 200o/7:
will reouce by 3.7 per cent for television licensees,
will marginally increase in real terms ,an average increase
of 3.7 per cent in nominal terms, for the raoio sector, ano
will increase by an average of 11 per cent for network ano
services operators to renect increasing work in 200o/7 in a
2. These were the Broaocasting Stanoaros Commission, the Inoepenoent Television Commission,
Oftel, the Raoio Authority ano the Raoiocommunications Agency.
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Ofcom calculates its operating revenue on the basis of its
statement of charging principles taking into account the
actual funos that it neeos to collect to oischarge its cash
liabilities ouring the year. This treatment gives rise to an
accounting surplus only. Ofcom returns the majority of
actual surplus funos to stakeholoers through the annual
tariffs raiseo in the next nnancial year.
The operating surplus for the year unoer review was
recoroeo as _31.om compareo with a surplus of _22.m
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range of areas incluoing implementation of the outcome
of the Strategic Review of Telecommunications ano
increaseo focus on consumer protection ano enforcement.
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At 31 March 200o, Ofcom hao 77o ,200: 73, employees
ano two ,200: 30, seconoees.The heaocount ngure is
signincantly below the 80-plus heaocount at Ofcom`s
launch in 2003 ano the estimateo 1,12 roles of the
combineo legacy regulators.
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Ofcom`s primary means of provioing pension benents is
through a oenneo contribution pension allowance provioeo
to all external recruits to Ofcom ano to those colleagues
from the legacy regulators who have chosen this option.
This allowance may be useo to make contributions to the
Ofcom oenneo contribution stakeholoer pension plan.
Other colleagues from the legacy regulators are provioeo
with membership of the oenneo benent pension schemes.
Ofcom has reouceo its exposure to the greater nnancial
risk associateo with oenneo benent pension schemes
by introoucing the pension allowance ano limiting the
potential growth of pensionable salary unoer oenneo
benent commitments.
Ofcom`s approach has proveo to be successful in
minimising liability while also ensuring colleagues are able
to set asioe funos for retirement. In total, 7 per cent of
Ofcom colleagues are employeo on terms with access to a
stakeholoer pension plan, 21 per cent are on Ofcom terms
with a oenneo benent pension with restricteo pensionable
salary growth, ano just ! per cent remain on the existing
terms inheriteo from legacy organisations.
Ior those colleagues who joineo Ofcom from the legacy
regulators ano who electeo to retain membership of a
oenneo benent pension scheme, Ofcom operates two
such schemes, which are closeo to new entrants:
the Ofcom ,former ITC, Fension Flan ,the former
ITC Flan`,, which Ofcom jointly participates in with
the Aovertising Stanoaros Authority ,ASA,, S!C ano
S!C Masnachol, ano
the Ofcom Denneo Benent Fension Flan ,the Ofcom Flan`,,
which Ofcom jointly participates in with the ASA.
The accounting treatment of these oenneo benent schemes
is set out in Notes 13 ano 2o of the notes to the nnancial
statements. These show that Ofcom has a pension asset as
of 31 March 200o of _10.2m as measureo by Iinancial
Reporting Stanoaro 17 ,IRS 17,, of which _8m relates
to the former ITC Flan.
During the year, 83 colleagues transferreo their oeferreo
pension provision from the Frincipal Civil Service Fension
Scheme ,FCSFS, to the Ofcom scheme, as oio ! colleagues
who were members of the former ITC Flan. Ofcom expects
to receive assets of arouno _om ,measureo at 31 March 200o,
from the FCSFS in relation to this transfer. The latest actuarial
valuation of the Ofcom Flan is currently being prepareo
as of 31 March 200o ano will be nnaliseo later in 2007.
The ITC scheme is a relatively mature scheme, compareo to
many similar schemes, in that more than 8 per cent of the
liability relates to pensioners or oeferreo pensioners. The use
of the oiscounting assumptions stipulateo by IRS 17 gives rise
to an accounting asset. By contrast, the assumptions useo by the
actuary for the actuarial valuation give rise to a net oencit in the
plan at 1 January 200! of _o.0m ano this forms the basis of the
recommenoeo annual contributions to the scheme. The next
actuarial valuation will be carrieo out at 1 January 2007.
Ofcom maoe ,ano continues to make, cash contributions to the
former ITC Flan on the basis of the actuarial valuation. These
cash contributions, rather than the amount chargeo to operating
surplus ,as calculateo unoer IRS 17,, are incluoeo in the
expenoiture useo to calculate the tariffs chargeo to stakeholoers
each year.
During the year, Ofcom maoe oenneo benent contributions of
_9.om to the two oenneo benent pension schemes. Separately,
Ofcom colleagues in receipt of the pension allowance electeo
to pay a total of _2.0m into the Ofcom oenneo contribution
stakeholoer pension scheme. The contributions to the oenneo
benent schemes incluoeo _1.9m paio in aovance ano a special
contribution of _!m to the Ofcom Flan to funo the oencit
arising as a result of the bulk transfers.
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During the full-year perioo unoer review, Ofcom investeo
a total of _o.om ,200: _.om, in tangible nxeo assets ano
_0.9m in intangible nxeo assets. Ofcom`s investment in
information systems ano equipment, which relates primarily
to Froject Unify a multi-year programme to replace
! oifferent IS systems accounteo for _!.om of assets
unoer construction.
On 31 March 200o Ofcom solo its investment in
Whyteleafe Hall for _2.9m after oisposal costs.
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Ofcom`s establishment ano restructuring loan of _2.3m
is repayable to the DTI in the perioo from March 200! to
March 2008. The repayment of the loan capital ano interest
is funoeo from the main sources of income for Ofcom.
The phasing of repayments is oetermineo unoer the loan
agreement with the DTI. Ofcom has allocateo the launch
costs for the complete repayment perioo until March 2008
on a proportionate basis, using the amount of expenoiture
incurreo by the legacy organisations in each sector as the
basis for allocation.
During the year unoer review, Ofcom repaio _17.8m of
the loan ano at 31 March 200o, the loan balance outstanoing
was _10.!m.
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As in 200/o, Ofcom has aoopteo a pruoent approach in
provioing against all future vacant property costs that are
surplus to requirements. The provision is baseo on all future
premises cash nows up to the earlier of either the nrst lease
break, or the eno of the lease, oiscounteo by the Treasury
recommenoeo cost of capital. While it is probable that the
longer leaseholo properties will be oisposeo of at some stage,
it is not possible to estimate the associateo income reliably.
Ofcom has therefore taken the pruoent approach of not
recognising any future income unless commitments are
alreaoy in place or reasonably certain.
During the year enoeo 31 March 200o, _!.9m of the vacant
property provision was utiliseo ano, after taking into account
the unwinoing of the 200/o element of the oiscount on
the provision of _0.3m, the provision at 31 March 200o
was _10.7m ,200: _1.2m,.
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Ofcom`s funoing for spectrum management activities
is ultimately oeriveo from the fees paio by licensees to
the UK Exchequer. In aooition, Ofcom is responsible
for oetermining ano collecting Aooitional Fayments
maoe by certain broaocast licensees using valuable
spectrum. In total, those monies, collecteo by Ofcom
on the Government`s behalf, represent a signincant
contribution to the public purse. In 200/o, in
accoroance with Section !00 of the Communications
Act, Ofcom invoiceo ano collecteo _281.3m
,_2.9m of which was refunoeo to licensees
following a revision of licence terms, from wireless
communications ano broaocasting companies in
spectrum revenues ano licence receipts.
At 31 March 200o, _39.8m ,200: _3.3m, of
spectrum fees were uncollecteo. Most of these oebts
were not oue for payment ano will be recovereo in
the oroinary course of business. No oebts may be
written off without authorisation from the DTI, ano
HM Treasury is also consulteo in respect of write-off
requests for signincant balances. At the balance sheet
oate, the following signincant amounts hao been
outstanoing for more than 12 months:
_1.m oweo by Inquam Telecom ,Holoings,
Limiteo a legal agreement between Ofcom ano
Inquam has agreeo a future repayment plan, ano
_0.2m oweo by Quiktrak ,UK, Limiteo, a
company in liquioation. At the oate of this report,
Ofcom ooes not expect to recover this oebt.
