/12 Annual Report 2011 2011 For the period 2012 1 AprilFor 31 March 2011 to Annual Report and Accounts Annual Report The Office of Communications of The Office

The Office of Communications Annual Report and Accounts For the period 1 April 2011 to 31 March 2012

OF 515 (July 2012) HERE FSC MARK

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Report and Accounts presented to Parliament pursuant to Paragraphs 11 and 12 of Schedule 1 of the Office of Communications Act 2002.

Ordered by the House of Commons to be printed 10 July 2012.

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Printed on paper containing 75% recycled fibre content minimum Contents

Section A Section D 5 Who we are and what we do 70 Operating and financial review

6 Chairman’s message 75 Certificate and report of the Comptroller and Auditor General 8 Chief Executive’s report to the Houses of Parliament

76 Statement of income and expenditure Section B 11 An overview of the markets 77 Statement of financial position we regulate 78 Statement of changes in equity 12 Progress on delivering against 79 Statement of cash flows our annual plan priorities 80 Notes to the accounts 27 Our ongoing responsibilities and the resources we manage Annex 36 How we manage risks and challenges 107 Regulatory Statements 38 How we work and who we work with 112 Broadcasting complaints, 44 Our employees cases and sanctions

46 Corporate responsibility 115 Statistical data

47 Sustainability report 116 Investigations programme

117 Spectrum engineering and enforcement – key Section C performance indicators 49 Governance statement 118 Spectrum licensing 50 The Ofcom Board 121 Sustainability Report 65 Statement of responsibilities

66 Remuneration report 123 Glossary of terms 2011/12

“We make sure that people in the UK get the best from their communications services.”

4 | Ofcom Annual Report & Accounts 2011/12 Who we are and what we do The Office of Communications (Ofcom) is the UK’s independent communications regulator.

We regulate the TV and competition. This underpins much of • people who watch television and radio sectors, fixed-line what we do. The Postal Services Act listen to the radio are protected 2011 says that Ofcom must secure the from harmful or offensive material. telecoms and mobiles, provision of a universal postal service. We handle complaints about the airwaves over which television and radio broadcasting We are involved in advising on wireless devices operate and assess each complaint against and setting some of the more the Broadcasting Code or other and, since 1 October 2011, technical aspects of regulation, relevant codes or licence conditions; postal services. as well as implementing and enforcing communications law, • people are protected from being competition and consumer law. treated unfairly in television and We ensure that people in the UK get radio programmes, and from having the best from their communications Ofcom is funded by fees from industry their privacy invaded; services and are protected from for regulating broadcasting and • the radio spectrum (the airwaves scams and sharp practices, while communications networks, and grant- used by everyone from taxi firms allowing competition to thrive. in-aid from the UK Government for and boat owners, to mobile-phone undertaking concurrent competition Established under the Office of companies and broadcasters) is used regulation and managing the radio Communications Act 2002, Ofcom in the most effective way; and spectrum. We work independently, operates under a number of Acts of free from political influence. • the provision of a universal Parliament and regulations, including postal service is financially the Communications Act 2003, the sustainable and efficient. Wireless Telegraphy Act 2006 and the What we do Broadcasting Acts 1990 and 1996. Our main legal duties This legislation sets out what Ofcom are to ensure that: What we do not do should do and how we should do Ofcom has powers to enforce • the UK has a wide range of it. More recent legislation includes consumer law on behalf of consumers electronic communications services, the Digital Economy Act 2010 and generally. Ofcom does not have the including high-speed services, such the Postal Services Act 2011. power to resolve individual consumer as broadband; complaints about telecommunications The Communications Act 2003 • there is a wide range of high- services, unlike TV and radio, but says that Ofcom’s principal duty is quality television and radio we provide advice to individual to further the interests of citizens programmes, appealing to a complainants and refer them to the in relation to communications range of tastes and interests; two Alternative Dispute Resolution matters and to further the interests (ADR) schemes that we have approved. • television and radio services of consumers in relevant markets, There is also an ADR scheme for are provided by a range of where appropriate by promoting post that we have approved. different organisations;

| 5 SECTION A CHAIRMAN’S MESSAGE

Chairman’s message Colette Bowe

The communications And with new powers from Parliament that our third round of community sector is more important in the past year, we are starting to radio licensing got under way in to the UK than ever. I see clear up the confusion so many the past year, commencing in Wales people face about call charges to and the West of England. We have this in the detailed market certain number ranges, starting moved ahead with the licensing of information Ofcom collects with proposals for making 0800 new local TV stations, including for and publishes, and I see it numbers free to call from mobiles. Belfast, Swansea, Edinburgh, Cardiff in the everyday consumer Ed describes some of these steps and Glasgow. In May we published experiences of services that, in more detail in his report. our report to the Secretary of State on the future licensing of channels in some cases, did not exist Communications services UK-wide three and five – the final decision for even a few years ago. which is likely to have a bearing on the As communications services become provision, in particular, of television more central to people’s lives and This growing importance and this news in the devolved nations. work, so do the benefits of their pace of change place a particular widespread availability, including in The UK Government’s decision to responsibility on Ofcom to ensure Scotland, Wales and Northern Ireland. provide £150m to extend 2G voice that consumers continue to get a fair The devolved administrations in mobile coverage to areas where it is deal wherever they are in the UK. Edinburgh, Cardiff and Belfast are all currently poor or non-existent is also a Over the past year, we have made taking steps to improve their nations’ significant step. The expected increase good progress. We have banned competitiveness and connectivity in the number of base stations has contracts that automatically renew, and I am keen that Ofcom continues in turn helped to make it possible helped push down charges that to work productively with them, the for us to propose a higher coverage customers face when leaving Scottish Parliament, the National obligation on one of the licences a contract early, and published Assembly for Wales, the Northern providing the next generation of authoritative new information on Ireland Assembly – and, of course, high-speed 4G mobile broadband, complaints levels and broadband the UK Parliament and Government. when we begin the auction process speeds. We have come down harder later this year. Even allowing for the Late last year Ofcom began a on rule-breaking practices that greater proportion of rural areas significant new project to understand cause harm and distress, cutting the in Scotland, Wales and Northern and explain in detail why some number of silent and abandoned Ireland, there is the potential for communications services are not calls and reducing by nearly a third 4G coverage to reach 95 per cent available as widely as others, and the complaints made to us about of all households in each of these the public interventions that seek to mis-selling of landline services. nations. Until now, much of the focus secure greater coverage than would has been on competing industry be commercially viable. We expect interests in the assignment of to publish a report on this work later spectrum. With 4G services expected in the year. We are implementing to become widely available in the governance changes to ensure that next year, this will now shift to the the licensing of new broadcast services huge benefits that this technology in Scotland, Wales and Northern will literally deliver into the hands Ireland is carried out with the benefit of consumers and citizens. of advice closer to those nations’ interests. I’m also pleased to report

6 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Working with Government Changes to the Board vacated airwaves – digital switchover Given the huge changes we all see Within Ofcom, there have been represents a major engineering in the provision and consumption changes to the Board. Philip Graf and public awareness programme. of communications services, it is no left at the end of 2011, after six years With just parts of the North East surprise that the UK Government as Ofcom’s Deputy Chairman and of England, Kent and Sussex, and intends to move toward a new Chairman of the Content Board. Northern Ireland still to switch, it is Communications Act. For Ofcom I would like to express my warm a credit to those involved in Ofcom, specifically, this would follow thanks to Philip for all he contributed in Digital UK and elsewhere, that the legislation enacted in the past year to Ofcom during this time. We also transition has so far been hassle-free. to make us responsible for the said goodbye to Millie Banerjee, one 2012 is also a year of immense challenge regulation of postal services. There of the founding members of Ofcom’s for London’s communications networks, is also likely to be further secondary Board. Again, Millie made a very already among the busiest in the legislation amending our duties as great contribution to the shaping world, as the London 2012 Olympic and a result of the Public Bodies Act. of Ofcom and to our way of doing Paralympic Games place unprecedented business, and I am most grateful for An important part of the future demand on the available radio spectrum her outstanding contribution, on legislative basis for our sector depends for the vast array of wireless services many different aspects of Ofcom’s on the outcome of the Leveson Inquiry, needed to run, secure and broadcast work, over nearly ten years. to which Ed and I gave evidence in this global event. My colleagues February. Our work on assessing We welcomed two new members – in Ofcom have been hard at work media plurality forms part of the Patricia Hodgson and Lynne Brindley. planning and testing to ensure that further evidence for that Inquiry. Patricia joins us as the new Deputy this critical aspect of the Games’ Chairman and Lynne has taken over as success functions as smoothly as The UK Parliament rightly holds Chairman of the Nations Committee. possible. On behalf of the Board I Ofcom to account for our work. In Tim Gardam has succeeded Philip Graf thank them and all our colleagues the past year we have given evidence as Chairman of the Content Board. for their work over the past year. to the Joint Committee on Privacy A point of continuity is the benefit and Injunctions and to the Culture, I and other Board members gain from Media and Sport Select Committee’s the direct, but considered, views of the inquiry into plurality. The Lords Communications Consumer Panel and Communications Committee, our advisory committees for England, meanwhile, examined the future of Scotland, Wales and Northern Ireland investigative journalism and superfast and for Older and Disabled People. broadband, to both of which inquiries we gave evidence, alongside the Business, Innovation and Skills Select Significant milestones Committee’s inquiry into stamp 2012 marks the end of a long era prices. Committees of the Scottish in UK broadcasting, as the process Colette Bowe Parliament, the National Assembly of switching terrestrial television Chairman for Wales and the Northern Ireland from analogue to digital reaches Assembly all examined aspects of the its conclusion. Despite the obvious sector, and our role in making it work benefits to viewers and others – not better for consumers and citizens. least those who will make use of the new 4G services dependent on the

| 7 SECTION A CHIEF EXECUTIVE’S REPORT

Chief Executive’s Report Ed Richards

In three weeks’ time from What our work has achieved Consumers are now also better able the publication of this In everything we do we aim to to shop around to take advantage of this competition. In 2011/12 Ofcom Annual Report, the UK’s serve the interests of citizens and consumers and deliver positive banned automatically renewable digital communications outcomes for them. At a time of contracts that tie customers into networks will face an changing technology, with the contracts. Following negotiation with Ofcom, operators have lowered the important test. need for major investment in new networks, Ofcom’s approach has charges they levy when a customer been both to promote investment leaves a contract early. And we have With a total global audience of around and sustainable competition and provided consumers with new sources four billion, all eyes will be on London to protect and empower citizens of information on issues such as levels as the host of the 2012 Olympic and and consumers across the UK. of customer complaints and actual Paralympic Games. Behind the scenes broadband speeds, allowing them Ofcom is quietly playing an important A new Ofcom regulatory framework to make better-informed decisions. role, securing and managing the for superfast broadband has promoted There has been a significant fall in the spectrum needed for wireless significant investment by operators. number of people experiencing silent communications, which will face Superfast broadband is already and abandoned calls, which can cause unprecedented demand from around available to around 63 per cent of inconvenience, annoyance and anxiety. 20,000 accredited media organisations the UK, according to our research, This followed new enforcement and the Games organisers. in large part helped by large-scale powers for Ofcom and a number of commercial investments from Virgin It will be the most digitally-connected new investigations into companies Media and BT. The UK Government Games ever held. People will suspected of breaking the rules. expects to see superfast broadband, watch the sport on digital TV, over supported by public funding, made broadband internet and on their We have reduced the complaints available to at least 90 per cent of the mobile phones; they’ll listen to to us about mis-selling of landline UK population by 2015, delivering commentary on radio, and they’ll services and ‘slamming’, a form the best network in Europe. share their views and pictures of mis-selling where a customer’s telecoms provider is changed without over social networking sites. As well as faster speeds, consumers their apparent consent. Our work have a greater choice of telecoms Page 11 of this report provides is ongoing in this area but we have provider. This is delivered through a some of the headlines from our seen a 31 per cent reduction in the process called local loop unbundling research, showing the extent overall number of complaints per (LLU), which allows competing to which consumers today month about landline mis-selling. providers to offer broadband and are using digital services. telephone services using the network One area that continues to cause The take-up of services has been controlled by BT’s wholesale access concern is the problem of consumers driven in part by new investment in division, Openreach. In January being hit with unexpectedly high networks, which is one of a number 2012 the number of unbundled phone bills, often when travelling of positive outcomes that Ofcom’s lines passed the eight million abroad. Ofcom research published in work has helped to achieve this year. mark, from just 123,000 in 2005. the year under review showed that

8 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

as many as 1.4 million mobile phone More benefits to come Section B of this report, starting on contract customers may have been During 2011/12 Ofcom carried out page 11, outlines in more detail affected by so-called ‘bill shock’ in significant pieces of work that will Ofcom’s work in 2011/12 and how a six-month period. Ofcom is now deliver positive benefits for consumers it has benefited consumers. working with the mobile operators to in the years to come. This includes: address the issue, including possible Inquiries into the media ‘opt-in’ measures and financial caps. • enabling the next generation One topic that has dominated the of 4G mobile services, with plans media over the past 12 months Audiences – especially children – have to auction prime spectrum at has been the future regulation of been protected from harmful or 2.6 GHz and 800 MHz, in what media. Allegations about phone inappropriate content on TV and radio will be the UK’s largest spectrum hacking led to the Leveson Inquiry thanks to our standards work, which auction, starting at the end of 2012; includes upholding the rules in the into the culture, practices and ethics Ofcom Broadcasting Code. To reinforce • advising on the future of ITV, STV, of the press, to which Ofcom has this we held industry-wide meetings UTV and Channel 5, with a report given both oral evidence and a with TV and radio broadcasters during to the Secretary of State on the number of written statements. 2011/12 to remind them of the rules future licensing arrangements of the In our report last year on the and to raise compliance concerns. channels when the current licences public interest test in relation to It is now easier for audiences to expire at the end of 2014; the proposed acquisition by News complain about inappropriate • preparing to license more than 20 Corporation of the shares in BSkyB content following improvements local TV stations across the UK by that it does not already own, to the Ofcom website and the 2015; and Ofcom suggested that the current creation of ParentPort, an online • protecting the future supply of framework for assessing plurality portal for parents, in collaboration geographic telephone numbers should be reviewed. In October with other media regulators. to communications providers and 2011 the Secretary of State asked The universal postal service, which providing greater clarity on the cost Ofcom a series of questions on guarantees same-price delivery to of calling non-geographic numbers assessing media plurality. Ofcom every UK address six days a week, (such as 08, 09 and 118). provided responses to these questions to both the Secretary of has been safeguarded. This followed Following our work to better State and the Leveson Inquiry and our decisions on the regulation understand the problem of mobile expects to provide further work to of stamp prices, giving Royal Mail phone not-spots, we are working the Secretary of State in 2012/13. greater flexibility – with necessary closely with the UK Government on safeguard caps – to set its own prices. how best to allocate its £150m fund Ofcom is reviewing evidence Sky Sports 1 and 2 continued to to address the problem. As part of emerging in the course of the be available to a range of pay-TV our second consultation on the 4G Leveson Inquiry and elsewhere, providers, delivering the content spectrum auction, we proposed relating to phone hacking and via satellite, cable and through measures to ensure that this money other activities by newspapers the TV aerial. This followed our would also enable next-generation owned by News International, investigation into the pay-TV sector. mobile services to be rolled out where we consider it may be to these hard-to-reach areas. relevant to our ongoing duty to ensure that broadcast licensees, such as BSkyB, are fit and proper to hold broadcast licences.