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As well as oeveloping policy, Ofcom provioes services to
stakeholoers ano unoertakes enforcement activity. Ofcom
has a range of Key Ferformance Inoicators ,KFIs, to
measure how we are oelivering these services. Together
with nnancial performance, they provioe a measure
of our internal efnciency ano effectiveness.
The oata in this section relates to the following areas:
applications for telephone numbers KFIs,
Wireless Telegraphy Act licensing issuing licences
,categories A, B ano C,,
Wireless Telegraphy Act licensing licensing KFIs,
Spectrum operations nelo operations activity,
Spectrum operations nelo operations KFIs,
Broaocasting programme complaints ,incluoing KFIs,,
Broaocasting Iairness ano Frivacy ,incluoing KFIs,,
Broaocasting Content Sanctions Committee,
Investigations programme KFIs,
The Ofcom Contact Centre KFIs.
In most areas Ofcom is operating on or close to
the targets we believe are requireo in oroer to meet
stakeholoer neeos.
Krj_bofkd
Ofcom is responsible for managing telephone numbers in
the UK. As part of this we process applications for blocks
of telephone numbers from communications provioers.
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Ofcom issues arouno 30 oifferent kinos of non-oiscretionary
WT Act licence. These are generally referreo to by the name
of the equipment they licence, such as Ships` Raoio Licence
ano Satellite Network Licence.
The non-oiscretionary licence types are oivioeo into three
larger categories: A, B ano C.
Category A are simple licences which involve no frequency
assignment, site clearance or international co-oroination.
Category B are more complex licences which involve
frequency assignment but oo not involve site clearance
or international co-oroination.
Category C are the most complex licences involving
frequency assignment ano site clearance ano/or
international co-oroination.
Ofcom is requireo to report on its spectrum management
activity in oetail, the tables which follow set out the non-
oiscretionary ano oiscretionary WT Act licensing activity
unoertaken ouring the perioo unoer review.
Ofcom is requireo to make a oetermination on applications
for telephone numbers within three weeks of receipt of
all relevant information. During the perioo unoer review,
that requirement was met in 97 per cent of cases. Of the
remaining three per cent, the extenoeo perioo was agreeo
with the applicant in all but one case.
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clojboivLk*pfqbM?O%Pmbb`e^kaA^q^&
TXZR T[UZ TU[S[
?rpfkbppO^afl%Lk*PfqbIl`^i@ljjrkf`^qflkpPvpqbjp&
clojboivLk*pfqbM?O%Il`^i@ljjrkf`^qflkp&
YR SST SUUX
?rpfkbppO^afl%Lk*PfqbElpmfq^iM^dfkd^kaBjbodbk`vPvpqbjp&
clojboivLk*pfqbM?O%Elpmfq^iM^dfkd^kaBjbodbk`vPmbb`e&
Y SR VXX
?rpfkbppO^afl%Lk*PfqbLkb*T^vM^dfkd^kaPmbb`ePvpqbjp&
clojboivLk*pfqbM?O%Lkb*t^vM^dfkd^kaPmbb`e&
SVX SWS SY[U
?rpfkbppO^afl%Tfab*>ob^Pmbb`e^kaA^q^Pvpqbjp&
clojboivTfab*>ob^M?O%Pmbb`e^kaA^q^&
SWUS SXZW SRYTY
?rpfkbppO^afl%Tfab*>ob^Lkb*T^vM^dfkd^kaPmbb`e
Pvpqbjp&clojboivTfab*>ob^M?O%Lkb*t^vM^dfkd^kaPmbb`e&
TT SR URU
?rpfkbppO^afl%Tfab*>ob^Afpqobpp>i^ojPvpqbjp&
clojboivTfab*>ob^M?O%Afpqobpp>i^ojp&
VR SS XR
?rpfkbppO^afl%K^qflk^i^kaObdflk^i&
clojboivK^qflk^i^kaObdflk^iM?O
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?rpfkbppO^afl%@ljjlk?^pbPq^qflk&
clojboiv@ljjlk?^pbPq^qflkLmbo^qlo
TZ U[ WZ[
?rpfkbppO^afl%@?P%?^kaF^kaPr_?^kaFlc?^kaFFF&
clojboiv%?^kaF&^ka%Pr_?^kaFlc?^kaFFF&@?P
U U SX
?rpfkbppO^afl%Mr_if`Jl_fibA^q^)Klk*slf`b&
clojboivMr_if`Jl_fibA^q^%klk*slf`b&
R R V
?rpfkbppO^afl%Mr_if`>``bppJl_fibO^afl&
clojboivMr_if`>``bppJl_fibO^afl
R R V
?rpfkbppO^afl%Mr_if`Tfab*>ob^M^dfkd&
clojboivMr_if`Jl_fibLmbo^qlo%clomr_if`tfab*^ob^m^dfkd&
R R U
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ObjlqbJbqboOb^afkd R S V
P`^kkfkdQbibjbqov S VW UR
Pr_qlq^iclo?rpfkbppO^aflmolar`qp VWVS WRSU U[WS[
Qlq^iclo@^qbdlov? VYWV WTVU VSURR
Pq^qfpqf`^ia^q^
ttt+lc`lj+lod+rhLc`lj>kkr^iObmloqTRRWXyZS
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@^qbdlov@
If`bk`bpqe^qobnrfobcobnrbk`v^ppfdkjbkq^ka
pfqb`ib^o^k`b^ka,lofkqbok^qflk^i`l*loafk^qflk
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P^qbiifqb%Mboj^kbkqB^oqePq^qflk& SX TV SST
P^qbiifqb%Qo^kpmloq^_ibB^oqePq^qflk& VU VY STY
P^qbiifqb%B^oqePq^qflkKbqtloh&
clojboivSbovPj^ii>mboqrobQbojfk^i
Z SY U[
Qlq^iclo@^qbdlov@ [Z SUZ XVY
Qbpq^kaAbsbilmjbkqIf`bk`bp
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Klk*Lmbo^qflk^iAbsbilmjbkqIf`bk`b TVY TZS TWW
Klk*Lmbo^qflk^iQbjmlo^ovIf`bk`b US SXR US
Qlq^icloQbpq^kaAbsbilmjbkq TYZ VVS TZX
ZTyLc`lj>kkr^iObmloqTRRWXttt+lc`lj+lod+rh
Jl_fib^ka?ol^a_^kaTfobibpp
If`bk`bpfpprbaqeolrdepmb`qorj^r`qflklo^t^oap
If`bk`bpfpprba
>mofiRWJ^o`e-3
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TD@biiri^oQbibmelkbp R R V
UD@biiri^oQbibmelkbp R R W
TD@e^kkbiFpi^kap^kaFpiblcJ^k@biiri^oQbibmelkbp U R Y
D@e^kkbiFpi^kap^kaFpiblcJ^k@biiri^oQbibmelkbp V R X
CfubaTfobibpp>``bp^ka?ol^a_^kaCfubaTfobibpp>``bpp
TZDEw)UXDEw^kaUVDEw
R R SR
CfubaTfobibpp>``bp#?ol^a_^kaCfubaTfobibpp>``bpp
@e^kkbiFpi^kap^kaFpiblcJ^kTZDEw)UXDew^kaUVDew
T W Y
Qlq^icloJl_fib^ka?ol^a_^kaTfobibpp [ W U[
Most category A licences are oealt with by the Raoio Licensing Centre ,RLC,, responsible for amateur, Citizen`s Bano ano ships`
raoio licences. The Civil Aviation Authority ,CAA, issues aircraft licences ano the Joint Irequency Management Group ,JIMG,
issues licences ano authorisations for outsioe broaocasts ano programme-making ano special events.
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M^oqkbop>`qfsfqv
If`bk`bpfpprba
>mofiRWJ^o`eRX
If`bk`bpfpprba
>mofiRVJ^o`eRW
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O^aflIf`bk`fkd@bkqob%OI@&fpprbpif`bk`bpclo@?)>j^qbro^ka
J^ofqfjb
SWYTWX SXYWXS SWRR[T
GCJDfpprbpif`bk`bpcloMoldo^jjb*J^hfkd^kaPmb`f^iBsbkqp TVSY TTVU TZTT
@>>fpprbpif`bk`bpclo>bolk^rqf`^i SVVSY SSTRR STZTW
Qlq^i SYVR[R SZSRRV SXWYU[
Qlq^iKrj_bolcIf`bk`bp^ii`^qbdlofbp SZR[WV SZZUWX TTRUSZ
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ttt+lc`lj+lod+rhLc`lj>kkr^iObmloqTRRWXyZU
Lmbo^qfkd^kaCfk^k`f^iObsfbtyPb`qflk@
HbvMbocloj^k`bFkaf`^qlop
HMFq^odbqcloqfjbqlfpprbif`bk`b
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@^qbdlov>If`bk`b SRRfkYa^vp [V ZT
@^qbdlov?If`bk`b [R"fkTSa^vp [X [T
SRR"fkVTa^vp SRR [Y
@^qbdlov@If`bk`b
[R"fkVTa^vp%SRR"bu`irafkdtebob
fkqbok^qflk^i`ib^o^k`bfpfkslisba&
[V [W
SRR"fkXRa^vp%fk`irafkdtebobfkqbok^qflk^i
`ib^o^k`bfpfkslisba&
[W [Y
Qbpq^kaAbsbilmjbkqHbvMbocloj^k`bFkaf`^qlop
HMFq^odbqcloqfjbqlfpprbif`bk`b
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@^qbdlov>If`bk`b SRR"fkYa^vp [T WX
@^qbdlov?If`bk`b [RfkVTa^vp SRR SRR
@^qbdlov@If`bk`b SRR"fkXRa^vp SRR SRR
M^oqkbopMbocloj^k`b
HMFq^odbqcloqfjbqlfpprbif`bk`b
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OI@ SRR"fkYa^vp SRR SRR
GCJD SRR"fkYa^vp SRR SRR
@>> SRR"fkYa^vp SRR SRR
Pmb`qorjIf`bkpfkdHMFp
Key performance inoicators ,KFIs, are currently in place for each category of licence. These measure the time taken by Ofcom
to issue the licence ano vary accoroing to the licence type. Ior Category A licences the KFI is for 100 per cent of valio licence
applications for new or varieo services to be awaroeo or rejecteo ,with explanation, within seven oays of receipt by Ofcom.
The KFI for Category B licences is 90 per cent of valio licence applications for new or varieo services to be awaroeo, or rejecteo
with explanation, within 21 oays, the remainoer to be awaroeo or rejecteo within !2 oays of receipt by Ofcom. The Category C
KFI is for 100 per cent of valio licence applications for new or varieo services to be awaroeo or rejecteo ,with explanation, within
!2 oays of receipt by Ofcom, except, where international clearance is involveo, applications to be awaroeo or rejecteo within
o0 oays or an explanation of the oelay to be given. Overall customer service satisfaction levels are at 90 per cent, with 91 per cent
satisneo with the speeo of receipt of licences. ,Source: Ofcom survey.,
ZVyLc`lj>kkr^iObmloqTRRWXttt+lc`lj+lod+rh
TlohMoldo^jjb>`qfsfqv,Fk`fabkq
Mbofla
TRRWXObmloqfkdVb^o
Mbofla
TRRVWObmloqfkdVb^o
Fkqbocbobk`bfksbpqfd^qflkobnrbpqpob`bfsba 2,946 3,1S9
?^ial`h7Obmloqpob`bfsbalcpboflrppmb`qorjfkqbocbobk`b
%pbbklqb_bilt&
2,SSS 2,399
Fkqbocbobk`bfksbpqfd^qflk`^pbp`ilpba 2,30/ 2,S64
Pmb`qorj^ppfdkjbkqp`ljmibqba S,6S6 6,619
Bkclo`bjbkqlmbo^qflkp^d^fkpqrkif`bkpba^ka`ofjfk^i^`qfsfqv 1,SSS 1,S34
O^aflpvpqbj`ljmif^k`bfkpmb`qflkp`ljmibqba 1,2// 4,024
Pr``bppcrimolpb`rqflkpclo`ofjfk^ipmb`qorj^`qfsfqv 6S S0
Rkpr``bppcrimolpb`rqflkpclo`ofjfk^ipmb`qorj^`qfsfqv 0 0
Nr^ifqvlcPbosf`bQ^odbqp
>`efbsbjbkqTRRWX
ObmloqfkdVb^o
>`efbsbjbkqTRRVW
ObmloqfkdVb^o
NPQ1
100"lcobmloqplcfkqbocbobk`bqlp^cbqv*lc*ifcbo^aflpvpqbjp
ql_bfksbpqfd^qbatfqefk24elrop
99.26% (134 lrqlc 13S) 99.4/% (1S9 lrqlc 190)
NPQ2
^&9S"lcobmloqplcfkqbocbobk`bql`ljjbo`f^i,molcbppflk^i
o^aflpvpqbjpql_bfksbpqfd^qbatfqefksbtlohfkda^vp
9S.S3% (/3S lrqlc /46) 9S.30% (639 lrqlc 6S0)
NPQ2
_& 100"lcpr`eobmloqpql_bfksbpqfd^qbatfqefk
qbktlohfkda^vp
99.46% (/42 lrqlc /46) 99.S4% (64/ lrqlc 6S0)
NPQ3
^&9S"lcobmloqplcfkqbocbobk`bqlaljbpqf`_ol^a`^pq
ob`bmqflkql_bfksbpqfd^qbatfqefklkbjlkqe
99.33% (1,919 lrqlc 1,932) 9S.40% (2,2S2 lrqlc 2,319)
NPQ3 _&100"lcpr`eobmloqpql_bfksbpqfd^qbatfqefkqtljlkqep 99.90% (1,930 lrqlc 1,932) 99.44% (2,306 lrqlc 2,319)
NPQ4
^& 90"lc`rpqljbopobnrbpqfkdfkqbocbobk`bfksbpqfd^qflkql
_bmolsfabatfqe`^pbmoldobppobmloqtfqefkqbktlohfkd
a^vplcpq^oqlcfksbpqfd^qflk+
99.2S% (2,12/ lrqlc2,143) 99.62% (2,60S lrqlc 2,61S)
NPQ4
_& 100"lcpr`e`rpqljbopql_bmolsfabatfqe`^pbmoldobpp
obmloqtfqefk20tlohfkda^vplcpq^oqlcfksbpqfd^qflk
99.6/% (2,136 lrqlc2,143) 99.96% (2,61/ lrqlc 2,61S)
Pmb`qorjLmbo^qflkp
CfbiaLmbo^qflkp^`qfsfqv
Ofcom`s Iielo Operations team is permanently on call to take action against illegal transmissions, to resolve interference ano to
unoertake compliance auoits of raoiocommunications installations in every part of the UK. The following table lists our activities.
CfbiaLmbo^qflkpHMFp
The Ofcom Iielo Operations team seeks to meet the terms of a number of key performance inoicators, oetails of which are set out
here. Customer satisfaction levels are at 79 per cent for investigations, 93 per cent for inspections ano 8o per cent for enforcement.
,Source: Ofcom survey.,
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ttt+lc`lj+lod+rhLc`lj>kkr^iObmloqTRRWXyZW
Lmbo^qfkd^kaCfk^k`f^iObsfbtyPb`qflk@
?ol^a`^pqfkd
Moldo^jjb`ljmi^fkqp
Ofcom has a statutory outy to consioer ano aojuoicate on
complaints from listeners ano viewers about television ano
raoio programmes transmitteo by UK broaocast licensees,
S!C ano the BBC.