| 9 SECTION A CHIEF EXECUTIVE’S REPORT

Reducing our spending Section D of this report, starting • provide appropriate assurance Ofcom has delivered its work in on page 70, covers Ofcom’s to audiences on standards. This 2011/12 under a significantly reduced expenditure in greater detail. includes carrying out a review of regulation of video on demand and budget. This followed a major review Priorities for 2012/13 last year of Ofcom’s expenditure, to considering future approaches to Ofcom’s budget for 2012/13, identify savings in response to the content regulation; and at £121.4m, will see a further challenge facing the public sector 6.1 per cent real-terms reduction • contribute to and implement public more generally. Ofcom built on its in the cost of regulation. The budget policy defined by the UK Parliament. track record of reducing its budget will be used to deliver important This includes advising the UK year on year to reduce its cost to work across the communications Government on measuring media taxpayers and stakeholders. An sector and, in particular, five plurality, contributing to the Leveson internal review showed that Ofcom strategic priorities. These are to: Inquiry and implementing the has continued to deliver outputs for provisions around online copyright consumers and citizens (as set out • promote effective and sustainable infringement. It also includes in Section B of this report) and has competition. This includes working with the UK Government maintained quality while operating promoting investment and in promoting widespread superfast under a constrained budget. competition in superfast broadband broadband and reducing mobile as well as ensuring effective not-spots in the UK. 2011/12 was the first year of a four- competition in the business year programme to reduce Ofcom’s connectivity and landline markets; budget by 28.2 per cent in real terms, as required by HM Treasury • promote the efficient use of public following its 2010 Spending Review. assets. This includes the release In a drive to reshape and refocus of prime chunks of spectrum the organisation, the majority of and safeguarding the necessary the cuts were made in year one. frequencies for the London 2012 Olympic and Paralympic Games; Ofcom’s core budget for 2011/12 was £115.8m. In October 2011 • help communications markets Ofcom assumed responsibility work for consumers. This includes ensuring that all communications for postal services regulation. Ed Richards providers supply clear information, Postcomm’s budget for the same Chief Executive financial year was £8.9m. so that consumers can make informed choices, and switch Ofcom’s audited outturn for 2011/12 providers easily. Other work will was £108.7m, some 9 per cent lower include securing the universal postal than the Ofcom budget revised service and determining the needs to accommodate postal services of postal users, as well as assessing regulation from October 2011. The the provision of communications underspend against budget resulted services in the UK’s nations; mainly from greater efficiencies in the regulation of postal services and delays due to litigation around the implementation of Ofcom’s new duties under the Digital Economy Act, aimed at addressing online copyright infringement.

10 | Ofcom Annual Report & Accounts 2011/12 SECTION B AN OVERVIEW OF THE MARKETS WE REGULATE www.ofcom.org.ukwww.ofcom.org.uk

An overview of the markets we regulate

The communications sector Nearly half of people’s waking Ofcom has a commitment to conduct plays an important role in hours are spent using media and and publish consumer and market communications, and consumers place research to inform our work. This the lives of UK consumers an enduring value on communications research spans a wide range of and citizens. services, relative to other activities. metrics looking at take-up, usage and satisfaction, which remains high in the markets we regulate.

TV Internet Mobile

TV viewing Broadband take-up Mobile take-up 242 minutes per person 75% of homes in 2010 91% of adults in 2010 per day in 2010 76% of homes in 2011 91% of adults in 2011 242 minutes per person Average broadband speeds Mobile use per day in 2011 6.2Mbit/s in November/ 125 billion minutes in 2010 Digital TV take-up December 2010 124 billion minutes in 2011 93% of homes in 2010 7.6Mbit/s in November 2011 Mobile use (texts) 94% of homes in 2011 Internet use 128 billion messages in 2010 Satisfaction with 15 hours per person 151 billion messages in 2011 DTV service per month in 2010 89% in 2010 Satisfaction 14 hours per person 90% in 2011 per month in 2011 91% in 2010 92% in 2011 Satisfaction with broadband service 80% in 2010 Radio 81% in 2011 Landline Radio listening telephone 20.1 hours per person Take-up per week in 2010 Post 86% of homes in 2010 20.4 hours per person per week in 2011 Use (volumes) 84% of homes in 2011 16.0 billion items in 2010 Digital radio take-up Use 15.2 billion items in 2011 34% in 2010 129 billion minutes in 2010 40% in 2011 Satisfaction with speed 116 billion minutes in 2011 of service Satisfaction 68% in 2011 88% in 2010 89% in 2011

All data based on Ofcom research

| 11 SECTION B PROGRESS ON DELIVERING AGAINST OUR ANNUAL PLAN PRIORITIES

Progress on delivering against our annual plan priorities

Ofcom’s principal duty is Outcomes describe what we expect • What progress have we made in to further the interests to happen as a result of our actions achieving the final outcome(s)? and decisions. An interim outcome of citizens in relation to may comprise several smaller changes The final columns address the value of communications matters that are needed in order to achieve budgeted, forecast and actual work: and to further the interests the final outcome. Due to the rapidly changing markets we regulate, we • Value of work budgeted – The of consumers in relevant do not always have complete control expected value of work for the markets, where appropriate over the outcomes of our work. activities as at 1 April 2011 by promoting competition. Within the table below, for • Mid-year forecast of value of each strategic priority, we have work – The forecast for the full This principal duty is embodied in assigned a status to each of year as at 30 September 2011 our five strategic purposes, under the following questions: which sat 13 priorities for 2011/12. • Value of work completed – The actual value of work completed to • Have we done what we said we We have assessed how successful 31 March 2012 would do? the delivery of our priorities for 2011/12 has been against the positive • Has it been as effective as we Certain priorities and outcomes outcomes that we seek for citizens intended it to be? indentified in 2011/12 span and consumers. To achieve this, we • What progress have we made in multiple years, and have have categorised our progress towards achieving the interim outcome(s)? continued into 2012/13. the identified interim and final outcomes, for each of our priorities.

12 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Priority What we have done

Have we done what we we what done we Have do? we’d said effective as been it Has intended? we’d as outcome Interim outcome Final work of Value (£k) budgeted forecast Mid-year (£k) work of value work of Value (£k) completed

Core purpose: Promote effective and sustainable competition

Promote competition and • Our work with BT Openreach contributed 1,553 1,516 1,790 investment in the delivery of to substantial reductions in the prices for Increased complexity in superfast broadband access to BT ducts and poles (designed to Business Connectivity Market support investment in NGA) Review and Leased Lines Charge Control in conjunction • Provided ongoing support to industry with advancing some aspects of the work resulted in increased regarding the implementation of expenditure during 2011/12 Openreach’s superfast wholesale services

Ensure fair and effective • Defended our decision to require BSkyB 2,133 2,161 1,774 competition in the delivery of to offer Sky Sports to retailers on other Appeals process against pay-TV services platforms Pay TV statement more protracted than anticipated and incomplete by 31 March 2012. Expenditure in 2011/12 is, as a consequence, lower than planned.

Core purpose: Promote the efficient use of public assets

Preparing for auctioning the • Consulted on competition issues in 2,423 1,963 1,685 600 MHz, 800 MHz and 2.6 GHz mobile markets arising from proposed Undertaking a further spectrum bands spectrum use consultation has delayed publication of the Information • Consulted on further refined proposals Memorandum and the Auction with a consequential effect on the timing of expenditure.

Timely spectrum clearance to • Consulted on protection of digital TV 1,670 1,797 1,613 enable new awards services from interference • Funding given to channel 69 users to move • New testing facility for Short Range Devices

Develop a future-looking • Consulted on long term demand 2,307 2,601 2,716 spectrum policy work • Consulted on future of UHF band Work and expenditure on programme taking account Mobile Not-Spots and Local • Published Call for Inputs to inform decisions of market developments and TV not originally planned for on the scope for Fixed and Shared Links 2011/12. Strategic decision also future demand for spectrum Band review taken to focus on UHF. Deliver the Government’s • Built and tested spectrum assignment 4,054 4,337 4,624 spectrum guarantee for the system Opportunity taken to accelerate London 2012 Olympic & • Built sensor network preparatory work for Spectrum Paralympic Games Interference Management, • Allocated spectrum frequencies logistics and colleague training with consequential impact on • Participated in test events timing of expenditure.

Core purpose: Help communications markets to work for consumers

Develop and implement • Banned automatically renewable contracts 521 596 566 policies that will improve the • Consulted on measures to make changing ease of switching between providers simpler communications providers for consumers

We have done what we said we would do We have not made as much progress as we thought we would do We continue to make progress towards achieving the priority It is too early to assess our progress

| 13 SECTION B PROGRESS ON DELIVERING ON OUR ANNUAL PLAN PRIORITIES

Priority What we have done

Have we done what we we what done we Have do? we’d said effective as been it Has intended? we’d as outcome Interim outcome Final work of Value (£k) budgeted forecast Mid-year (£k) work of value work of Value (£k) completed

Core purpose: Help communications markets to work for consumers

Ensure communications providers • Published two reports on speeds for fixed 839 945 938 deliver clear information so that broadband broadband consumers can make • Report on mobile broadband performance informed choices • Published compliance testing on broadband speeds Code of Practice • Report published on traffic management, Additional wave of research undertaken in relation to and further work in hand to understand the broadband quality of service consumer experience and whether there is a that was not originally planned need for intervention on transparency in 2011/12.

Core purpose: Provide appropriate assurances to audiences on standards

Implement streamlined • Published and implemented revised procedures Preparatory work and expenditure concluded in broadcasting standards for broadcasting investigations and sanctions 2010/11. New procedures procedures embedded into business as usual during 2011/12 with no additional costs.

Consider new regulatory • Published independent research on public 118 498 539 approaches to content regulation expectations and priorities Complexity necessitated independent research and additional resources over original plan. Core purpose: Contribute to public policy

Prepare for and fulfil regulatory • Took over postal regulation 2,459 4,575 3,230 duties in relation to postal • Consulted on and published decision on Significant savings achieved regulatory framework regulatory framework, pricing and safeguards during the integration process. A greater deregulatory stance has resulted in savings in the fulfilment of our ongoing duties in relation to postal services.

Core purpose: Contribute to and implement public policy defined by Parliament

Implement Digital Economy Act • Awaiting Government approval of our draft 2,974 1,149 407 2010 provisions around online Initial Obligations Code. copyright infringement • Approval will allow us to publish the draft Publication of the Code was Code, prior to it being submitted to the delayed by a Judicial Review of European Commission for consideration. the Digital Economy Act and by difficulties securing approval Following this process, the draft Code will be for the Code. laid before Parliament. • In parallel, we can publish our consultation document on the setting of tariffs

Prepare statutory report to • Submitted a report on licensing arrangements 210 200 233 Government on post-2014 to Secretary of State licensing arrangements for channels 3 & 5

Note: The values of the work shown are based on the direct internal and external costs of related activities (excluding any share of common costs). Stakeholders are billed in accordance with our Statement of Charging Principles and not solely on the direct cost of an activity.

We have done what we said we would do We have not made as much progress as we thought we would do We continue to make progress towards achieving the priority It is too early to assess our progress

14 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Progress on delivering against our annual plan priorities

We aim to deliver against the objectives set in our Annual Plan priorities. This section explains how we performed against these priorities and provides detail on our objectives, what actions we took and the outcomes for consumers.

Our objective What we did among the lowest, if not the lowest, In October 2010, we introduced our for comparable products elsewhere Promote investment and regulatory framework in this area. in Europe. In areas where BT has no competition in the delivery This required BT to open up access commercial plans to invest, access of superfast broadband to its ducts and poles, which would to these ducts and poles will allow give other operators the opportunity other providers to bid for the funding which will be made available by There has been significant investment to invest in superfast broadband Broadband Delivery UK (BDUK), part in broadband networks in the past networks. We also required BT to of the Department for Culture, Media decade, which has led to healthy offer ‘virtual’ unbundled access to its and Sport (DCMS), in competition competition, high consumer take-up new next-generation fibre network, with one another and with BT. and steadily increasing broadband so others could compete and supply superfast broadband services to speeds. However, broadband speeds We also published further broadband consumers. A key component of our have reached a point where new speeds research, which aims to help regulatory framework is to give pricing investment is needed to take them consumers make informed decisions flexibility to operators who invest in to the next level. Our aim is to when choosing a broadband supplier. new superfast broadband networks. create an environment that gives It is our intention to continue confidence to potential investors, After we required BT to offer access to monitoring availability and enabling them to make a case to roll its network of underground ducts and take-up through the publication out new superfast networks. At the telegraph poles to allow companies of regular reports, building on same time, we are keen to maintain to offer superfast broadband services, our 2011 Infrastructure Report. competition so that consumers have BT published prices for these in a choice of services and providers. October 2011. These prices are

| 15 SECTION B PROGRESS ON DELIVERING AGAINST OUR ANNUAL PLAN PRIORITIES

Outcome BT is part-way through a £2.5bn investment in deploying next- generation access, which aims to provide superfast broadband services to about 66 per cent of the UK population. BT’s deployment had passed seven million UK premises by March 2012.

Virgin Media has continued to invest in increasing capacity in its network, Our objective the way in which these films are sold offering services up to 100 Mbit/s. In and distributed has created a situation February 2012, the company said that Ensure fair and effective in which Sky has the incentive and it would double its broadband speeds competition in the delivery ability to distort competition – over the next 18 months, with the meaning less choice, less innovation exception of its 100 Mbit/s service, of pay-TV services and higher prices for consumers. which will increase to 120 Mbit/s. In March 2010, we said that Outcome We estimate that superfast broadband consumers would benefit if Sky Sports is now available to around 63 per cent 1 and 2 were offered to competing Our decision on Sky Sports is the of the UK, with headline speeds of up retailers on platforms other than subject of appeals by Sky, FA Premier to 100 Mbit/s. An increasing number Sky’s, and at regulated prices for the League, Virgin Media and BT to of consumers – in excess of 1.1 million SD versions of the channels. We also the Competition Appeal Tribunal. at the end of December 2011 – are consulted on a market investigation However, as a result of the decision, taking superfast broadband services reference to the Competition Sky Sports 1 and 2 are already with speeds of 30 Mbit/s or more. Commission in relation to movies. available from a wider range of pay-TV retailers. In particular, viewers can By the end of April 2012, there were What we did buy these premium sports channels several communications providers directly through their existing TV Our decision meant that pay TV using or testing BT’s fibre lines to aerial rather than exclusively through providers Virgin Media, BT Vision deliver superfast broadband services satellite or cable services, improving and Top Up TV were able to retail Sky to consumers in the UK. Separately, choice and promoting innovation. the UK Government is progressing Sports to viewers based on the new its plans to subsidise the deployment regulated wholesale price in time for We expect the Competition of superfast broadband services in the 2010/11 Premier League season. Commission to publish its final report on movies around areas where there are currently no We also referred the sale and the end of July 2012. commercial plans. BDUK is overseeing distribution of subscription premium the procurement process for this. pay-TV movies to the Competition Commission. First-run Hollywood movies are important for many consumers when signing up to a pay- TV service. We were concerned that

16 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Our objective What we did As the UK enters the next generation Between March and May 2011, of mobile communications, Ofcom’s Prepare for auctioning the Ofcom consulted on how use of this objectives are to promote effective 600 MHz, 800 MHz and spectrum is likely to affect future competition and to stimulate 2.6 GHz spectrum bands competition in the mobile telecoms investment and innovation. The markets. Based on this, we outlined UK benefits from being one of the most competitive mobile phone ‘Spectrum’ is the airwaves used for a number of proposals for how the markets in Europe, according to our wireless services such as TV, radio spectrum should be auctioned. research1. This means that consumers and mobile phones. It is a valuable The responses to this consultation pay less for mobile services and resource because its supply is limited, and the evidence submitted, together have the ability to shop around for but with careful planning, citizens with further analysis by Ofcom, packages that best suit them. and consumers in the UK stand to helped us to develop and refine our benefit significantly from the launch proposals. In January 2012, we set In addition, we are proposing a of new services using this spectrum. out further plans for how spectrum significant enhancement of mobile broadband, extending 4G coverage Ofcom is planning the largest-ever should be made available in the UK. to match – and even go beyond – single auction of additional spectrum These included measures to extend existing 2G coverage, helping to for mobile services in the UK, 4G mobile coverage to at least 98 per serve many areas of the UK that equivalent to three-quarters of the cent of the UK population and revised have traditionally been under- mobile spectrum in use today, and plans to promote competition. In served by mobile coverage. 80 per cent more than the 3G auction order to accommodate the responses to this second consultation, along held by the UK Government in 2000. With regard to 600 MHz spectrum, with our own additional analyses, we we are working to ensure that This new capacity is essential to have had to re-schedule the auction nearer-term decisions regarding its meet the growing demand for to take place in 2012/13, instead of in release are consistent with longer- mobile internet and data, which is 2011/12 as we had proposed to do. term objectives and benefits for estimated to increase in Western consumers and citizens. We must Europe by more than 500 per cent Outcome balance the interests of continued over the next five years. Ofcom has completed the first universal free-to-air access to DTT The capacity (or ‘digital dividend’) is step in preparing for the most services with growing demand being created as the UK switches from significant spectrum release in the for wireless broadband services in analogue to more spectrum-efficient UK for many years. The proposals Europe, Africa and the Middle East. digital terrestrial TV (Freeview). This will we have outlined will influence the The 2012 World Radio Conference free up the airwaves in the 800 MHz provision of services to consumers (WRC 12) passed a resolution to band, which Ofcom plans to auction, for the next decade and beyond. enable the 700 MHz band to be used along with higher-frequency spectrum for mobile broadband after the next in the 2.6 GHz band, from the end of World Radio Conference in 2015. 2012, to enable 4G mobile to launch. This could have implications for how the 600 MHz spectrum is used. 1 International Communications Market Report 2011, Price Benchmarking analysis

| 17 SECTION B PERFORMANCE AGAINST OUR ANNUAL PLAN PRIORITIES

Our objective What we did In March 2012, we made a new test From March 2011, we started making facility available for Short Range Device Ensure timely spectrum payments under the funding scheme (SRD) manufacturers. SRDs include a clearance to enable new to help wireless microphone users wide array of products ranging from awards move out of channel 69, at the top wireless microphones to social alarms, of the 800 MHz band. The scheme which operate adjacent to the top of the 800 MHz band. The test facility The new spectrum that Ofcom will will run until the end of 2012/13. was set up to give manufacturers auction in the 800 MHz and 2.6 Throughout the year we continued an environment to assess the GHz bands at the end of 2012 will to work with multiplex operators performance of their products in provide much-needed capacity for Digital UK and Arqiva, to clear DTT the presence of 4G mobile signals. 4G mobile technology, set to deliver from channels 61 and 62 at the significantly faster mobile broadband bottom of the 800 MHz band, and The 862 to 863 MHz band, which is services – approaching today’s we assessed applications and made adjacent to the 800 MHz spectrum ADSL home broadband speeds. payments related to some of the we will be awarding, is available for emergency services and supports a However, before mobile operators costs of carrying out this work. number of communication systems can use this spectrum, it must be We also continued working closely that are used throughout the UK by cleared of existing users. Analogue with the UK Government’s radar the police, fire and rescue services. and digital terrestrial television (DTT) remediation programme, comprising Throughout the year, we have been broadcasters and wireless microphone the Department for Culture, Media working with DCMS, the Home Office, users currently use this spectrum. and Sport, the Department for the Department for Communities and Ofcom is undertaking a significant Transport, the Ministry of Defence, Local Government and the Chief Fire programme of work to relocate and supported by the Civil Aviation Officers’ Association to assess the these users to other frequencies. Authority and Ofcom, to support impact of interference on emergency We must also make sure that operators of aeronautical radar in services’ operations and to develop spectrum users in adjacent bands planning and implementing the plans to manage the interference risks. can coexist safely with their new 4G changes to their radars necessary to ensure they can continue to neighbours. Two key users include Outcome operate safely in the presence of DTT (Freeview) and aeronautical Ofcom is on track to make the emissions from the 2.6 GHz band. radar. A high proportion of 800 MHz and 2.6 GHz spectrum households in the UK rely on DTT Between February and April 2012, bands widely available for use by for at least some of their TV viewing, Ofcom consulted on the arrangements the end of 2013. In many areas of so we must carefully manage the to protect existing DTT services from the UK they will be available for frequency changes to clear the 800 interference from mobile broadband. use before this, enabling mobile MHz band. Similarly, we identified This followed a UK Government operators to start rolling out 4G a potential issue with interference announcement on 21 February networks earlier in 2013. This into aeronautical radar from future 2012, outlining a number of policy means that consumers could soon mobile services in the 2.6 GHz band. decisions in this area, including a be benefiting from a significant decision to allocate £180m to fund enhancement of mobile broadband. consumer solutions to TV signal interference resulting from new mobile services. The UK Government has also decided this scheme will be overseen by a company which will be managed by the operators that buy the 800 MHz spectrum. Our consultation was on how Ofcom will implement these policy decisions.

18 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Our objective Harmonising these allocations Our objective with other countries could lead Develop a medium-term to economies of scale, and price Deliver the Government’s spectrum policy work reductions for consumers. Ofcom is guarantee of wireless looking to work with stakeholders to programme, taking account establish the extent of these benefits. spectrum for the London of market developments A key outcome of the World Radio 2012 Olympic Games and Conference 2012 was to allocate Paralympic Games Spectrum is a scarce resource that plays spectrum in the 700 MHz band to a vital role in enabling the delivery both mobile services and broadcasting The wireless technologies that will of a wide range of entertainment at the next conference in 2015. In the help ensure the smooth running of the and communications services that light of this development, Ofcom London 2012 Olympic and Paralympic we use in our daily lives. So it is consulted with stakeholders in March Games will more than double the important to have a long-term view 2012 on the future of UHF Bands IV demand on spectrum in London during of what the best use of spectrum and V. This consultation discussed the seven weeks of the two events. This might be in the future, taking into the implications of releasing the presents a unique logistical challenge account changes in technology and 700 MHz band for mobile use, never faced before by the UK. consumer behaviour. We must think and the consequences for the about the likely future demands on award of the 600 MHz spectrum, Ofcom is responsible for finding the spectrum for mobile broadband, released by digital switchover. necessary spectrum; for ensuring that balanced against the needs of digital frequencies are licensed to those who terrestrial television viewers. need them; and for keeping these Outcome frequencies free of interference. Our Ofcom has started to develop What we did objective is to contribute to a safe and a framework to make sure that successful Games, by ensuring that In 2011, we asked stakeholders what the use of this UHF spectrum spectrum is used effectively, with the they considered to be the long-term delivers significant benefits to least disruption to existing users. demand for prime spectrum in the citizens and consumers in the range of 470 to 790 MHz. Mobile long term, while ensuring efficient What we did phones, terrestrial television and use of this scarce resource. a wide range of other services all Because there is a limited supply of depend on this spectrum – called Ultra There is a high level of uncertainty spectrum, it is important that it is High Frequency (UHF) Bands IV and over how markets will develop carefully assigned and efficiently used, V – to wirelessly transmit information. in the future, and what decisions with minimal interference. Ofcom Some of this spectrum is in very high will be made on the international has built and tested a state-of-the-art demand because of its limited supply harmonisation of UHF spectrum. spectrum assignment system that will and its ability to carry information We must balance the interests of manage access to spectrum, making over long distances and through walls. continued universal free-to-air it available for those who need it and access to digital terrestrial TV keeping it free from interference. In the future, a growing range of services with the growing demand different services could potentially use for wireless broadband services. In addition, we have built a modern this spectrum to deliver a wide range sensor network across the UK of attractive services. To ensure that From a consumer perspective, these to monitor the radio spectrum citizens and consumers benefit from benefits may include access to a and quickly locate any sources these future services, Ofcom is using wider range of attractive services of interference. Ofcom has also this information to work out the best and increasing competition between recruited and trained additional balance for use of this prime spectrum. service providers. We will also engineers who will help us track consider how best to manage the down and deal with any cases of impact of future changes of spectrum interference during the Games. use; for example the requirement for people to invest in new equipment.

| 19 SECTION B PERFORMANCE AGAINST OUR ANNUAL PLAN PRIORITIES

By the start of the Games, we will have Outcome assigned up to 20,000 frequencies Careful management of London’s to be used by broadcasters and airwaves will be essential for the organisers in London. This is more coverage and organisation of the than double the number usually London 2012 Games. Ofcom will assigned in a year. We assigned a large achieve this by ensuring that the proportion of these during 2011/12. necessary wireless spectrum is licensed to those who need it and In preparation for the special is kept free from interference. circumstances of the Games, Ofcom has participated in a series The equipment, systems, processes of test events during 2011 and and experience from the London 2012 2012. These have taken place at Games will act as a legacy, assisting high-profile events such as the Ofcom in the future to carry out its royal wedding at Westminster day-to-day responsibilities for UK Abbey, the Formula 1 Grand Prix spectrum management. Ofcom will at Silverstone and the Sail for Gold support the Commonwealth Games event at Weymouth, as well as the 2014 in Glasgow, the World Athletics London Prepares series of test events Championship in London in 2017 organised by the London Organising and similar major events, using the Committee of the Olympic Games knowledge and experience derived and Paralympic Games (LOCOG). from the London 2012 Games. In February 2012, we published the final update of the detailed spectrum plan of the frequencies to be used at the Games.

20 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Our objective What we did Ofcom has also been working to In February 2012, we proposed ensure that broadband and landline Develop and implement measures to make changing customers are not charged unfairly policies that will improve broadband and landline provider when leaving a contract. We made the ease of switching simpler and more reliable, while significant progress in this area protecting consumers from being last year, with three of the major between communications switched without their consent. providers lowering their early providers These proposals do not apply to termination charges for landlines, cable customers at present. One of and for landline and broadband Consumers must be able to switch the options we are considering is services combined. We continue providers easily to ensure they can that the new provider would manage our work in this area in 2012/13. choose the broadband or telephone the switching process, verified by an service that best suits their needs. independent third party to protect Outcome consumers from ‘slamming’. But Ofcom research shows that Our proposals should ensure that changing broadband and landline consumers often face difficulties In December 2011, we banned providers is simpler and more reliable when changing their provider. Our automatically renewable contracts. for consumers, while reducing research suggests that over the These ‘roll-over’ contracts tied instances of slamming. We also want past year 130,000 households faced landline customers into repeated to ensure that switching processes problems during the switching minimum contract periods unless do not get in the way of providers process or when moving house. they opted out. We continue to competing to deliver benefits to all accredit price accreditation websites, consumers, in terms of lower prices, which ensure that consumers greater choice and innovation, have access to price information and value for money. We expect to which is accurate and reliable. announce our plans later in 2012.

| 21 SECTION B PERFORMANCE AGAINST OUR ANNUAL PLAN PRIORITIES

Our objective What we did Following our previous research We published two reports on reports, which showed that advertised Ensure that communications comparative speeds for residential speeds were often different to actual providers deliver clear fixed-line broadband in the UK speeds, we worked with the Advertising information so that (July 2011 and February 2012), and Standards Authority’s (ASA) Committee also published a report on mobile of Advertising Practice (CAP) and the broadband consumers can broadband performance (May Broadcasting Committee of Advertising make informed choices 2011). These reports set out the Practice (BCAP) in their review to average actual speeds delivered to help ensure that advertisements are Broadband plays an important role in consumers in the UK and highlighted not misleading. CAP/BCAP issued consumers’ lives and has changed the the differences in speeds and other guidance on the use of speed claims way we communicate, work and find performance metrics between in broadband advertising, which entertainment. Nearly three-quarters internet service providers (ISPs) and came into force in April 2012. (74 per cent) of UK homes had a fixed between different technologies. broadband service at the beginning Among other things, the guidance of 2011, up from 41 per cent in 2006. We carried out mystery shopping requires that speed claims should be It is vital that consumers have the into compliance with the voluntary achievable by at least ten per cent right information when choosing broadband speeds Code of Practice of the relevant ISP’s customer base. a broadband service. and published the results in May Where a significant proportion of 2012. Ofcom also acquired new customers are unlikely to receive powers in relation to internet traffic a speed sufficiently close to that management and ‘net neutrality’ advertised, further qualifying in May 2011. We published our information, such as the speed range statement in November 2011, obtainable by those customers, should which set out our views on how be included in the advertisement. there should be transparent

41% information for consumers. Our objective Fixed Outcome Implement streamlined broadband Ofcom’s research found that average broadcasting standards actual broadband speeds in the UK procedures increased from 6.8 Mbit/s in May 2006 2011 to 7.6 Mbit/s in November 2011. Ofcom has an important role to play Mobile broadband speeds averaged in setting and upholding standards 1.5 Mbit/s in the last quarter of 2010. in broadcasting to help protect The mystery shopping results showed viewers and listeners. In June 2011, overall improvement in compliance we published and implemented with the Code since our last exercise, revised procedures for broadcasting and most customers are receiving investigations and sanctions. accurate speed estimates at the We revised and streamlined our point of sale. But there is still room procedures, as we believed that they

for improvement regarding the could be improved for the benefit of 74% unprompted provision of speed all our stakeholders. These changes Fixed estimates to customers, and we will improved the speed with which we broadband continue discussions with ISPs to carry out investigations; allowed for increase compliance with the Code. more responsive decision making; helped us make efficiency savings and simplified stakeholder interactions 2011 with us on a day-to-day basis.