C^fokbpp^kamofs^`v
The Iairness Committee is Ofcom`s most senior oecision-
making booy with respect to fairness ano privacy cases.
It is a committee of Ofcom ,with oelegateo powers from
the Ofcom Main Boaro, ano consists of a minimum of three
members, all of whom are orawn from the Content Boaro.
It consioers cases referreo to it by the Executive ,for example,
oue to their complexity,. It also reviews oecisions maoe by
the Executive where either one or both of the parties have
maoe a case for that oecision to be revieweo.
A total of 1,102 cases were closeo.
During the perioo unoer review, Ofcom`s Content ano
Stanoaros Group reacheo oecisions on a total of 1!,227
programme complaints, of which 1!,02* were complaints
about programme stanoaros ,incluoing issues relating
to political aovertising ano the amount ano oistribution
of aovertising, ano 202 were complaints about allegeo
unfairness ano/or infringements of privacy.
Of the programme stanoaros cases closeo:
nve broaocasters were subject to statutory sanctions
,single or multiple programmes/issues, ,23 complaints
about 1o issues,
o3 programmes/issues** were founo to be partially
in breach/in breach ,!9! complaints,
109 programmes/issues were resolveo/partially
resolveo ,33! complaints,
91! programmes/issues were not in breach
,13,17! complaints*,
Number completeo within target:
Straightforwaro cases
8! closeo within target of !0 oays ,target: 80,
Complex cases
83 closeo within target of o0 oays ,target: 80,
'Fk`irabpZZXRmlpq*qo^kpjfppflk`ljmi^fkqp^_lrq??@Tp
GboovPmofkdboqebLmbo^
''Moldo^jjb,fpprbpfk`irabp`^pbptebobqebobj^v_bpbsbo^i
moldo^jjbp%clobu^jmib)fk^pbofbp&_rqqebp^jbfpprbfppr_gb`q
ql`ljmi^fkqp.
Number of cases closeo: 202
Of the fairness ano privacy cases closeo 18 were consioereo
by the Iairness Committee , of which involveo a Hearing,.
Of these:
11 were uphelo ,of which 9 were uphelo in part,, ano
7 were not uphelo
Of the fairness ano privacy cases closeo 18! were
consioereo by the Executive.
Of these:
8 were uphelo ,of which 7 were uphelo in part,,
!! were not uphelo,
7 were resolveo ,following appropriate action taken
by the broaocaster,, ano
12 were not entertaineo or oiscontinueo after
entertainment.
o0 ,12 cases, completeo within target of 12 oays.
This is short of Ofcom`s target of 80. During the perioo
unoer review, Ofcom experienceo an overall increase in
the number of fairness ano privacy complaints of !7
,in comparison to the legacy regulators,. The review
mechanism introouceo by Ofcom has also meant that
complaints are open for longer.
ZXyLc`lj>kkr^iObmloqTRRWXttt+lc`lj+lod+rh
@lkqbkqP^k`qflkp@ljjfqqbb
Cases which the Executive believe may warrant the
consioeration of a statutory sanction are referreo to the
Content Sanctions Committee, comprising nve members
orawn from the Ofcom Boaro ano the Content Boaro.
The Content Sanctions Committee is quorate with
three Content Boaro Members. The Content Sanctions
Committee is chaireo by either the Chairman of the
Content Boaro or Kip Meek ,member of the Ofcom
Boaro ano the Content Boaro,.
During the perioo unoer review, nve cases were referreo to
the Content Sanctions Committee.
The Content Sanctions Committee oecioeo to nne*:
Vioeo Interactive Television Flc in respect of its service
Channel U _18,000
Life TV Meoia Lto in respect of its service Life TV
_12,000.
The Content Sanctions Committee oecioeo to nne* ano
oirect:
Channel ! Television Corporation _,000 ano a
Direction to transmit Ofcom`s statement of nnoing
Ficcaoilly Raoio, in respect of its service Key 103 IM
Manchester - _12,000 ano a Direction to transmit
Ofcom`s statement of nnoing three times oaily for a
week.
The Content Sanctions Committee oecioeo to oirect:
Bloomberg LF in respect of its service Bloomberg
Television Direction to transmit Ofcom`s statement of
nnoing on three consecutive oays.
'>iijlkfbpob`bfsbafkkbp^obm^ppbaqlqebRHBu`ebnrbo+
Fksbpqfd^qflkpmoldo^jjb
Ofcom has an investigations programme to oeal
with complaints about anti-competitive behaviour,
breaches of certain EXANTE conoitions ano oisputes.
The following table examines Ofcom`s activities in
hanoling enquiries ano full investigations ouring
200/o, incluoing performance against publisheo
targets ,incorporating statutory targets,.
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The Ofcom Contact Centre ,OCC, oeals with
questions ano complaints from a broao range of
viewers, listeners, customers of telecoms companies
ano users of wireless communications services.
Ferformance against targets for hanoling queries
ano complaints is shown here.
Pq^qfpqf`^ia^q^
ttt+lc`lj+lod+rhLc`lj>kkr^iObmloqTRRWXyZY
Lmbo^qfkd^kaCfk^k`f^iObsfbtyPb`qflk@
Obpmlkafkdql
`loobpmlkabk`b
,Target: 80 in 10 working oays,
Broaocasting 98
Telecoms 90
Spectrum 8!
@^qbdlov^kaq^odbq >`efbsbjbkqibsbi%clo^ii`ilpba`^pbp
arofkdqebobmloqfkdmboflafoobpmb`qfsb
lctebklmbkba&
>`efbsbjbkqibsbi%clo`ilpba`^pbp
lmbkbaarofkdqebobmloqfkdmbofla&
Ab`fpflkqlobgb`qlo^``bmqbknrfovtfqefk
SWtlohfkda^vp
YZ"%lcXY`ilpba)SWbu`bbabaq^odbqtfqe
^dobbjbkq&%SRR"tfqe^dobbjbkqclo
`ljmibu`^pbp&
YY"%lcXYlmbkba)XV`ilpba)SWbu`bbaba
q^odbqtfqe^dobbjbkq&%SRR"tfqe^dobbjbkq
clo`ljmibu`^pbp&
Obplirqflklcafpmrqbp%clrojlkqep& SRR"
%qeobb`^pbp`ilpba)klkbbu`bbabaq^odbq&
SRR"%lcbfdeqlmbkba)lkb`ilpba&+Klqb7
qeobblkdlfkdafpmrqbptfiibu`bbaqebclro
jlkqeq^odbqarbqlbu`bmqflk^i`fo`rjpq^k`bp
@ljmbqfqflk>`qfksbpqfd^qflkp%pfujlkqep
tebobkldolrkapclo^`qflkab`fpflkj^ab8
STjlkqepclo^kfkcofkdbjbkqab`fpflk&
VR"%sb`^pbp`ilpba)qeobbbu`bbabaq^odbq&
Klqb7fk`irabplkbfksbpqfd^qflkrkaboqeb
@ljmbqfqflk>`qqe^qt^p`lkar`qbalk
Lc`ljpltkfkfqf^qfsb
SRR"%lcclrolmbkba)lkb`ilpba&+Klqb7
fk`irabplkbfksbpqfd^qflkrkaboqeb
@ljmbqfqflk>`qqe^qt^p`lkar`qbalk
Lc`ljpltkfkfqf^qfsb+Lkb`^pblmbkba
mofloqlqebobmloqfkdmboflaobj^fkplmbk
^kae^pbu`bbabaq^odbq
M^oq5lcqebBkqbomofpb>`qfksbpqfd^qflkp
%pfujlkqepqll_q^fkrkaboq^hfkdp&
K,>+Klqb7lkbfksbpqfd^qflkrkaboqeb
Bkqbomofpb>`qt^p`lkar`qbalkLc`ljp
ltkfkfqf^qfsb^kafpfk`irabafkqeb
a^q^_bilt
K,>%klkblmbkba&+Klqb7lkbfksbpqfd^qflk
rkaboqebBkqbomofpb>`qt^p`lkar`qbalk
Lc`ljpltkfkfqf^qfsb^kafpfk`irabafkqeb
a^q^_bilt
Fksbpqfd^qflkpfkql_ob^`ebplcbu^kqb
`lkafqflkp^karkc^foqbojpfk`lkprjbo
`lkqo^`qp%clrojlkqepclo^`ilprob
pq^qbjbkqloklqf`^qflkqe^q^`lkafqflk
e^p_bbk_ob^`eba&
[V"%SZ`^pbp`ilpba)lkbbu`bbabaq^odbq& SRR"%lcSXlmbkba)SS`ilpba&+Klqb7lkb
`^pblmbkbamofloqlqebobmloqfkdmbofla
t^p`ilpba^kabu`bbabaq^odbq
Ltk*fkfqf^qfsbfksbpqfd^qflkp%pfujlkqep& SRR"%SU`^pbp`ilpba)klkbbu`bbabaq^odbq& SRR"%lcSUlmbkba)kfkb`ilpba&
Qlq^ifksbpqfd^qflkp [R"%U[`^pbp`ilpba)clrobu`bbabaq^odbq& SRR"%lcVSlmbkba)TT`ilpba&+Kllkdlfkd
`^pblmbkbaarofkdqebobmloqfkdmbofla
e^abu`bbabafqpq^odbq^p^qUSJ^o`eTRRX
>kptbofkd`^iip
8 customers satisneo or very
satisneo with ease of contacting
OCC over the telephone
,Source: Ofcom survey.,
90 of consumer ano licensing
customer enquiries resolveo in
single phone call
FpprfkdIf`bk`bp
,Targets vary between seven ano !2 oays
oepenoing on complexity of licence type,
98 of licences issueo within target
88 |Ofcom Annual Report 2005/6 www.ofcom.org.uk
Heading