22 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

What we did Our objective Outcome The key changes included moving to The research findings suggest an ‘issues-based’ model for ensuring Consider new regulatory that viewers value the established compliance with requirements; the approaches to content regulation around broadcast TV, but introduction of a ‘preliminary view’; regulation may want more assurance for video- and the removal of the internal review on-demand services and for similar mechanism. We also removed the In the light of rapid changes in the services which enter the living room Broadcasting Sanctions Committee technology available for distribution through connected TVs. The research and replaced it with a panel, and of audio-visual content, including also suggests that viewers are seeking we clarified our approach to the the growing take-up of internet simplicity and clarity in the overall disclosure of the information Ofcom protocol television (IPTV) and online regulatory system for content. gathers during investigations. TV services in the UK, we proposed In October 2011, Ofcom and other to continue to review our wider UK media regulators joined forces to Outcome regulatory approach to content launch ParentPort: a single website regulation, to ensure that it remains The revised procedures ensure that acts as an interface between fit for purpose, continues to serve the continued fairness to those involved regulators and parents who have interests of citizens and consumers, in our investigations and complaints concerns about content and its and is clear for stakeholders. procedures, while maintaining suitability for children. In 2012 we high quality decision-making, will undertake further work, in and deliver greater value for our What we did conjunction with other regulatory stakeholders. For further information We considered that our regulatory bodies and through our involvement on Ofcom’s performance when approach in this area should be with the UK Council for Child Internet assessing complaints and completing based on understanding audience Safety (UKCCIS), on the protection of investigations during 2011/12, please expectations for protection. children in the online environment. see the Annex, pages 112 to 114. In January 2012, we published independent research (conducted in summer 2011) on the public’s expectations and relative priorities for protection across broadcast, video-on-demand and ‘open’ internet services. The report is intended to be a public source of information and a foundation for discussion and debate.

| 23 SECTION B PERFORMANCE AGAINST OUR ANNUAL PLAN PRIORITIES

Our objective Outcome Our objective Having carefully considered all Prepare for and fulfil the consultation responses, we Prepare a statutory report for regulatory duties in published our decision in March Government on television relation to post 2012. We gave Royal Mail greater licensing arrangements for freedom in the way it sets its prices, ITV, STV, UTV and Channel 5 On 1 October 2011, Ofcom took over but introduced safeguards to ensure regulation of the UK’s postal services that consumers and competition after 2014 from the previous regulator Postcomm are protected. Specifically, we put Our research shows that TV viewers and was given concurrent competition a cap on the price of Second Class place a high value on public service powers in relation to post. Ofcom stamps for standard letters to protect broadcasting. Ofcom has a duty to is responsible for safeguarding vulnerable consumers. Over the next prepare a report for the Secretary of the UK’s universal postal services, seven years, this will ensure that State on the licensing arrangements which guarantee UK consumers a Royal Mail can price Second Class for some of the UK’s public service universally-priced, affordable postal stamps no higher than 55p (indexed broadcasters, Channel 3 licensees, service, six days a week. Since 2006, in line with the Consumer Price which includes services offered by there has been a 25 per cent decline Index inflation). To further protect ITV, STV and UTV, and Channel 5. in postal volumes as consumers have vulnerable consumers and small We must prepare this report by the moved away from traditional mail to businesses, we are consulting on end of June 2012 so the Secretary digital technology such as email. extending the cap to Second Class small parcels and large letters up to of State can decide whether these 2kg in weight. Ofcom believes this companies should continue to hold What we did work will make the universal service these licences before the current We published proposals that gave provided by Royal Mail viable in ones expire at the end of 2014. Royal Mail greater freedom in the way the medium term. We will monitor it sets some of its prices, subject to carefully Royal Mail’s performance What we did safeguards to ensure that consumers over the seven-year period. We prepared our report on the and competition are protected. The licensing arrangements in early 2012. universal service obligation requires In the report, we outlined the different Royal Mail to collect and deliver letters options available to the Secretary six days a week (and packets five days of State, which included renewing a week) at an affordable and uniform the licences, extending the current price to every address in the UK. terms or allowing other parties to bid for the licences in an auction.

Outcome The broadcasting sector has undergone significant change since these licences were last issued. Our work assesses the continuing ability of the current licensees to make a sustainable contribution to the purposes of public service broadcasting. It will help establish a basis for commercial broadcasters to deliver content serving the interests of UK citizens and consumers over the next decade.

24 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Our objective What we did was delayed by a Judicial Review The Digital Economy Act requires of the Digital Economy Act and by Implement Digital Economy the making of a code which sets difficulties securing approval for the Act 2010 online copyright out a process whereby internet Code. We currently anticipate that infringement provisions service providers (ISPs) are obliged the Code will be published in summer to notify subscribers of reports 2012 and will be laid before the UK Parliament before the end of 2012. Consumers are increasingly enjoying of apparent infringement sent by films, TV programmes, books copyright owners. They must also and music online and in digital produce on request an anonymised Outcome formats. However, this brings new list of subscribers against whom The Code forms part of a multi- challenges; in particular, it is now multiple infringement reports have pronged approach by the UK much easier to make and distribute been made. The intention is that Government aimed at reducing online copies of copyright content, and in this will aid copyright owners in copyright infringement, through a some cases to do so without the taking targeted legal action against mixture of enforcement, educating permission of the copyright owner. egregious offenders. Copyright consumers about copyright, and The Digital Economy Act 2010 gave owners are required to secure a encouraging industry to develop Ofcom new responsibilities for court order before ISPs will disclose lawful alternatives. Ofcom is required implementing measures aimed at the identity of subscribers against by the Digital Economy Act to monitor significantly reducing the level of whom they wish to take action. and assess these activities and will online copyright infringement. start making regular reports on In the absence of industry producing progress to the UK Government once a code for Ofcom to approve, Ofcom the scheme is up and running. was required to make and publish a code. Publication of the Code

Previous years’ Make progress on mobile Commercial references in annual priorities phone not-spots programming We have published research into TV and radio broadcasters have been As the communications mobile not-spots, identifying able to use commercial references, sector develops and different types of mobile coverage (product placement), in certain issues, looking at the reasons for programmes since February 2011. consumers’ needs change, them, their impact on consumers, In October 2011, the Nationwide so does our focus on key and ongoing market developments Building Society agreed a deal to priorities. However, we to address them. In October 2011, feature a branded ATM machine remained focused on a the UK Government announced within the corner shop in ITV’s a £150m fund to address mobile Coronation Street soap opera. ITV number of these issues. not-spots. As part of our second research suggested that seven out consultation on the 4G spectrum of ten viewers correctly recalled auction, we said that we would the Nationwide brand featured work with the UK Government in the programme. In February to ensure that this money would 2012, the deal was extended for a also enable next-generation year. We will monitor investment mobile services to be rolled out in product placement as part to these hard-to-reach areas. of our wider duties to monitor the markets we regulate.

| 25 SECTION B PERFORMANCE AGAINST OUR ANNUAL PLAN PRIORITIES

Areas of work not set out in our 2011/12 annual plan While we plan our work around our priorities and fulfilling our duties, we also carry out vital work that arises during the course of the year. In 2011/12, this included:

Measuring media plurality At the end of last year, in our report on the public interest test on the proposed acquisition by News Corporation of the shares in BSkyB that it did not already own, Ofcom suggested that reform of the current framework for plurality may be required.

In October 2011, Jeremy Hunt, the Secretary of State for Culture, Supporting the Leveson inquiry Creating ParentPort and Olympics, Media and Sport, wrote The Government established the responding to the Bailey review to Ofcom to ask us to assess how Leveson Inquiry into the culture, ParentPort was set up last October to practical it would be to set limits on practices and ethics of the press in make it easier for parents to complain media ownership to protect plurality. 2011. Ofcom provided evidence on about material they see or hear across He asked Ofcom to recommend a models of regulation for TV and the media, communications and retail framework for measuring plurality radio and also gave evidence to the industries. Ofcom played an active role across different media. Parliament inquiry on 1 February 2012. During in establishing the ParentPort website, has seen it as important to that evidence session, Lord Justice which was created in response to Reg safeguard plurality because of an Leveson said that he would welcome Bailey’s Independent Review of the organisation’s ability to influence Ofcom’s views on how the press could Commercialisation and Sexualisation opinions and set the political agenda be regulated in a way that preserves of Childhood. This recommended that if it has too much control over the its independence and the rights of regulators should work together to media. We provided this evidence free expression. We provided these create a single website to act as an to the Secretary of State and the views to the Inquiry in April 2012. interface between themselves and Leveson Inquiry into the culture, parents. It was jointly developed by practices and ethics of the press. Ofcom, the Advertising Standards Authority, the Authority for Television On Demand (ATVOD), the BBC Trust, the British Board of Film Classification, the Press Complaints Commission and the Video Standards Council/ Pan-European Game Information.

26 | Ofcom Annual Report & Accounts 2011/12 OUR ONGOING RESPONSIBILITIES AND THE RESOURCES WE MANAGE www.ofcom.org.uk

Our ongoing responsibilities and the resources we manage

As well as fulfilling our During the past year, we have issued We warned industry to comply with Annual Plan priorities, we notifications to five companies the new policy or face enforcement (TalkTalk, Axis Telecom, DTC Direct, action, including fines of up to are constantly working to Sensim and Save Money on Calls) £2m, after the UK Parliament raised achieve the best outcomes under this programme. We also the maximum penalty from the for citizens and consumers concluded investigations into previous maximum of £50,000. Continental Telecom, Plus Save and within our day-to-day KCT Ltd. We have also continued to We investigated and issued responsibilities. prioritise work with the Office of the notifications under section 128 Telecoms Adjudicator and industry of the Communications Act 2003 Consumer protection to understand the reasons why to three companies (Homeserve, consumers are switched in error and nPower and TalkTalk), where we have We want to make sure that consumers to put in place measures to reduce it. reasonable grounds for believing get the best choice and value for that they persistently misused an money from their communications Our work is ongoing but to date we electronic communications network services and we need to be prepared have seen a positive reduction in or electronic communications to intervene if things aren’t overall complaints about fixed-line services. In April 2012, we fined working as well as they should. mis-selling; from an average of 844 HomeServe £750,000 for making complaints per month in 2010/11 to an an excessive number of silent and During the past year, we acted on average of 644 complaints per month abandoned calls to consumers. This a wide range of consumer issues, in 2011/12, a reduction of 31 per cent1. was the first case to be determined some of which we review here. following the introduction of the Abandoned and silent calls increased maximum penalty. Telephone line mis-selling By 1 February 2011, companies We are committed to ensuring Fewer consumers are experiencing were expected to adhere to the that consumers are protected from harm from silent or abandoned calls, principles of our revised policy landline mis-selling and the practice according to Ofcom research. Just (published in October 2010) to tackle of ‘slamming’, which happens when under a quarter of consumers the problem of consumers being a customer is switched to another (23 per cent) experienced an harassed by abandoned and silent provider without their consent or abandoned call during 2011, down calls. An abandoned call is one that is knowledge. We also work with the from over a third (35 per cent) in terminated when the call is answered. Office of the Telecoms Adjudicator 2009. The number of consumers Instead of hearing a person on the to address problems of consumers experiencing silent calls has also fallen other end of the line, the recipient being switched in error. from 30 per cent in 2009 to 24 per cent hears an information message from in 20111. We believe that the fall in We have an open monitoring and the company that is trying to make the incidence of abandoned and silent enforcement programme into fixed line the call. With a silent call there is calls is, at least partly, the result of mis-selling and analyse complaints we just silence at the other end of the our action to raise awareness of our receive about all fixed-line providers. line. Both can cause consumers new policy to investigate companies considerable concern and anxiety. who might not be complying with it, and to take enforcement action against those we find in breach.

1 Data based on calls to Ofcom Consumer Contact Team

| 27 SECTION B OUR ONGOING RESPONSIBILITIES AND THE RESOURCES WE MANAGE

Taking on strengthened consumer Protecting consumers the UK, mainly by exceeding inclusive protection powers from unfair terms and allowances or calling numbers outside New European Union (EU) telecoms of allowances; and lost or stolen phones law, implemented into the UK in May practices – where the number of consumers 2011, led to a number of changes to Financial penalty imposed affected was low, but the level of Ofcom’s powers to benefit consumers. on TalkTalk financial harm was often substantial. Ofcom was also given new consumer In July 2010, following complaints from In February 2012, we published protection powers to address breaches over 1,000 consumers, we opened an an action plan designed to reduce of its regulations more quickly. investigation into TalkTalk Telecom the risk of consumers receiving Limited and Tiscali UK Limited (the The changes to the regulations include: unexpectedly high bills. We are “TalkTalk Group”) for billing customers urging mobile providers to do more • shorter phone and broadband for services that had not been provided. to allow consumers to set their own tie-in periods – consumer contracts We found that the companies had financial caps and receive alerts are now limited to a maximum of wrongly issued bills to over 62,000 about usage. We continue to work 24 months and consumers and consumers for services they had not with providers to explore how they businesses must also be offered received, in particular to consumers could limit how much consumers a contract lasting no longer than who had cancelled their services. are liable to pay if their phone is 12 months. Shorter contracts are As a result, the companies paid lost or stolen. We are also reviewing likely to promote competition by almost £2.5m in refunds and goodwill what providers say about their tariffs enabling consumers to switch gestures to affected customers to ensure that the information is providers more easily, to benefit and, in August 2011 Ofcom fined transparent, and we supported calls from better prices and services. TalkTalk Group £3,037,120 to reflect to extend the EU Roaming Regulation • a requirement for mobile providers the seriousness of the breach of to protect consumers who download to port phone numbers to a new consumer protection rules. data anywhere in the world. provider within one working day; Publishing complaints data on • improved access for disabled Working to help stop consumers telecoms providers consumers to emergency receiving unexpectedly high bills services; and Following complaints to Ofcom We publish complaints data on and an increased number of calls a quarterly basis which includes • powers for Ofcom to impose a from the media and MPs, we asked complaints about providers with four financial penalty in respect of a consumers and stakeholders to per cent or more market share in past contravention, without having provide details of their experiences of the landline, broadband and mobile to give a company a month to unexpectedly high bills or ‘bill shock’. markets. This is based on consumer comply with the condition they telecoms complaints received by are in breach of or remedy the We carried out an extensive review Ofcom. We believe that regularly consequences of the contravention into the causes of ‘bill shock’ in publishing this information will: (as was previously the case). Ofcom the communications sector and can also fine a company up to a found that unexpectedly high bills • encourage competition, by letting maximum of £20,000 per day if the are experienced more often by consumers know about the alleged contravention is continuing. mobile contract customers than by performance of individual providers; broadband, fixed-line or mobile pre- • be useful for consumers: alongside pay customers. The main causes of other things, the data may be bill shock were: downloading data, relevant to those considering a primarily while travelling outside the new service or provider; and EU, but also when using data in the • incentivise telecoms providers UK; using mobile voice services in to improve their performance.

28 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Helping consumers with hearing Content and standards and/or speech difficulties Community radio continues in broadcasting to flourish Text relay services are vital to help consumers with hearing and speech Ofcom has a range of duties in relation There are around 200 community impairments make and receive phone to broadcasting, which include radio stations broadcasting calls. We proposed to improve the text securing adequate protection for around the UK, enabling around relay service by moving to an IP-based the public from offensive or harmful 12.5 million people to receive a service, known as Next Generation material and from unfair treatment service that is relevant to their Text Relay. The service proposed would or unwarranted infringements local area or interests. They introduce parallel two-way speech of privacy; and ensuring a wide are small-scale radio stations with “live captions” to enable more range of TV and radio services of generally targeting the local natural-flowing conversations and the high quality and wide appeal. community within a 5km radius, ability for users to use mainstream although some focus on serving a particular community of interest equipment (instead of dedicated TV and radio licensing equipment). We also considered (such as the elderly, or a particular Ofcom carries out its duties by ethnic minority). They involve the case for the introduction of a granting broadcast licences, which restricted video relay service for volunteers to run the stations come with conditions. These conditions and produce output, and, based users of British Sign Language, include requirements to pay fees, subject to a further consultation. on annual returns from stations, to provide information, to offer we estimate that on average over In May 2012 we confirmed the specific programmes and types of 45,000 volunteer hours each week introduction of the improved text content, and to comply with various are given to community radio. relay service. Following a short codes of practice issued by Ofcom. consultation, Ofcom expects this Providing ‘social gain’ for the service to become available in 2013. Licensing local TV channels target community is at the heart of these services. Stations run on The UK Government confirmed its Ofcom intends to issue a further a not-for-profit basis and bring objective to secure a network of local consultation on video relay benefits such as training and TV stations in up to 20 areas of the UK services in summer 2012. community news and discussion, by the end of 2015. Ofcom provided as well as output aimed at under- technical advice and assistance to served and disadvantaged groups. the Government as it formulated its policy. Following the introduction By May 2012, we had granted of new legislation, we assisted the a total of 251 community radio Government in its policy development licences. There is continuing by helping to establish a licensing demand for licences, and regime for the new local TV channels, in 2011/12 Ofcom invited and advertised licences in spring 2012. applications from locations in the south west of England and Wales (32 applications received), as well as Scotland (19 applications). Ofcom has so far awarded 15 licences in the south west of England and four in Wales, and the remaining applications are being assessed community radio stations 198 and considered for licensing. 12.5 million listeners

| 29 SECTION B OUR ONGOING RESPONSIBILITIES AND THE RESOURCES WE MANAGE

Broadcasting complaints We have also measured parents’ views The music video for the song S&M and investigations about the time of the watershed and by Rihanna on WTF TV focused on Audience complaints about possible whose responsibility it is to protect sex, bondage and sadomasochistic breaches of their obligations by children. For example, fewer parents sexual practices. Ofcom considered broadcasters play an important role are now concerned about the TV that these images, in tandem with the in ensuring viewers and listeners programmes their children watch lyrics, meant that the video conveyed are appropriately protected. Ofcom (31 per cent) than in 2009 (36 per cent). a powerful sexualised fetish theme. assesses each complaint it receives Seventy-seven per cent of parents Ofcom considered that the content of against the Broadcasting Code, think that the watershed is at the these music videos was not suitable or other relevant code or licence right time, and 73 per cent believe the for children and would have exceeded condition. We then decide whether amount of regulation of television is the likely expectations of the audience a complaint raises potential issues “about right”. This research has shown for these channels during the daytime. that require further investigation. consistently that parents continue to Therefore, the licensees did not apply During the past year, Ofcom assessed understand and value the concept of appropriate scheduling restrictions to 21,484 complaints about broadcasting the watershed on television to protect the videos so as to protect children. standards or licence conditions children, even taking account of the (down from 24,462 in the previous growth in recent years of other means year), and 288 complaints about of accessing audiovisual material. Sanctions against unfairness and/or unwarranted ‘adult chat’ channels In September 2011, we issued new infringements of privacy (compared In December 2011, Ofcom imposed guidance to TV broadcasters, which to 171 in the previous year). a financial penalty of £130,000 reflected the results of our research on Satellite Entertainment Ltd in with parents and teenagers. This made respect of its services Sport XXX Protecting children and upholding clear the genres and types of content Girls, Essex Babes and Northern rules around the watershed broadcast before and immediately Birds. This followed serious and Following several cases in 2011 after the watershed that require repeated breaches of rules of the involving unsuitable pre-watershed particular care in order to comply UK Code of Broadcast Advertising: broadcasts, Ofcom undertook with the Broadcasting Code rules. a number of actions on the • Advertisements must not enforcement of the 9pm watershed Unsuitable material in music videos cause serious or widespread on TV. This is in line with our offence against generally As part of our work to enforce statutory duty to protect under-18s. accepted standards. the watershed, Ofcom found two We held industry-wide meetings with music videos that were broadcast • Relevant timing restrictions must television broadcasters who transmit pre-watershed to be in breach be applied to advertisements that popular family entertainment shows of the Broadcasting Code. are unsuitable for children. before the watershed, and with The music video for the song In November 2011, we imposed broadcasters who transmit music Turn Around (5, 4, 3, 2, 1) by Flo Rida a financial penalty of £110,000 videos, to discuss our concerns about on 4Music, MTV Base, MTV Dance on Playboy TV UK/Benelux compliance with the Broadcasting included images of dancers Limited for similar breaches. Code rules relating to the watershed. performing in a very provocative We conducted new research into manner and repeated close-up images parents’ and teenagers’ views on of the female dancers’ buttocks. pre-watershed TV programmes. Since Ofcom considered that these images Ofcom assumed its broadcasting conveyed a highly sexualised theme responsibilities in 2003, we have and more sexualised images than regularly undertaken research among would normally be expected in a parents about the level of concerns music video broadcast at a time when related to the type of content that children were likely to be watching. their children watch on television.

30 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Upholding rules around offensive Investigative journalism and One significant complaint from the language on radio freedom of expression Palestine Liberation Organisation In September and October 2011, It is essential that broadcasters can (PLO) concerned The Palestine Papers Ofcom found a number of radio investigate and explore potentially (Al Jazeera). This documentary stations in breach of the Broadcasting controversial issues that are in series examined leaked diplomatic Code for the use of offensive language the public interest and of benefit documents concerning the Middle in radio programming, including to the audience. Ofcom will East peace process, known as the material that was broadcast at times continue to defend the right to “Palestine papers” which included when children were particularly freedom of expression in broadcast documents taken from the office of likely to have been listening. investigative journalism, applying the PLO’s chief negotiator. The PLO standards in the manner that complained that the programme In view of our concerns about best guarantees an appropriate was unfair to it and to its chief the material in these cases, we level of freedom of expression. negotiator and also unwarrantably requested that a number of radio infringed their privacy. broadcasters who transmit such In the past year, Ofcom has programming – especially when adjudicated on a number of Ofcom took the view that the public children were particularly likely challenging programmes which, interest in examining these issues to have been listening – attend a in many cases, received significant outweighed their expectation of meeting to discuss our concerns numbers of complaints. These privacy and we concluded that the about compliance with the included programmes like Panorama: obtaining and use of the material Broadcasting Code rules in this area. Death in the Med (BBC 1), which was warranted. Ofcom’s investigation examined an incident in which Israeli also found that the broadcaster, Ofcom then issued new guidance to soldiers boarded a ship in the Gaza Al Jazeera, had taken extensive steps assist radio broadcasters in complying Freedom Flotilla, and also Sri Lanka’s to authenticate the documents it relied with the rules in the Broadcasting Killing Fields (Channel 4), which upon and took great care to ensure Code relating to offensive language presented evidence of alleged war that the facts were presented fairly. on radio. The detailed guidance also crimes in the final stage of the Sri made clear the particular genres Lankan civil war. In both cases Ofcom Enforcing broadcasting rules and types of content broadcast did not uphold the complaints. In Where the Broadcasting Code has when children are particularly particular, Sri Lanka’s Killing Fields likely to be listening which require been breached, we normally publish a dealt with a deeply controversial finding and explain why a broadcaster particular care in order to comply issue with fairness and Ofcom with the Broadcasting Code rules. has breached the Code. When a concluded that overall Channel 4 broadcaster breaches the Code had preserved due impartiality in deliberately, seriously or repeatedly, its examination of the Sri Lankan Ofcom can impose statutory sanctions government’s actions and policies against the broadcaster, such as during the final stage of the war. a financial penalty or, in the most serious cases, revocation of a licence. Below are examples of Ofcom’s decisions over the past year.

| 31 SECTION B OUR ONGOING RESPONSIBILITIES AND THE RESOURCES WE MANAGE

Press TV serious illnesses, including cancer, • worked with the UK Government on Through the course of 2011, Ofcom kidney failure and diabetes, could the transposition of the revised EU was engaged in a sanctions case be cured exclusively through use of Regulatory Framework for Electronic with Press TV regarding an interview certain products, such as ‘Miracle Olive Communications into UK law, which obtained under duress from the Oil Soap’ or oil, or through contacting brought Ofcom new responsibilities Newsweek and Channel 4 journalist a prayer line. The programmes and powers in areas such as Maziar Bahari while in an Iranian also said that conventional medical network security, information- prison, which Ofcom had held to be treatment of such illness was not gathering and enforcement; required for this healing to take place. a serious breach of the Broadcasting • supported the work of the Body of Ofcom concluded that the material Code. This resulted in the imposition European Regulators in Electronic had the potential to cause serious of a £100,000 fine on Press TV Limited. Communications (BEREC). Ed harm, and that the licensee had not Richards, Ofcom’s Chief Executive, During the course of the sanctions taken steps to provide adequate was elected on to BEREC’s Board as hearing the licensee (Press TV protection from the inclusion of Vice Chairman. Key issues for BEREC Limited, based in London) made such harmful material. The Licensee in 2011/12 included international representations that suggested had also failed in its compliance roaming, next-generation access to Ofcom that editorial control of responsibilities by broadcasting networks and net neutrality; the channel rested with Press TV material which was similar to that International (based in Tehran). previously found in breach, and • represented UK interests at the Broadcasting rules require that placing vulnerable viewers directly International Telecommunication a licence is held by the person at risk of harm and exploitation. Union (ITU), including at the who is in general control of the 2012 World Radio Conference TV service: that is, the person that Noor TV fined for encouraging (WRC) and in preparations for the viewers to donate money in return chooses the programmes to be 2012 World Telecommunication for prayers shown in the service and organises Standardisation Assembly; the programme schedule. Ofcom imposed a penalty of £75,000 upon Al Ehya Digital Television • took part in the EU Radio Spectrum Ofcom gave Press TV Limited the Limited, in respect of its TV channel Policy Group, which included opportunity to apply to have its Noor TV, for encouraging viewers to contributions to the agreement operations in Tehran correctly licensed donate money to the channel in return of the first multi-annual Radio and Ofcom offered to assist it to do for prayers. The appeal focused heavily Spectrum Policy Programme (RSPP); so. Press TV Limited was also given the on religious beliefs, which Ofcom • continued our contribution to the opportunity to make representations believed made susceptible viewers work on broadcasting content on Ofcom’s ‘minded to revoke’ letter more likely to make donations than regulation carried out by the but the broadcaster failed to make they would otherwise have been. European Platform of Regulatory the necessary application and Ofcom Authorities (EPRA) including through therefore revoked Press TV’s licence to our presence on EPRA’s Board; broadcast in the UK. The channel was International • participated in the work of the removed from the Sky TV platform on Ofcom engages closely with other European Regulators Group for 20 January 2012. Ofcom’s decision to national regulatory authorities, the Postal Services (ERGP) and in revoke Press TV’s licence is the subject European Union (EU) institutions and the European Committee for of an application for judicial review. relevant global bodies. We do this Postal Regulation (CERP); and with a view to influencing decisions Believe TV fined for the broadcast • chaired the Organisation for of harmful material taken in international fora to ensure they are practical, proportionate and Economic Co-operation and Ofcom imposed a penalty of £25,000 best reflect the interests of UK citizens Development (OECD) Working Party on The Light Academy Limited, in and consumers. In 2011/12, Ofcom: on Communication, Infrastructures respect of its TV channel Believe TV. and Services Policy (CISP), and led The broadcaster aired programmes preparations for a workshop on that suggested to viewers that very broadband metrics.

32 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

World radio conference 2012 Spectrum life services as well as licensed BBC, The World Radio Conferences (WRC), commercial and local community Protecting the airwaves held every three to four years, are radio stations can suffer interference the major events in the international One of Ofcom’s key responsibilities is from illegal stations. We conducted spectrum calendar. Their impact is the management of radio spectrum – 392 operations against illegal becoming greater as we increasingly the airwaves that all wireless devices broadcast (pirate) stations in 2011/12, rely on wireless services, and electronic use to communicate. This covers compared to 421 in year 2010/11 everything from mobile phone, communications become ever more White space technology global. The main task of the conference and TV, to WiFi and car key fobs. The airwaves that wireless devices is to harmonise spectrum allocation Wireless technology is playing depend on are becoming increasingly at a global and regional level. This an increasingly important role congested. We need to think about allows manufacturers to mass- and this means that demands on more efficient ways of using this produce wireless products. As well as spectrum are rapidly increasing. limited resource. White space is the resulting in lower prices, it benefits When two devices transmit on the name given to bands of spectrum that consumers, as they can use devices same frequency, interference is are unused by the licence holder in a (laptops, mobile phones, tablets and caused. For this reason, it is important specific location and at a specific time. other devices) wherever they travel. that access to spectrum is carefully White space spectrum can potentially A key outcome of WRC 2012 was the managed. Ofcom’s team of spectrum be accessed by users other than the decision to allocate spectrum in the engineering officers operate across licensee, and can result in increased 700 MHz band to both mobile services the UK to trace and where possible overall spectrum efficiency, and and broadcasting. This will come into resolve harmful interference. innovative new services for consumers. effect at the next conference (expected A commonly-reported problem is We have consulted with stakeholders in late 2015) and will bring Europe, drivers suffering interference to on the development of a regulatory the Middle East and Africa into line wireless car key fobs. During 2011/12, framework to allow access to TV white with the rest of the world, where such Ofcom’s engineers resolved more space spectrum. This is the unused an allocation to mobile services is than 100 of these cases. This involves capacity that exists in frequencies already in place. While this could pave visiting the affected area and tracking licensed to digital terrestrial TV and the way for the eventual use of the down the source of the interference wireless microphones. A key priority of 700 MHz band for mobile services in by using specialist radio equipment. this work has been to protect licensed Europe, any such decision is likely to be users from harmful interference. some years off, pending the results of Illegal broadcasting studies and other technical work and In September 2011, we published Another important area of spectrum the replanning of broadcasting use of a statement saying that we would enforcement relates to illegal the remaining UHF TV bands. In March consider and consult on how to broadcasting – or pirate radio – which 2012, we consulted on this issue. make white space devices licence- is a significant problem in some of the exempt in the UK. Based on our UK’s major urban areas. Key safety-of- current observations on industry activity and standardisation, we estimate that white space devices could be deployed from 2014.