125190 section D.indd 88 7/7/06 12:31:40
www.ofcom.org.uk Ofcom Annual Report 2005/6 | 89
Statement of Accounts and Corporate Governance | Section D
Statement of
Accounts and
Corporate
Governance
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Report of the Board
The Board presents its Report and the audited financial
statements for the year ended 31 March 2006.
Statement of Accounts
This Statement of Accounts has been prepared in accordance
with Schedule 1 of the Office of Communications Act 2002 and
as directed by the Secretaries of State for Trade and Industry
and for Culture, Media and Sport. The Accounts cover the
period from 1 April 2005 to 31 March 2006.
Principal activities
Ofcom is a statutory corporation without shareholders,
established under the Office of Communications Act 2002.
Ofcom is empowered, under the Communications Act 2003, to
regulate and license television, radio, the use of the radio
spectrum and telecommunications in accordance with the duties
imposed upon it under the Act.
Operating and Financial Review
The Chairmans Message on pages 2 to 3, the Chief
Executives Report on pages 4 to 9 and the Operating and
Financial Review on pages 65 to 87 form part of this Report and
provide information on the activities of Ofcom during the year.
The financial statements of Ofcom are set out on pages 126 to
153
External auditors
The Comptroller and Auditor General, whose staff is the
National Audit Office (NAO), is appointed as Ofcoms external
auditor under the Office of Communications Act 2002. The cost
of the statutory audit for 2005/6 was 90,000.
In so far as the Accountable Officer is aware, there is no
relevant audit information of which Ofcoms auditors are
unaware, and the Accountable Officer has taken all the steps
that he ought to have taken to make himself aware of any
relevant audit information and to establish that Ofcoms auditors
are aware of that information.
The Board
The Board has full responsibility for deciding and operating
Ofcoms affairs. The details of the Board Members are set out
on pages 94 and 95. Details of Members remuneration are set
out on pages 116 to 122.
Members interests
Ofcom embraces full disclosure of Members interests. The
details of these can be found online at www.ofcom.org.uk.
Post balance sheet events
There have been no significant post balance sheet events
between the end of the period under review and the date of
issue of this Annual Report and Accounts.
Foreword
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Ofcom mission and values
Ofcoms commitment to its mission and values is shared by
Board Members and Ofcom colleagues. The purpose of the
shared mission and values is to ensure each Board Member
and colleague undertakes Ofcoms work by reference to a clear
set of core values which include:
a commitment to colleagues, including a positive working
culture and dedication to diversity;
a commitment to be dynamic, responsive and commercially
aware; and
a commitment to incisive thinking, rigorous evidence-based
analysis and engagement with stakeholders.
Colleague involvement and consultation
The quality, commitment and effectiveness of Ofcom colleagues
are crucial to its success. Colleague involvement is actively
encouraged as part of all Ofcoms day-to-day processes.
Ofcom specifically informs and consults its colleagues through:
the Ofcom Colleague Forum, an information and
consultation forum which is made up of representatives of
colleagues from across Ofcom and which meets regularly
with senior management at Joint Consultative Group
meetings;
the Ofcom intranet, which is available to all colleagues in
all of Ofcoms offices;
presentations hosted by senior managers during which
new strategic initiatives are explained to colleagues and
updates are provided regarding continuing projects;
regular inter-group meetings both to listen to colleagues
and to disseminate information;
regular messages from the Chief Executive; and
an annual all-colleague event to review progress and the
year ahead.
Additionally, Ofcom signed a recognition agreement with
BECTU and Prospect, who work together as one body the
Partner Union.
Employment policies, performance development
and public sector duties
As a public body, Ofcom has a number of statutory duties
placed upon it relating to social responsibility. These include
specific duties aimed at promoting equality and diversity and
general duties which include considering the environmental
impact of its policies.
Ofcom is an equal opportunities employer and recruits
colleagues regardless of age, gender, cultural and ethnic
background, disability, religion or belief and sexual orientation.
Ofcom is committed to building an organisation where all
colleagues are treated fairly, with dignity and respect and has
developed a range of policies which are consistent with the
requirements of employment law, and in particular with
legislation aimed at eliminating discrimination including the
Race Relations (Amendment) Act 2001, the Disability
Discrimination Act 1995 and, in relation to activities in Northern
Ireland, section 75 of the Northern Ireland Act 1998.
During 2005/6 Ofcom continued to roll out its integrated
diversity policy, designed to deliver equality of opportunity in all
areas of employment, including development and promotion. All
managers and colleagues attended a diversity workshop as part
of a programme of diversity training designed specifically for
Ofcom. In May 2005 Ofcom published the final version of its
Race Equality Scheme which sets out how Ofcom as an
employer will promote equal opportunities among different racial
groups and how as a regulator it will ensure its policies do not
discriminate against any racial group. In September 2005 the
Equality Commission for Northern Ireland approved Ofcoms
Equality Scheme, which requires Ofcom to conduct impact
assessments in relation to its policies and their potential impact
on nine designated groups in Northern Ireland.
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Ofcom has also published a Welsh Language Scheme that
clarifies which of its documents will be made available in Welsh.
Ofcom has an internal whistle-blowing policy setting out the
procedure colleagues should follow if they wish to raise a
concern about malpractice within the organisation.
Ofcom has a performance management process to ensure
colleagues agree clear objectives for both performance and
their ongoing development. The number of development
activities delivered across the organisation during the period
exceeded 400.
Statement on health and safety policy and practice
Ofcom now has an established health and safety committee
which reviews health and safety policy. Policy and performance
are reviewed annually to ensure colleagues are unharmed by
their work. For example, during the reporting period Ofcom
implemented postural assessment for all computer users.
Ofcom has a dedicated Member of the Executive Committee
(ExCo) specifically responsible for safety, and during the year
Ofcom appointed an occupational health adviser.