Government spectrum release plans In line with our public assets priority, we have been actively engaged throughout the year with the Government’s work to identify and release 500 MHz of public spectrum for new uses by 2020.

| 33 SECTION B OUR ONGOING RESPONSIBILITIES AND THE RESOURCES WE MANAGE

Competition Ofcom expects its prices to lead shortage of number blocks) in to real-terms price reductions for November 2012 and to conduct a pilot Ofcom, as sectoral regulator, has a consumers, as communications scheme to charge communications range of duties based on promoting providers pass on savings to their providers on an annual basis for the and ensuring competition. These landline and broadband customers. use of number blocks in the 30 areas include implementing competition The prices relate to wholesale charges with the fewest blocks remaining. policy under our sectoral powers: for telephone and broadband services for example, reviewing markets, delivered to homes and businesses Non-geographic numbering resolving disputes and setting and over BT’s copper network through Services provided via non-geographic enforcing regulatory conditions. a process called unbundling. This numbers, such as 03, 08, 09 and 118 allows communications providers As a competition authority, Ofcom numbers, are used by millions of to install their equipment in also has concurrent powers to deal consumers to call businesses, public Openreach’s telephone exchanges to with anti-competitive behaviour services and other organisations. provide broadband and telephone and abuse in the communications However, Ofcom research has shown services to their customers. and postal sectors. Ofcom has the that many people are confused power to enforce Article 101 and The number of ‘unbundled’ lines about what these numbers are for Article 102 of the Treaty on the has increased from 123,000 in and how much they cost, resulting Functioning of the EU and the Chapter September 2005 to over eight million in a lack of confidence and trust in I and Chapter II prohibitions of the in March 2012, enabling a range of the services. As a result, consumers Competition Act 1998. Ofcom also communications providers to offer make fewer calls to these numbers, has concurrent powers to make landline voice and broadband services providers are discouraged from using market investigations and references to residential and business customers. them and there is less innovation to the Competition Commission that might benefit consumers. under the Enterprise Act 2002. Geographic numbering Therefore, in April 2012 we made In March 2012, we published proposals to simplify these call Competitive landline and proposals to help conserve the charges. These included making calls broadband markets UK’s supply of geographic numbers to 0800 telephone numbers free In March 2012, we set prices that made available for allocation to from all phones, including mobiles. Openreach, BT’s wholesale access communications providers. These Following consultation, Ofcom division, can charge communications include proposals to close local intends to make a final decision providers for access to some of its dialling in the Bournemouth area on the new rules by early 2013. main wholesale telecoms services. (where there is a particularly acute

Number of ‘unbundled’ lines 2005: 123,000 2012: 8,000,000+

34 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

We also continue to play a lead role price of ISDN30 services to their Resolving telecoms on the approach to regulation of underlying costs by April 2014. After industry disputes non-geographic numbers in Europe, notifying the European Commission During 2011/12, we resolved through our work with BEREC. of our proposals, we published a four disputes between telecoms statement in April 2012, confirming companies. Each of these was ISDN30 and setting the price control. completed within the statutory ISDN30 is a multi-line digital telephone four-month deadline. In addition, service which is used by businesses, Review of the TV advertising there are a further four ongoing primarily to provide incoming and trading market dispute cases. These disputes covered outgoing calls. We reviewed ISDN30 In December 2011, Ofcom concluded a wide range of issues from BT’s markets during 2010 and found its initial review of TV advertising compliance with its cost-orientation that there appeared to be excessive trading. The review, which examined obligations to a practice known as profits in Openreach’s provision the way TV advertising is bought ‘flip-flopping’ in relation to wholesale of wholesale ISDN30 services. and sold, found no clear evidence mobile voice call termination charges. of harm to consumers – whether Further information on our We decided in the review that TV viewers, advertisers or end-users investigations into complaints some sort of price control was likely of products advertised on TV. to be appropriate to address the about anti-competitive behaviour, potential market distortions arising In the light of the significant costs breaches of certain regulatory from these profits. During 2011 we which would be imposed by a market rules and regulatory disputes is consulted on the form and level of investigation, and the potentially given in the Annex on page 116. this price control. In March 2012, we destabilising effects on industry, we notified in our draft conclusion to said that it would not be proportionate the European Commission that we to refer the TV advertising market would apply an ‘RPI-minus-X’-style to the Competition Commission. price control to reduce the wholesale

The state of the The maps were part of our first • 3G from all five networks – report on the UK’s communications 73% of premises and 13% UK communications infrastructure which we are required of the UK’s landmass could nation to submit to the Secretary of State for receive a signal outdoors. Culture, Olympics, Media and Sport • Premises that do not have a In November 2011, every three years. Ofcom’s report also choice of all five 3G mobile Ofcom launched digital refers to the coverage and capacity networks – 7.7 million. communications of the UK’s landline network, digital coverage maps, including radio and TV. The maps showed: • Residential fixed broadband customers’ data usage – 17 GB outdoor mobile • 2G from all four networks – of data per month on average. coverage and mobile 97% of premises and 66% of the UK landmass can • Mobile broadband customers’ broadband availability, receive a signal outdoors. data usage – 0.24 GB per month using data supplied by per connection on average. • UK premises that do not communications providers. have a choice of all four 2G mobile networks – 900,000.

| 35 SECTION B HOW WE MANAGE RISKS AND CHALLENGES

How we manage risks and challenges

Managing risk is an integral part of To ensure that our risk management our internal control framework. The our day-to-day business activities and framework is effective and is findings and recommendations of is a key pillar in our internal control aligned to the requirements of the annual risk review are considered framework. Ofcom’s risk management the organisation, we conduct an and commented on by KPMG as policy is reviewed regularly and clearly annual risk review which includes part of Ofcom’s internal audit plan. defines our approach to managing an exercise to benchmark our risk as well as defining the specific risk process against the Treasury’s Risk The table below highlights some of management roles and responsibilities Management Assessment Framework. the key risks currently being managed throughout the organisation. Recommendations from the risk by the organisation. For further review are endorsed by senior explanation of how we manage risks management and the Risk and Audit and challenges, please refer to the Committee and form part of our Governance Statement in Section C. ongoing programme to improve

Objective/Business Area Risk Mitigation

Deliver the Government’s There could be insufficient spectrum available to We have created a comprehensive spectrum plan guarantee of wireless meet all needs during the Games period and the UK for the Games period, making sufficient spectrum spectrum for the London Government’s spectrum guarantee to the International resources available to meet Games needs. 2012 Olympic and Olympic Committee might not be met. We have built and tested a new spectrum assignment Paralympic Games Harmful interference could prevent the use of system to maximise the efficiency of spectrum use. assigned spectrum and interrupt the safety and We have implemented a modern sensor network success of the Games. across the country to pinpoint any sources of interference and a large team of field engineers to resolve any problems. We have participated in the London 2012 Games test events and implemented any lessons learnt.

Clearance and auction of The plans and timetable in place to clear and auction We have put highly-skilled resources in place, and spectrum in the 800 MHz spectrum in the 800 MHz and 2.6 GHz bands are we are using professional programme and project and 2.6 GHz bands challenging and in some areas, may be subject to management and independent audit expertise to help stakeholder challenge. ensure timely and effective delivery of the plans. Delays could impact the availability of new telecoms During 2012, we again consulted on plans for services, including 4G mobile services, for consumers managing potential interference into digital terrestrial and citizens. television caused by the use 4G services and on our proposals to auction spectrum in the 800 MHz and 2.6 GHz bands. We continue to work closely with Government and stakeholders.

36 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Objective/Business Area Risk Mitigation Information, Delays to achieving full transition to a new service We implemented a comprehensive governance Communications and provider and issues around operational stability structure to oversee the transition to the new supplier Technology (ICT) outsource may present a risk to business-as-usual functions with progress, risks and issues presented on a regular contract and in particular, preparation and delivery of our basis to the main Board, Risk and Audit Committee work to support the London 2012 Olympic and and Operations Board. Paralympic Games. Robust Service Level Agreements were defined with the contract and performance is reviewed regularly with the supplier. We are working alongside the supplier to improve operational performance. We have implemented an ICT systems change freeze in advance of the London 2012 Games. We have contingency plans in place for Olympics support in the event of any ICT issues.

Prepare for and fulfil During the year Ofcom took over regulation of the UK’s Successful assumption of our new duties and powers. regulatory duties in relation postal services from the previous regulator Postcomm. We consulted on a new approach to the economic to post We may be unable to safeguard the UK’s universal regulation of postal services, which included a number service obligation (USO) on postal services, with a of regulatory safeguards to ensure the universal postal direct impact on citizens and consumers. service remains viable. We will undertake a range of work to secure the provision of a universal postal service, including an assessment of user needs.

Implement Digital Economy Our Code of Practice, as required by the Digital We have engaged extensively with stakeholders Act 2010 online copyright Economy Act may be challenged by stakeholders. and consulted formally during the drafting of the infringement provisions Proposed amendments to the Protection of Freedoms Code of Practice. Bill may repeal key provisions of our Code of Practice. We are advising the UK Government on the Protection Ofcom may be seen as a target for those who oppose of Freedoms Bill. the implementation of the Digital Economy Act. We have robust security policies in place and have completed a plan of ICT disaster recovery tests.

Rapid change in the sectors The sectors regulated by Ofcom are characterised by We seek to maintain breadth of expertise and scope regulated by Ofcom rapid change, making it challenging to develop plans for flexibility in project teams so that resources can be to anticipate significant activities or events which may adapted or redeployed at short notice if necessary. require Ofcom’s involvement. Ofcom’s Executive Committee is responsible for In the current environment, additional unplanned prioritising projects and adjusting work plans as work may result in the reprioritisation of ongoing required. We have strengthened our project planning and planned activities which could lead to delays in processes through the establishment of a dedicated delivering benefits for consumers and citizens. Planning and Performance Team to ensure optimal use of resource. Ofcom’s Annual Plan, which outlines its strategic priorities, is subject to public consultation each year.

Ability to regulate in an Increasing volume of appeals and litigation may result We make sure that our decisions are evidence-based efficient and timely manner in potential delays to the implementation of regulatory and robust and we carry out impact assessments changes which: to measure the likely effect on stakeholders. • stops consumers benefiting from them at the We engage with stakeholders throughout our earliest opportunity; consultation processes to ensure we understand • can interfere with effective competition in the their views and can give them due consideration. markets we regulate; and The UK Government is exploring potential • can make regulation more expensive for the options regarding the appeals regime for stakeholders who fund Ofcom. telecoms with stakeholders.

| 37 SECTION B HOW WE WORK AND WHO WE WORK WITH

How we work and who we work with

Ofcom’s duties and powers Ultimately, we believe that our to inform our day-to-day work. The are set out in statute. performance should be judged by the speed with which the communications outcomes that are delivered for citizens sector is changing makes it especially and consumers as a result of our important for us to have clear guiding As the independent regulator for work. We measure thoroughly these principles, as included below. the communications industries, we outcomes in a number of ways, using a are required to further the interests comprehensive and robust framework of citizens and consumers. for measuring, reporting on and Ofcom’s regulatory We are funded both by stakeholders communicating our performance, both principles (television and radio broadcast licence internally and externally. During the fees and administrative charges to past year we have focused on how When we regulate regulate communications networks we communicate these outcomes, Ofcom will operate with a bias and postal providers) and through and have sought to measure our own against intervention, but with a grant-in-aid funding from the UK performance as we progress through willingness to intervene promptly Government. Further details of our the lifetime of a work programme. and effectively where required. funding arrangements can be found The table on page 13 measures our Ofcom will intervene where in the Operating and Financial Review performance for the 13 priorities we there is a specific statutory duty in Section D. Every year, following set out in our 2011/12 Annual Plan. to work towards a goal that consultation, we publish our Annual To help monitor whether our work markets alone cannot achieve. Plan, which outlines new initiatives is successful in achieving the desired and ongoing activities that we carry outcomes, we conduct in-depth, How we regulate out in support of our duties. periodic consumer research, Ofcom will always seek the least which we publish regularly in an intrusive regulatory methods Measuring and accessible form on our website. of achieving its objectives. We publish the data in a range of communicating Ofcom will strive to ensure that Ofcom publications including the interventions are evidence-based, outcomes Communications Market Report, the proportionate, consistent, In our 2011/12 Annual Plan, we International Communications Market accountable and transparent in identified 13 priorities with around 40 Report, the UK Infrastructure Report, both deliberation and outcome. projects and programmes allocated the Consumer Experience report, our against them. Underpinning this is the media literacy reports and the Public Ofcom will regulate with a clearly requirement to meet our Spending Service Broadcasting Annual Report. articulated and publicly reviewed Review settlement with the Treasury annual plan, with stated objectives. by delivering efficiencies throughout the organisation. Ofcom, as has been When we regulate How we support regulation set out in this Report, made significant The Communications Act requires us to Ofcom will research markets progress delivering outcomes against have regard to the principles of better constantly and will aim to many of its Annual Plan priorities and regulation: that regulation should be remain at the forefront of ‘business as usual’ work in 2011/12. transparent, proportionate, consistent, technological understanding. accountable and targeted only at cases where action is needed. When Ofcom will consult widely with Ofcom was established, we built on all relevant stakeholders and these principles by developing a more assess the impact of regulatory specific set of regulatory principles action before imposing regulation on a market.

38 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Reducing regulation Specifically, we take We are committed to reducing decisive and effective action to regulation by, for example: Ofcom is focused on reducing protect citizens and consumers regulation where possible. We where necessary, for example: • giving Royal Mail greater freedom believe that ‘better regulation’ is in the way it sets its prices, ensuring that regulation is properly • defending our work to reduce but introducing safeguards to targeted and does not impose mobile call termination charges at ensure that consumers and undue burdens on stakeholders. the Competition Appeal Tribunal; competition are protected;

During the past year we made a • ensuring that consumers are • simplifying our procedures for number of significant regulatory protected from landline mis-selling handling broadcasting complaints, decisions. Some decisions saw a and the practice of ‘slamming’, cases and sanctions; and which happens when a customer continuing trend towards reduced • exempting the use of wireless is switched to another provider regulation. In order to safeguard the devices from the need for a licence. interests of citizens and consumers, without their consent or knowledge. An overview of the key decisions and some decisions required additional • shortening phone and broadband statements that we have made during or strengthened regulation. Figure contract tie-in periods – consumer the year can be found in the tables 1 provides an overview of how the contracts are now limited to in the Annex on pages 107 to 109. regulatory burden on stakeholders a maximum of 24 months changed as a result of Ofcom’s regulatory decisions and statements in 2011/12. It shows that 18 per cent of statements and decisions published during the year resulted in a reduced regulatory burden on our Figure 1: Impact of our statements on the regulatory burden to stakeholders in 2011/12 stakeholders (29 per cent last year). The majority (70 per cent) of the Number % statements saw no change in Reduced regulation 10 18% regulatory burden, or the work is ongoing (54 per cent last year); Streamlined/co-regulatory 3 5% 7 per cent saw the introduction Mixed/no change/ongoing 40 70% of increased or new regulation (14 per cent last year) while Increased/new regulation 4 7% 5 per cent resulted in streamlined or co-regulatory outcomes (3 per cent last year).

5%

70%

18% 7%

| 39 SECTION B HOW WE WORK AND WHO WE WORK WITH

Relationships with • Category 1: consultations which contain major policy initiatives and/ Contact with stakeholders or are of interest to a wide range consumers and Ofcom’s role as a regulator requires of stakeholders (especially those citizens us to engage with a wide range of who may need a longer time to stakeholders, including companies respond); in these cases we will Understanding consumer and and industry bodies in the sectors we normally consult for ten weeks. citizen interests and behaviour is regulate, consumers and consumer vital to our work. Ofcom makes • Category 2: consultations which, groups, the UK Government and extensive use of market research while containing important policy devolved institutions, co-regulators to understand trends in the take- proposals, will be of interest to a and other regulators. We are members up and use of communications limited number of stakeholders of the Joint Regulators Group (JRG), services and the behaviour and who will have awareness of the which this year launched working concerns of consumers. Our issues; in these cases we will groups across a number of topics annual Consumer Experience and normally consult for six weeks. to share knowledge and expertise, Communications Market Report, in and to tackle issues common across • Category 3: consultations which particular, highlight and analyse regulated industries. We also fall within one or more of the these trends. Ofcom’s Consumer engage with various international following categories, where Contact Team receives over 100,000 organisations and regulatory bodies. the normal time period for calls directly from consumers consultations is one month: each year, and the information that consumers provide helps Consultations −−technical issues; us target our policy-making and Consultations allow stakeholders −−where there is a need to complete enforcement work. Consumers to comment on and respond to our the project in a specified can also contact us through our proposals before a decision is made. timetable because of market website. While we cannot resolve If the period for consultation is too developments or other factors individual complaints about short, some of those with important which require the project to be telecommunications services, we views to share may not have enough concluded within a short period; provide advice to complainants time to prepare their responses. If it and refer them to the Alternative is too long, the market concerned −−the issue has already been the Dispute Resolution (ADR) schemes may have changed dramatically. This subject of a consultation; that we have approved. We do, could affect our ability to deal with an however, handle complaints about issue as quickly as the stakeholders −−a proposal will have a limited TV and radio programmes. involved would like. When we effect on a market; or decide how long a consultation The Communications Consumer −−a proposal is only a limited should last, we need to strike the Panel and, from the perspective amendment to an existing right balance between these two of the nations of the UK, Ofcom’s policy or regulation. considerations. There are generally Nations Committee and National three categories of consultation: Advisory Committees, provide advice on Ofcom’s decision- making. The Consumer Forum on Communications, with over 50 members from consumer bodies, meets every quarter with Ofcom to discuss consumer policy topics. We also hold regular bilaterals with consumer stakeholder organisations as well as consultation meetings on specific topics.

40 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Figure 2: Analysis of consultation duration: 2011/12 Figure 2 sets out an analysis of the length of our consultations by sector. Consultation period Consultation period less than 10 weeks at least 10 weeks (including category 2 and category 3 A longer consultation period gives consultations) stakeholders greater opportunity to respond and become involved in Telecoms 6 12 decisions. This is particularly important Broadcasting 7 11 when the consultation issue has great significance. In 2011/12, 37% Spectrum 3 1 of our consultations lasted at least ten weeks, compared to 26% last Post 1 4 year and 51% in 2009/10. Sixty-three Other 1 1 per cent of consultations lasted less than ten weeks in 2011/12, Total 18 (= 38%) 29 (= 62%) down from 74% in 2010/11.

Figure 3: Responses to consultations 2011/12 Ofcom collects statistics on Change on 2010/11 the number of responses to +3 -16 -2 -4 +2 -2 -1 consultations, which are shown 25 in Figure 3. The chart illustrates the large number of responses 20 19 we have had over the year, based on the 43 consultations where we 15 subsequently published a statement. 10 Eight consultations attracted 10 a very wide range of responses 5 (i.e. 31 or more). This is two fewer than in 2010/11 when 10 consultations 5 5 0 4 3 attracted 31 or more responses. Number of consultations responses received responses consultations of Number 0 1-10 11-20 21-30 31-40 41-50 50+

Range of responses received

| 41 SECTION B HOW WE WORK AND WHO WE WORK WITH

Figure 4: Analysis of the time taken to publish an Ofcom decision from the close of the Timeliness of decision-making consultation period: 2011/12 We also analyse how long it takes us to publish a decision following Change on 2010/11 the close of a consultation (see -15 -1 +1 -4 Figure 4). In 2011/12, 14 decisions 20 were announced within ten weeks of closing a consultation. Thirteen 15 14 decisions were published between 13 12 11 and 20 weeks after the end 10 of the consultation period.

7 Impact assessments 5 Impact assessments (IAs) are an

Number of statements of Number important part of the decision- 0 making process. Section 7 of the Communications Act requires us to carry out an IA when we are 0-10 weeks 11-20 weeks 21-30 weeks 31+ weeks proposing to do anything for the Period in weeks purposes of, or in connection with, the carrying out of our functions and we consider the proposal to Figure 5: Analysis of impact assessments carried out be important. Impact assessments ensure, among other things, that Number of consultation documents Total IA explicit in published document in relation to our decisions: Telecoms 18 11 • a wide range of options are Broadcasting 17 9 considered, including the option of not regulating; Spectrum 4 4 • these options are clearly presented; Post 5 2 • the potential impacts that Other 2 1 would flow from each option are analysed carefully; and Total 46 27 (= 59%) • the costs associated with the chosen option are outweighed by the benefits. Ofcom must publish a list of the IAs carried out during the year, which appears here and in the Annex on pages 110 and 111.

42 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

In July 2005, we published guidelines: • a possible Order under the Public Co-regulators Better policy-making: Ofcom’s Bodies Act through which the UK Ofcom shares regulatory approach to impact assessment which Government has proposed to amend responsibilities in certain areas with emphasised Ofcom’s commitment Ofcom’s duties in some areas; and other regulators. Ofcom handed over to conducting assessments as an • the transfer of regulation of postal responsibility for handling complaints integral part of the policy-making services to Ofcom from Postcomm, relating to editorial content of process and stated that we expected as set out in the Postal Services Act UK-based video on demand (VoD) to carry out IAs in the great 2011. Ofcom assumed regulatory services to its co-regulatory partner the majority of our policy decisions. responsibility for postal services Authority for Television on Demand (ATVOD), formerly the Association Fifty-nine per cent of consultation on 1 October 2011. for Television on Demand. In March documents contained an impact 2012, Ofcom invited contributions assessment, set out in a specific We also published our firstUK to a review of its designation of section or annex of the consultation Infrastructure Report, which we are ATVOD. The designation, made in document, which was unchanged on required to submit to the Secretary of March 2010, is subject to formal last year (see Figure 5). Consultation State for Culture, Olympics, Media and review by Ofcom after two years. documents without a specific Sport every three years (see page 35). section for an IA may still include Ofcom designated the Advertising There are also requirements for assessments of impact, integrated Standards Authority (ASA) as the Ofcom to comply with specific throughout the document. In addition, appropriate co-regulatory authority provisions of the revised European in some circumstances, it may not in respect of advertising on video-on- Communications Framework. To give be either necessary or appropriate demand services notified to ATVOD. to conduct an IA. We will continue effect to this, during the year we: to ensure that impact assessments This builds on the existing • revised our General Conditions are carried out and properly co-regulatory partnership with the and Universal Service Conditions, presented in all relevant cases. ASA formed in 2004. Broadcasters as appropriate; and are obliged to comply with the New and revised duties • updated our dispute resolution Advertising Codes under their and enforcement processes. broadcast licences issued by Ofcom. We are also implementing new or When the ASA adjudicates on an revised duties. There are several advertisement, broadcasters comply amendments to UK legislation, Ofcom worked with communications with rulings immediately under implemented or proposed by the UK regulators in other European the conditions of their licences. Government and being considered countries and around the world, However, where necessary, the ASA by Parliament, which will change both bilaterally and through is able to refer licensees to Ofcom. our duties. Some of these enable regulatory networks such as us to reduce our costs while others BEREC, the Radio Spectrum Policy PhonepayPlus is another regulatory will require us to undertake new Group (RSPG), and the European agency that carries out day-to-day responsibilities. They include: Platform of Regulatory Authorities regulation on behalf of Ofcom. (EPRA), to pursue a coordinated PhonepayPlus works with the industry • implementing the provisions approach to international and enforces a code of practice for in the Digital Economy Act communications regulation. premium-rate services, which enable aimed at addressing online consumers to purchase goods and copyright infringement; services by charging the cost to their phone bills and pre-pay accounts.

| 43 SECTION B OUR EMPLOYEES

Our employees

Ofcom’s mission and values Organisation structure The savings have been made through Board Members and Ofcom colleagues Over the three years to 2014/15, a combination of efficiencies, a have a shared commitment to Ofcom’s Ofcom will continue to reduce its reduction in staff costs, streamlining mission and values and undertake the budget by 28.2 per cent in real terms. projects and governance and organisation’s work by reference to In a drive to reduce uncertainty and to ceasing some activities altogether. these core values. Colleagues across reshape and refocus the organisation At the beginning of 2011, we the organisation were instrumental swiftly, we made the majority of put a new internal structure in in developing the six values that our cuts in 2011/12, when Ofcom’s place and a number of colleagues reflect our desire to work in an open, budget was £115.8m; this was set left through redundancy. effective and people-driven way. before Ofcom assumed responsibility During 2011/12 our focus has been on for postal services regulation from embedding the new structure whilst We strive to be dynamic, responsive Postcomm whose 2011/12 budget ensuring that we continue to fulfil our and commercially aware: incisive was £8.9m. At the end of March 2012, regulatory duties during a period of thinking, rigorous evidence-based we said that our budget for 2012/13 significant change. As a consequence analysis and engagement with was £121.4m; this included £7.2m of taking on responsibility for stakeholders are crucial to our for Ofcom to fulfil its new duties to regulating postal services, effectiveness as an organisation. regulate the postal services sector. 27 colleagues transferred to Ofcom from Postcomm on 1 October 2011.

The Ofcom values are: • communicating openly and honestly; • listening with an open mind; • making a difference; • empowering and prioritising; • investing in and supporting our colleagues; and • genuine collaboration.

44 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Colleague involvement We also carry out regular surveys Absence and consultation through which colleagues have Ofcom encourages a culture where Colleague involvement is actively the opportunity to contribute their good attendance is expected and encouraged as part of our day- views on a range of topics. The valued. However, it recognises that to-day processes. We inform and outcomes from these surveys provide from time to time absences for consult colleagues through: a key foundation for much of our medical reasons may be unavoidable. organisational development work. Ofcom aims to treat its staff who are • the Ofcom Colleague Forum, ill with sympathy and fairness and a consultation forum which is Professional development and where possible to provide them with made up of representatives of employment policies support which will enable them to colleagues from across Ofcom and The quality and commitment of our recover their health and attend work which meets regularly with senior people are central to our ability to regularly. In 2011/12, the number of management at Joint Consultative fulfil our duties. In 2011, we carried working days lost was 4.0 days per Group meetings (which include out an organisation-wide learning annum per employee. This compares two members from the union); needs analysis, which has led to a favourably to the public sector average • the Ofcom intranet, which renewed approach to learning and of 7.1 days per annum per employee. is available to all colleagues development aimed at ensuring in all of Ofcom’s offices; that our colleagues’ personal Preparation for the London 2012 • presentations hosted by senior and professional development Olympic and Paralympic Games managers during which new needs are met more effectively. One of Ofcom’s priorities is to deliver the UK Government’s spectrum strategic initiatives are explained to We are committed to ensuring that guarantees for the London 2012 colleagues and updates are provided all colleagues are treated fairly, with Olympic and Paralympic Games. To regarding continuing projects; dignity and respect. We have reviewed enable us to do this we have created • regular group meetings both our HR policies to ensure that they a team within Ofcom whose specific to listen to colleagues and to are up-to-date and consistent with remit is to carry out this programme disseminate information; and our organisation values, as well as the of activity, and have supplemented requirements of employment law. • regular messages from our own field engineering team the Chief Executive. with the loan of expert colleagues from other countries.

| 45 SECTION B CORPORATE RESPONSIBILITY

Corporate Responsibility

Ofcom’s commitment to equality, We have already delivered some Corporate responsibility diversity and human rights of our key objectives. These have Ofcom is committed to ensuring As an employer, we are committed included an equal pay audit to that we are not only a responsible to equality of opportunity for all investigate whether there were any employer towards our colleagues, but colleagues, irrespective of race, discrepancies in the pay of male also that we manage our impact on disability, gender (including gender and female colleagues doing equal the wider community. Our Corporate re-assignment), age, religion or work; an investigation of the diversity Responsibility purposes are to: belief and sexual orientation. composition of our colleagues to This commitment sits at the assess what we might need to do in • treat all colleagues with dignity heart of our employment policies relation to recruitment and retention and respect in an inclusive and fair and our approach to training initiatives; and we have continued working environment, promoting and career development. to take part in benchmarking equality of opportunity for all; activities to ensure that we are • reduce our carbon footprint, Our Single Equality Scheme (SES) is operating in line with best practice. provide value for money and central to our determination to do ensure Ofcom’s practices are what we can to promote equality and During March and April 2012 we environmentally sustainable; and diversity inside our organisation. In consulted on our revised Equality the past two years we have worked Scheme for Northern Ireland. This sets • engage, inspire and develop hard to implement the actions out how we will promote equality of colleagues while proactively seeking we committed to in the scheme opportunity and good relations across to support our local community. we published in October 2009. different groups of people when Other achievements have included carrying out our functions relating to improvements to the accessibility of In October 2011, we published an Northern Ireland. The final version of our website and publications, the updated SES to tie in with Ofcom’s our scheme has since been published. current and future priorities. This inclusion of an equality element in our built on the achievements we had We were pleased to improve our research and the provision of more made since launching our first SES score in the Stonewall Workplace support to our disabled colleagues. and explained how we would go Equality Index for the second year In the wider community we have about meeting our obligations running, which looks at our attitude continued to run a reading mentoring under the Equality Act 2010. to lesbian, gay and bisexual staff. scheme with a local primary school in Southwark, giving colleagues the opportunity to coach young children to improve their literacy skills. In addition, we work with Career Academies UK, mentoring 16-17 year old students and helping them prepare for corporate life and in 2011 we hosted three interns from local academies for a six-week period.