Colleagues at all levels are involved in prioritised risk
management, and particularly high-risk activities are reviewed
internally for example in Field Operations, substantial
progress has been made against the top two risks: driving and
work on dangerous rooftops.
Data protection
Ofcom is a Data Controller under the Data Protection Act 1998
(the Act) and is committed to processing all personal data in a
manner which meets the requirements of the Act, including the
data protection principles. Ensuring compliance with the data
protection standards is not simply an issue of operating within
the law; it is also about the effective handling of personal data
and respecting the interests and rights of individuals. It is for
these reasons that Ofcom has undertaken an internal
awareness campaign to ensure all colleagues understand their
responsibilities to comply with good information handling
practice. Ofcom is also in the process of reviewing policies and
processes for collecting and holding personal data, to ensure
that it is fully compliant with the Act and that Ofcom
communicates these policies and processes effectively with
those whose data it holds.
Freedom of Information
Under the Freedom of Information Act 2000 which established a
general right of access to all types of recorded information held
by public authorities, Ofcom has continued via its publication
scheme to make a wide range of information readily accessible
on its website. Ofcom received 835 requests for information
between 1 April 2005 and 31 March 2006 and in keeping with
the Acts purpose to foster a culture of openness Ofcom
provided information requested in 87 per cent of cases.
Foreword
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Going concern
Based on normal business planning
and control procedures, the Board has
a reasonable expectation that Ofcom
has adequate resources to continue in
operational existence for the
foreseeable future. For this reason, the
Board continues to adopt the going
concern basis for preparing the financial
statements.
David Currie
Chairman
Stephen A Carter
Chief Executive
27 June 2006
Charitable donations
Ofcom has chosen to play a positive role
in the London locality of its headquarters.
Within the Borough of Southwark, Ofcom
has chosen the St Mungos organisation
for the homeless as its nominated
voluntary organisation.
The Ofcom Board has decided that it
would not be appropriate for executives
to retain gifts with a value greater than
25; instead, organisations wishing to
make a courtesy gift to an Ofcom
executive (for example, a speakers fee)
are requested to pay the equivalent as a
charitable donation to St Mungos.
The relationship with St Mungos was
formalised in December 2003; by the end
of the period under review Ofcom had
passed almost 6,500 in charitable
donations to the organisation.
Thanks to Ofcom's continuing
commitment St Mungo's is able to help
thousands of homeless men and women
off the street and hundreds of people
back into work every year.
Charles Fraser
Chief Executive
St Mungos
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Millie Banerjee CBE (age 60)
Millie Banerjee CBE is a Non-Executive
Member of Ofcom. She is the Chair
of Postwatch, the Chair of the
Carnegie UK Trust and a Member
of the Advisory Board of the Tanaka
Imperial College Business School.
Millie Banerjee is Chairman of the
Remuneration Committee.
Stephen A. Carter (age 42)
Stephen Carter is the Chief Executive
of Ofcom. He is the organisations
Accountable Ofcer and Chair of the
Executive Committee. Previously he was
Managing Director and Chief Executive
at J. Walter Thompson UK Limited and
MD and Chief Operating Ofcer of NTL
UK & Ireland. He is a law graduate from
Aberdeen University and completed the
Harvard Business Schools Advanced
Management Programme (A.M.P. 152)
in 1997. He is the current Chairman of
the Marketing Group of Great Britain, a
Non-Executive Director of Travis Perkins
PLC, a Governor of the Ashridge Business
School, and a Vice President of UNICEF.
David Currie (age 59)
David Currie is the Non-Executive Chairman
of Ofcom. David has been Dean of Cass
Business School at City University since
January 2001. He was Professor of Economics
at London Business School from 1988 to
2000 and Deputy Dean from 1992 to 1995
and again in 1999-2000. He is Chairman
of Independent Audit and a Board member
of the Dubai Financial Services Authority.
He sits on the cross-benches in the House
of Lords as Lord Currie of Marylebone.
David Currie is a Member of the Audit and
Remuneration Committees of Ofcom.
Stephanie Liston (age 48)
Stephanie Liston is a Non-Executive Member
of Ofcom, appointed on 1 September
2005. She is a Corporate Partner in Howes
Percival, Norwich. A qualied lawyer in
the US and the UK, she is co-chairman of
the Communications Committee of the
International Bar Association and co-
founder and chair of Women in Telecoms
and Technology. She has more than 15
years of experience advising on strategic
regulatory issues, contractual negotiations
and commercial transactions in the UK
and international communications and
technology sector.
Kip Meek (age 51)
Kip Meek is an Executive Member of Ofcom
and Chief Policy Partner. Prior to joining
Ofcom, he was Managing Director of
Spectrum Strategy Consulting, and one of its
two founders. His consulting career focused
on major decisions in the communications
industry, particularly those that involved
integration of the media, telecommunications
and information sectors.
The Ofcom Board
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Phillip Graf CBE (age 59)
Philip Graf was appointed Non-Executive
Deputy Chairman of Ofcom in November
2005. Philip Graf joined the Liverpool Daily
Post and Echo in 1983, which became
Trinity International Holdings in 1985. He
subsequently became Chief Executive in
1993. He became Chief Executive of Trinity
Mirror Group when the company merged
with the Mirror Group in 1999 a position
he held until February 2003. He is a former
Chairman of the Press Standards Board of
Finance and of the Broadband Stakeholder
Group. He is currently a partner with Praesta
Partners LLP and a non-executive director
of Archant Limited. He is Chairman of the
Content Board and is a Member of the
Remuneration and Audit Committees.
Sara Nathan (age 50)
Sara Nathan is a Non-Executive Member
of Ofcom. She is also a member of the
Judicial Appointments Commission and
chairs the Animal Procedures Committee
for the Home Ofce. She is also on the
Regulatory Decisions Committee, Financial
Services Authority and a Member of ICSTIS,
the premium rate regulator. Sara Nathan is
a member of the Audit Committee.
Ed Richards (age 40)
Ed Richards is the Chief Operating
Ofcer for Ofcom and the Senior Partner,
Strategy and Market Developments. He
was previously Senior Policy Advisor to
the Prime Minister for media, telecoms,
internet and e-government. He has
been Controller of Corporate Strategy
at the BBC and worked in consulting
at London Economics Ltd. He is a Non-
Executive Board Member of the Donmar
Warehouse Theatre.
Sean Williams (age 43)
Sean Williams is an Executive Member
of Ofcom and Competition Partner,
responsible for the development and
enforcement of Ofcoms economic
regulation and competition policies in
communications markets. He is also a Non-
Executive Director of Williams Lea Holdings
PLC. Previously he was a partner of LEK
Consulting, a strategy consulting rm,
from 1997 to 2003, where he advised on
competition and business strategy issues,
and a special advisor in the Prime Ministers
Policy Unit from 1995 to 1997.
Stephanie Liston joined the Board
as a Non-Executive Member
on 1 September 2005
Richard Hooper CBE was Non-Executive
Deputy Chairman of Ofcom and
Chairman of the Content Board until
his retirement on 31 December 2005
Philip Graf joined the Board as
Non-Executive Deputy Chairman of
Ofcom and Chairman of the Content
Board on 1 January 2006
Sean Williams joined the Board as an
Executive Member on 1 January 2006
Ian Hargreaves (age 55)
Ian Hargreaves is a Non-Executive
Member of Ofcom. Since January 2003,
he has been Director of Corporate
and Public Affairs at BAA plc, but has
retained his position as Professor of
Journalism at Cardiff University. He
is a regular contributor to Radio 4.
Ian Hargreaves is Chairman of the
Radio Licensing Committee.
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The Combined Code on Corporate Governance, appended to
the Listing Rules of the Financial Services Authority, is a set of
principles of good governance and a code of best practice.
The Combined Code does not apply to Ofcom as Ofcom is an
independent statutory corporation. However, its principles
provide a useful benchmark for all bodies wishing to make a
statement about their corporate governance performance.
Ofcom has complied with the main principles of the Combined
Code during the period 1 April 2005 until 31 March 2006; it has
adopted the principles of the Code where it was either capable
of doing so, or it was appropriate to do so, given its status as an
independent statutory corporation.
Board Members remuneration
Details of Members remuneration are set out on pages 116 to
122.
Board
The Ofcom Board comprises both Executive and Non-Executive
Members. The Chairman and Non-Executive Members of the
Ofcom Board are appointed jointly by the Secretaries of State
for Trade and Industry and for Culture, Media and Sport for a
period of up to five years. In this capacity the Departments have
effectively carried out the role of a Nominations Committee for
the Non-Executive Members of Ofcom. Executive Members to
the Board are appointed by the Chairman and all of the
independent Non-Executive Members. Members biographical
details are set out on pages 94 and 95.
Ofcom has adopted a unitary Board model. The Board consists
of six Non-Executive Members including the Chairman, who is
responsible for running the Board, and four Executive Members
including the Chief Executive. The Board is responsible and
accountable for the discharge of Ofcoms statutory functions
and provides strategic leadership and manages overall control
of Ofcoms activities. Members duties and responsibilities are
set out in a Members Code of Conduct. A register of Members
interests is available on the Ofcom website.
For the purposes of compliance with the Combined Code:
the Board considers all of the Non-Executive Members to
be independent of management and free of any business
or other relationship which could materially interfere with
the exercise of their judgement;
the Board believes that the Members have, between them,
a wide range of experience which ensures an effective
Board to lead and control Ofcom;
the Non-Executive Members comprise a majority of the
Board. Millie Banerjee is regarded as being the senior Non-
Executive Member for the purposes of the Combined
Code;
on appointment all Members are given a full induction on
their responsibilities and thereafter receive further
guidance and briefings as and when required;
the Board meets at regular intervals during the year. The
Board reserves certain matters to itself but otherwise
delegates specific responsibilities to senior managers and
committees. The role of executive management is to
implement Board policies. The work of both the Board and
Executive is informed by the contributions of a number of
advisory bodies;
the Board is supplied in a timely manner on a regular basis
with information in a form and of a quality appropriate to
enable it to discharge its functions; and
all Members have access to the Secretary to the
Corporation, who is responsible to the Board for ensuring
that correct rules and procedures are followed. All
Members have access to advice from independent
professionals at Ofcoms expense.
The Board undertook an evaluation of its performance during
February 2006.
Corporate Governance
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In general terms, the Chairman manages the Board to ensure
that:
Ofcom has appropriate objectives and an effective
strategy;
the Chief Executives team is able to implement the
strategy;
there are procedures in place to inform the Board of
performance against objectives; and
Ofcom is operating in accordance with the highest
standards of corporate governance.
As a statutory corporation, the principles and provisions of the
Combined Code in respect of relations with shareholders are
not directly applicable; however, Ofcoms Annual Report is sent
to the Department of Trade and Industry which lays copies of it
before each House of Parliament, to which Ofcom is
accountable.
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In the exercise of its powers under the Office of
Communications Act 2002, the Board delegates
certain of its responsibilities to the executives
within Ofcom and certain responsibilities to Board
Committees with clearly defined authority and
terms of reference. The composition and main
functions of these Committees are described
below.
The Executive Committee
The Executive Committee (ExCo) was established in April
2004 and is the senior management team responsible for
running Ofcom. It is responsible for the management of the
overall direction and strategy of the organisation, including the
setting of internal organisational priorities, the management of
Ofcoms operational resources and activity and the review of
major projects. ExCo meets weekly. The members of ExCo
during the year were:
Stephen A Carter (Chairman)
Rona Chester
Robin Foster (resigned 31/07/05)
Graham Howell
Peter Ingram
Sandra Jenner (resigned 31/01/06)
Kip Meek
Dominic Morris CBE
Peter Phillips (appointed 13/03/06)
Ed Richards
Philip Rutnam
Tony Stoller CBE (retired 31/01/06)
Tim Suter
Sean Williams
Other senior Ofcom colleagues are invited to attend meetings of
ExCo on an ad-hoc basis.
The Content Board
The role and remit of the Content Board is set out in the report
from the Chairman of the Content Board on pages 10 to 13. The
Content Board meets monthly and held 12 meetings during the
year. The Members of the Content Board during the year were:
Richard Hooper CBE (Chairman, resigned 31/12/05)
Philip Graf CBE (Chairman, appointed 01/01/06)
Sara Nathan (Deputy Chairman)
Sue Balsom
Floella Benjamin OBE
Kevin Carey
Jonathan Edwards CBE (resigned 28/02/06)
Pam Giddy
Rosemary Kelly (resigned 28/02/06)
Matthew MacIver
Kip Meek
Adam Singer
Tim Suter
Kath Worrall
Non-Executive Members of the Content Board were appointed
for an initial extended period of three years and two months
until June 2006. A recruitment and re-application process for
the appointment of Members to the Content Board concluded in
July 2006. Kip Meek and Tim Suter are the only Executive
Members of the Content Board.
Board Committees
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The Audit Committee
The Audit Committee comprises three Non-Executive Members
of the Ofcom Board and an independent external non-executive
Chair. The members of the Audit Committee during the year
were:
Anne Bulford (Chairman, resigned 30/06/05)
Peter Teague (Chairman, appointed 18/10/05)
David Currie
Richard Hooper CBE (resigned 31/12/05)
Philip Graf CBE (appointed 1/1/06)
Sara Nathan
Peter Teague, the external independent Chair, is a qualified
chartered accountant and satisfies the requirement under the
Combined Code that one Member of the Committee has
relevant financial experience. The additional requirements of
the Combined Code are met to the extent that three Members
of the Committee are independent Non-Executive Members of
the Ofcom Board.
The Chief Executive, Chief Operating Officer and Finance
Director are invited to attend Committee meetings, as are the
internal and external auditors. The Chairman of the Audit
Committee reports the outcome of Audit Committee meetings to
the Ofcom Board through the Chairman of Ofcom, David Currie.
The main duties of the Audit Committee are to:
review and direct the internal audit function and the
appointment of the internal auditors;
review the nature and scope of the external audit and the
findings of the external auditors;
to monitor and review, on behalf of the Board, the
effectiveness of the systems of internal control and risk
management;
to monitor and review, on behalf of the Board, the integrity,
quality and reliability of the financial statements, Annual
Plan and Accounts;
to continually review the scope and results of both internal
and external audits; and
to approve the financial authority framework.
The internal audit function is carried out independently from
Ofcom by KPMG. The Audit Committee believes it is
appropriate for the internal auditors, in addition, to provide
Ofcom with specific advice on internal risks. The provision of
other services by KPMG to Ofcom is decided on a case-by-case
basis. The external audit function is carried out by the National
Audit Office.
Meetings are held not less than three times a year. The terms of
reference are available on the Ofcom website.
Peter Teague is paid 5,000 per annum for the provision of his
services as Chair of the Audit Committee. However, as Peter
was appointed during the year, he was actually paid 2,276 for
the period.
The Remuneration Committee
The Remuneration Committee consists of three Non-Executive
Members of the Ofcom Board. The members of the
Remuneration Committee during the year were:
Millie Banerjee CBE (Chairman)
David Currie
Richard Hooper CBE (resigned 31/12/05)
Philip Graf CBE (appointed 01/01/06)
The Chief Executive and the HR Director attend meetings at the
invitation of the Remuneration Committee.
The Committee advises Ofcom on the remuneration and terms
and conditions of service for the Chief Executive, other
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Executive Members of the Board and Members of the Executive
Committee. The Committee also advises Ofcom on the terms
and conditions of the Non-Executive members of the Content
Board, the Consumer Panel, the Advisory Committee for Older
and Disabled Persons and the four Advisory Committees for the
Nations and Regions.
The Committee oversees the process for determining the terms
and conditions of all other Ofcom colleagues. The Committee
also oversees and decides upon issues relating to the pension
arrangements established by Ofcom for all Ofcom colleagues.
The Remuneration Committee meets as and when required.
During the period the Committee met seven times. The
Chairman of the Remuneration Committee reports the outcome
of the Remuneration Committee meetings to the Board.
The remuneration of Non-Executive Members of the Ofcom
Board (excluding the Chairman whose remuneration is decided
upon by his employers, the City Business School, details of
which are provided in the Remuneration Report) is determined
by the Secretaries of State and is set out in detail in note 4 to
the Remuneration Report. Should it be necessary for Ofcom to
consider any aspect of Non-Executive Member remuneration a
Non-Executive Member Remuneration Committee has been
established consisting of the Chairman, Stephen A. Carter and
other executive colleagues, which will meet and report directly
to the Secretaries of State. Consequently, no Board Member is
involved in the setting of his or her own remuneration.
The Remuneration Report on pages 116 to 122 sets out
Ofcoms application of the relevant principles of the Combined
Code.
Fairness and Privacy Committee and Content
Sanctions Committee
Both these committees are made up of members of the Content
Board. On occasions, the Content Sanctions Committee has the
addition of members of the Ofcom Board.
Both Committees have a permanent Chair who, during the
period, was Sara Nathan for the Fairness and Privacy
Committee and Richard Hooper CBE and then Philip Graf CBE
for the Content Sanctions Committee.
The Committees meet as and when required and details of their
activities can be found on pages 85 and 86.
Radio Licensing Committee
Ian Hargreaves, Non-Executive Member of the Ofcom Board,
chairs this committee. Its membership consists of two
permanent Non-Executive Members of the Content Board
(Matthew MacIver and Pam Giddy) and four Ofcom colleagues.
It meets monthly and details of its activities can be found on
page 53.
Board Committees
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The Consumer Panel
Section 16 of the Communications Act 2003 requires Ofcom to
establish a Consumer Panel.
Independent of Ofcom and operating at arms length from it, the
Panel exists to advise Ofcom on consumer interests in the
markets it regulates. During the year the Members of the
Consumer Panel were:
Colette Bowe (Chairman)
Ruth Evans (Deputy Chairman)
Azeem Azhar
Fiona Ballantyne
Nainish Bapna (resigned 30/6/05)
Roger Darlington
Simon Gibson OBE
Graham Mather
Kevin McLaughlin
Jeremy Mitchell (appointed 2/2/06)
Kate ORourke
Bob Twitchin
Allan Williams (appointed 2/2/06)
While Ofcom provides the Consumer Panel with operational
support, the Panel holds its own budget and sets its own
priorities on the basis of its statutory remit.
Ofcom and the Consumer Panel have jointly agreed a
Memorandum of Understanding. This memorandum establishes
the principles that both bodies agree to adopt in their relations
and dealings with each other and affirms the independence of
the Panel from Ofcom.
The Consumer Panel engaged in four major areas of work
during the year: tracker research, consumer-focused regulation,
digital switchover and the Strategic Review of
Telecommunications.
The Consumer Panel made representations to Ofcom during
the year on the following subjects:
Consumer interest toolkit;
Ofcom's Annual Plan;
Ofcoms Consumer Policy Review;
Digital switchover;
Ofcoms Strategic Review of Telecommunications;
BT Group plc Undertakings;
Publication of BT financial reports;
Impact assessment;
Local Loop Unbundling;
Next Generation Networks;
Ofcoms duty to encourage availability of easily usable
apparatus;
Number Translation Services;
Public body use of revenue sharing services;
Mis-selling of fixed-line telecoms services;
Wholesale Broadband Access;
Alternative Dispute Resolution schemes; and
Universal Service Obligations.
The Consumer Panel published its 2005/6 Annual Report on its
activities on 8 June 2006. The Report and further details of the
Panels work can be found online at
www.ofcomconsumerpanel.org.uk.
Non-Board Committees
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The Ofcom Spectrum Advisory Board
The Ofcom Spectrum Advisory Board (OSAB) was established
on 19 May 2004 to provide independent advice to Ofcom on
strategic spectrum management issues. OSAB meets five to six
times a year. During the year the Members of OSAB were:
Sir David Brown (Chairman)
Bob Barron (appointed 25/7/05, resigned 12/9/05)
Professor Martin Cave
Dr David Cleevely
Professor Leela Damodaran
Professor Barry Evans
Debbie Gillatt (appointed 12/9/05)
Mike Hibberd (resigned 1/2/06)
Stephen Lowe
Phillipa Marks
Professor Mike Short
Andrew Sleigh
Stephen Speed (resigned 24/7/05)
Professor Will Stewart
Stephen Temple CBE
Dr Gary Tonge
Dr Walter Tuttlebee
OSAB has advised Ofcom this year on a number of strategic
spectrum issues including:
the role of Ofcom in promoting innovation, particularly in
the wireless sector;
the content and direction of Ofcoms research and
development work;
digital divide issues and the role that spectrum might play
in addressing them;
a detailed and wide-ranging assessment of Ofcoms
trading and liberalisation proposals and the difficulties and
improvements that might be made in implementing them;
and
the type of metrics that might be useful in measuring the
impact of Ofcoms spectrum initiatives.
In addition, OSAB provided substantial input and advice into the
Cave Audit of Government spectrum holdings which was
completed during the year.
OSABs Annual Report, covering its activities during its second
year, was published on 8 May 2006 and can be found on the
OSAB website at www.osab.org.uk
The Advisory Committee for Older and Disabled
Persons
Section 21(1) of the Communications Act 2003 requires Ofcom
to establish a Committee to advise Ofcom on issues in the
communications sector that particularly impact on older and
disabled people. The Committee meets at least four times a
year. During the year the Members of the Committee were:
Mike Whitlam CBE (Chairman)
Lydia Thomas (Deputy Chairman)
Professor Janet Askham
Rt Hon Lord Carter
Simon Cramp
Gareth Davies
Caroline Ellis
Baroness Greengross OBE
Fred Heddell
Jonathan Kaye
Suneel Shivdasani (appointed 1/1/06)
Ross Trotter
John Welsman (appointed 1/1/06)
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Throughout the period, the Committee has advised Ofcom on
proposed Ofcom policy as it may impact older and disabled
people:
the review of the Universal Service Obligation in
telecoms;
the implications of the development of Voice over
IP (VoIP) services;
Television Access Services particularly audio description,
signing and subtitling, and especially the preparations for
digital switchover;
digital switchover and its impact on older and disabled
consumers; and
Ofcoms research function to ensure that a comprehensive
body of evidence is developed on the communications
interests of older and disabled people.
The Committee has joined the Government and Digital UKs
Consumer Expert Group, which advises on accessible digital
equipment and how to ensure older and disabled people
receive appropriate and timely advice and support during the
switchover process.
The Advisory Committees for the Nations and
Regions
Section 20 of the Communications Act 2003 requires Ofcom to
establish Advisory Committees for the different Nations in the
United Kingdom. The function of each Committee is to provide
advice to Ofcom about the interests and opinions, in relation to
communications matters, of people living in the part of the UK
for which the Committee has been established. Committees
were established for the English Regions, Northern Ireland,
Scotland and Wales during the early part of 2004.
Each Committee meets at least four times a year and they have
each advised Ofcom on proposed Ofcom policy as it may
impact on the Nations and Regions:
the finalisation of the review of public service broadcasting,
in particular the importance of quality and localness in
regional programming and the value of regional news and
current affairs;
the developing 'digital divide' between the UKs main urban
and rural areas relating principally to access to digital
television, affordable broadband access and mobile phone
reception;
the future of the Universal Service Obligations (particularly
public call boxes), the availability of mobile phone services,
number portability and service bundling;
the impact of digital switchover on each Nation and the
English regions;
the television production sector review;
the proposals to improve media literacy;
the review of number translation services; and
implications for the Nations and Regions of Ofcoms review
of radio.
Non-Board Committees
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