46 | Ofcom Annual Report & Accounts 2011/12 SUSTAINABILITY REPORT www.ofcom.org.uk

Sustainability Report

This section presents an overview In 2009, Ofcom commissioned a Carbon Trust standard of Ofcom’s sustainability strategy second independent carbon audit certification and our performance in this area. which confirmed that a 15 per cent Ofcom attained Carbon Trust It also contains sustainability data reduction in carbon emissions had Standard certification in 2009. and associated financial costs which already been achieved. A subsequent This is an independent certification have been presented in a format audit in 2012 confirmed that a awarded to organisations that that conforms to the sustainability 21 per cent reduction had been measure, manage and reduce their reporting guidelines issued by achieved. A final carbon audit in annual carbon footprint, the Treasury for 2011/12. 2013 will confirm whether Ofcom and was initially valid for two years. has achieved its overall 25 per cent In 2011 Ofcom was successful in Ofcom’s overall reduction target. gaining Carbon Trust Standard re-certification, demonstrating Further detail about Ofcom’s sustainability strategy continued effort and progress in sustainability performance and Introduction managing its carbon footprint. progress can be found on our website. Ofcom commissioned an independent carbon audit in 2007, and subsequently committed to a 25 per cent reduction in carbon emissions by the end of 2012/13 A summary of our emissions over the past four years is provided in Figure 6. (relative to a 2007 baseline). Ofcom’s Please refer to pages 121 to 122 for more detail. Footprint and Sustainability project was set up to identify and drive Figure 6: Sustainability performance overview forward actions to ensure that Ofcom meets its carbon reduction Sustainability Performance Performance Year commitment and that its practices Overview are environmentally sustainable. 2008/09 2009/10 2010/11 2011/12

Footprint and Sustainability is one of Greenhouse tCO2e 260,939 260,833 226,663 226,048 three workstreams within Ofcom’s Gas emissions overall Corporate Responsibility (Scopes 1,2) Expenditure £520,568 £561,815 £518,158 £420,108 programme (see page 46). Business Travel tCO2e 452,981 371,478 374,811 408,279* Overview of reduction targets Expenditure £987,034 £820,896 £627,606 £713,021 Ofcom’s 25 per cent reduction target represents a reduction split over seven Waste tCO2e 100 156 150 151 areas: information services, utilities, waste, business travel, procurement Expenditure £35,557 £31,591 £25,649 £28,094 materials, procurement capital and commuting. Each of these areas has Water Consumption 9,263 9,915 10,495 7,737 (m3) been allocated a reduction target where applicable, based on their Expenditure £26,772 £22,461 £23,994 £19,672 potential for greater efficiency. * Business travel emissions have increased due to enhanced levels of regulatory activity in Europe during 2011/12, including the negotiations of the Roaming Regulation and the RSPP, the WRC 2012 and work with BEREC.

| 47 SECTION B SUSTAINABILITY REPORT

Governance Waste minimisation Future plans The Footprint and Sustainability and management Ofcom expects that the majority of project reports to the Corporate Ofcom has a ‘no waste to landfill’ the remainder of our 25 per cent Responsibility Steering Group (CRSG). policy in its London office. We recycle reduction target will be delivered Members of the CRSG hold senior paper, cardboard, cans, plastics, glass, in 2012/13 by the transition to management positions within Ofcom batteries, toners and CDs. Any disposal greener data centres, which was and set the strategic direction of of ICT equipment complies with completed in 2011/12. This involved the work. Any proposal with an the Waste Electrical and Electronic a reduction in the overall number of environmental impact is submitted Equipment Directive (WEEE). servers by 57 per cent and also the for guidance and approval from replacement of these with newer the CRSG before implementation. Finite resource consumption and more energy-efficient servers. The CRSG provides bi-annual Water consumption comes primarily detailed progress reports directly Ofcom will continue its regular from washrooms, drinking water to Ofcom’s Executive Committee. monitoring of carbon emissions and catering facilities in our London across all areas, with particular office. Ofcom monitors water focus on the energy consumption 2011-12 Overview consumption on a monthly basis. reduction resulting from the data Greenhouse gas emissions centre transition. Ofcom will also Biodiversity action planning continue to promote sustainable We have made significant investment behaviour to its colleagues. in energy-saving infrastructure over Biodiversity is not a significant consideration for Ofcom and the past few years, and conduct As one of its key technology we do not undertake data close monitoring of heating, cooling sustainability partners, Ofcom also collection in this area. and lighting settings. Ofcom has plans to continue its work with the an energy policy which is designed London Organising Committee of to guide energy-related decision- Sustainable procurement the Olympic and Paralympic Games making and to support an effective Ofcom is keen to encourage (LOCOG) to support the delivery energy management strategy. sustainability from its suppliers. The of the first sustainable Games. pre-qualification questionnaire that We continue to encourage colleagues Ofcom uses as part of its tender to make use of video-conferencing process to procure goods and facilities across our various UK offices, services from outside organisations and have also put in place a number includes the following question: of strict travel policies. Ofcom has a fleet of vehicles used by our Spectrum “Please provide evidence of Engineering and Enforcement compliance with the Eco-management colleagues, chosen, in part, for their audit scheme or any other low emissions per mile, and we relevant recognised environmental monitor fuel usage on a monthly basis. standard with which your company complies which is relevant to the subject of the contract.”

48 | Ofcom Annual Report & Accounts 2011/12 SUSTAINABILITYSECTION C REPORTGOVERNANCE STATEMENT www.ofcom.org.uk

Governance Statement

Chairman and Chief and works together with Ed Richards, With all parts of the governance Executive’s Overview as Ofcom’s Accountable Officer, structure engaged in Ofcom’s In the earlier sections of this report, to ensure that an appropriate and activities, we ensure that all strategic we highlighted the priorities and effective governance structure is in policies to be implemented by activities of Ofcom during the past place. Ofcom’s corporate governance Ofcom, together with all other financial year. In this overview we framework is built around the areas of performance, responsibility are pleased to discuss more fully the structure illustrated in Figure 7, which and accountability, are robustly framework of governance Ofcom is underpinned by a rigorous system of challenged. Such challenge results deploys to lead the organisation internal control, risk management and in strong, well-founded, evidence and underpin the achievement assurance, and in this statement, we based and high-quality decision of its objectives, whilst ensuring will examine each part of the structure making, both at Board level and that we safeguard public funds. in more detail. Our strategy for each across the wider organisation. component part of the structure The statutory framework establishing is regularly reviewed to ensure its Colette Bowe, Chairman Ofcom sets out clearly that it is an continued relevance and effectiveness. Ed Richards, Chief Executive independent body. This independence, and Accountable Officer both legal and functional, ensures The Board is constantly developing 19 June 2012 that Ofcom can take autonomous and its membership offers a strong decisions independently from balance of skills, knowledge and experience. It is supported in its work Government or the companies LEADERSHIP in the markets it regulates. This by a number of committees, the principle of independence is at the Content Board, the Communications EFFECTIVENESS heart of effective regulation and is Consumer Panel and the Ofcom fundamental to Ofcom’s oversight Spectrum Advisory Board, which of the communications sector. It together complement, enhance ACCOUNTABILITY underpins Ofcom’s decision-making and support the work of the Ofcom and provides the clarity and certainty Executive. The work of these parts of ENGAGEMENT that encourages much of the the governance structure in advising investment in the sector, which is to both the Ofcom Board and the Ofcom the benefit of citizens and consumers. Executive is extremely valuable and we thank all of the members of these The Ofcom Board strongly upholds this bodies for their challenging and principle of independence, both in the incisive advice and decision making. ASSURANCE

appointment of its members and in its Ofcom could not function as well as it INDEPENDENT INTERNAL CONTROL INTERNAL RISK MANAGEMENT RISK deliberations. The Ofcom Board is the does without their continued support. AND MANAGEMENT key decision-making entity for Ofcom Figure 7: Components of Ofcom’s governance structure

| 49 SECTION C GOVERNANCE

The Ofcom Board

Colette Bowe Dame Patricia Ed Richards Dame Lynne Tim Gardam Hodgson, DBE Brindley, DBE

Mike McTighe Lord Blackwell Stuart McIntosh Jill Ainscough

Colette Bowe Dame Patricia Hodgson, DBE Ofcom’s Remuneration Committee and Colette Bowe became Non-Executive Dame Patricia Hodgson, DBE was a member of the Nations Committee, Chairman of the Ofcom Board in March appointed as a Non-Executive Member the Nominations Committee and 2009. She trained as an economist and of the Ofcom Board on 1 July 2011 Risk and Audit Committee. has held a number of senior roles in the and became Deputy Chairman on Ed Richards public and private sectors. She began 1 January 2012. She has been Principal her career at the Department of Trade of Newnham College, Cambridge, Ed Richards has been Chief Executive and Industry and subsequently worked since 2006 and was appointed Chair of of Ofcom since October 2006, having at the Independent Broadcasting the School Teachers’ Review this year. joined the Board in 2003. He is Authority, the Securities and Investment Having begun her career as a producer currently a Vice-Chairman of the Body Board, as Chief Executive of the and journalist, she was Director of of European Regulators for Electronic Personal Investment Authority and as Policy and Planning at the BBC and Communications (BEREC), a Director Executive Chairman of the European a Member of the BBC Trust from its of Thames Water Utilities Limited and Asset Management Business at inception until June 2011. From 2000 the Donmar Warehouse Theatre, and a Robert Fleming. She is currently the to 2003 she was Chief Executive of the Trustee of The Teaching Awards. Prior Chairman of Electra Private Equity plc, Independent Television Commission. to joining Ofcom he was Senior Policy Chairman of the Associated Board of She has been a non-executive director Advisor to the Prime Minister (Tony Blair) the Royal Schools of Music, a Board of the Competition Commission and for media, telecoms, the internet and e Member of Axa Deutschland GmBh GCap plc, a Member of the Higher government and Controller of Corporate and The UK Statistics Authority, a Education Funding Council for England, Strategy at the BBC. He has also worked Governor of Bancroft’s School and a the Wellcome Trust, the Committee in consulting at London Economics Ltd trustee of the Tablet Trust and of the for Standards in Public Life and the and began his career as a researcher Nuffield Foundation. She is Chairman Statistics Commission. She has also with Diverse Production Ltd, where he of Ofcom’s Nominations Committee chaired the Higher Education Regulation worked on programmes for Channel 4. and a Member of the Remuneration Review Group. She is Chairman of and Risk and Audit Committees.

50 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Dame Lynne Brindley, DBE of Ofcom’s Content Board, Chairman he was head of the Prime Minister’s Dame Lynne Brindley, DBE was appointed of the Radio Licensing Committee (John Major) Policy Unit. He was made as a Non-Executive Member of the Ofcom and a Member of the Remuneration a Life Peer in 1997. He is a Member of Board on 1 September 2011. She has and Nominations Committees. Ofcom’s Content Board, Remuneration been Chief Executive of the British and Nominations Committees. Mike McTighe Library since July 2000, which she joined Stuart McIntosh from the University of Leeds where she Mike McTighe has been a Non- was Pro-Vice-Chancellor. Previously she Executive Member of the Ofcom Stuart McIntosh joined Ofcom as was a senior consultant with KPMG Board since September 2007. He has Competition Partner in January 2008 and has held leadership positions in held a number of directorships, and and was appointed to the Board information technology and knowledge is currently Chairman of Volex Group in July 2008. He was appointed management at Aston University and at plc, WYG plc and JJB Sports plc; he a Commissioner of Postcomm in the London School of Economics. She is also senior independent director December 2010 until Ofcom assumed is a council member of the Arts and of Betfair Group plc. He acts as a responsibility for postal services Humanities Research Council and is on special advisor to General Atlantic, regulation. Prior to joining Ofcom, the board of the Creative Industries the US based private equity firm. He he was a Strategy partner in IBM’s Knowledge Transfer Network. She was appointed a Commissioner of communications practice in the US. chaired the national Online Learning Postcomm in December 2010 until Previously, he held senior positions Taskforce set up by HEFCE and was a Ofcom assumed responsibility for postal with PwC, where he led its Telecoms member of the UK’s Strategic Advisory services regulation. Previously he was Consulting Practice (in the UK and the Board for Intellectual Property. She Chairman of Pace plc, Chairman and US), and with Adventis, a boutique is a member of the Council of City CEO of Carrier1 International SA, and strategy consultancy. He began his University and on the Court of the before that Executive Director and career as an economist in the UK’s Goldsmiths’ Company. She is Chairman Chief Executive, Global Operations of Government Economic Service. He of Ofcom’s Nations Committee and Cable and Wireless plc. Prior to this also worked for BT for a period of a Member of the Remuneration he was at Philips of the Netherlands, four years, where he held the position and Nominations Committees. Motorola and GE. He is the Chairman of Head of Business Economics. of Ofcom’s Risk and Audit Committee Tim Gardam and a Member of the Remuneration Jill Ainscough Tim Gardam has been a Non-Executive and Nominations Committees. Jill Ainscough joined Ofcom in August Member of the Ofcom Board since 2007 as Chief Operating Officer and Lord Blackwell January 2008. He has been the was appointed to the Board in October Principal of St Anne’s College, Oxford Norman Blackwell has been a Non- 2010. Prior to joining Ofcom she since 2004. He is a member of the Executive Member of the Ofcom Board was Managing Director of Easynet, a University Council and Chair of The since September 2009. He is Chairman company she first joined as Director Conference of Colleges. He had a 25- of the Board at Interserve plc, Senior of Strategy in 2001. In that role she year career in broadcasting starting Independent Director at Standard oversaw new market entry into at the BBC. He was a part of the first Life plc and non-executive director of corporate data networks and secured senior management team at Five Halma plc and Lloyds Banking Group a three-year sponsorship of the British and was Director of Programmes plc. He is also a Board member of Olympic Association. Previous main at Channel Four. He was the author the Centre for Policy Studies. He has roles include Head of Marketing of the DCMS Review of BBC Digital previously held Non-Executive Director Development at NTL, Financial Planning Radio Services in 2004, a member of or Chairman positions at the Office and Analysis Manager for Barclaycard, Lord Burns’ Advisory Panel on the of Fair Trading, SEGRO plc, Corporate Business Planner for the Cambridge BBC Charter Review and a Director of Services Group plc, Akers Biosciences Cable Group and Senior Financial SMG plc from 2005-7. He established, Inc, SmartStream Technologies Ltd and Analyst for the Granada Group. She is and is now Chairman of, the Reuters Dixons plc. He was a Commissioner of also on the Board of Sport England. Institute for the Study of Journalism at Postcomm from December 2010 until Millie Banerjee retired from the Board Oxford University. He is the Chairman Ofcom assumed responsibility for postal services regulation. From 1995 to 1997 with effect from 30 June 2011 and Philip Graf from 31 December 2011.

| 51 SECTION C GOVERNANCE

Leadership The Ofcom Board has delegated • overseeing Ofcom’s preparations certain of its responsibilities to the for the London 2012 Olympic The Ofcom Board leads the Executives within Ofcom and certain and Paralympic Games; organisation, with a shared responsibilities to other parts of the • assuming responsibility for the commitment to the mission and governance structure (see Figure regulation of postal services; values described on page 44. 8) with clearly defined authorities Its core activities include: and terms of reference. It also takes • the arrangements for the auction advice from other parts of the of the 600 MHz, 800MHz and • setting the overall governance structure. The remits 2.6 GHz spectrum bands; and strategy for Ofcom; and main functions of the different • measuring media plurality. • acting as the ultimate decision- bodies that make up this structure making authority; are described on pages 53 to 60. More detail about the major issues that the Ofcom Board oversaw during • obtaining assurance that material In the year under review the Board the year is set out on pages 12 to 26. risks to Ofcom are identified provided the overall strategic direction and appropriate systems of in the setting of Ofcom’s priorities in The Ofcom Board is led by risk management and control its Annual Plan. The Board continued the Chairman who manages exist to mitigate such risks; to oversee Ofcom’s overall work for the Board to ensure that: • defining Ofcom’s appetite the benefit of citizens and consumers • Ofcom has appropriate objectives for risk; and and gave approval to, or guidance around, a number of specific policy and an effective strategy; • Board and executive decisions and activities, including: • there is a structure in place to management succession. allow the effective contribution of all Members, and of Non- Executive Members in particular; Board Committees Content Board Nations Committee Risk and Audit Committee Advisory Nominations Committee Committees Remuneration Committee National Advisory Non-Executive Remuneration Committees Committee Advisory Committee for Spectrum Clearance Finance Older and Disabled People Committee Communications Radio Licensing Consumer Panel Committee Ofcom Spectrum DTT Allocation Advisory Board Committee Ofcom Board

Operational Decision Making Executive Committee Policy Decision Making – Operations Board Policy Executive – Olympics – Project steering – Security groups – Health and Safety – Corporate Social Responsibility Figure 8: Ofcom’s Board and Committees

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• the Chief Executive and The Ofcom Board • the Board believes that the other executives are able to The Ofcom Board comprises six Members have, between them, implement the strategy; Non-Executive Members and three a wide range of experience which ensures an effective Board • the Board Committees Executive Members and of these to lead and control Ofcom; are properly established, nine Members, five are men and four composed and operated; women. Members have a broad range • the Non-Executive Members of experience in related industries, as comprise a majority of the Board. • there are procedures in place to well as experience in senior positions The Deputy Chairman is regarded inform the Board of performance in both the private and public sector. as being the senior Non-Executive against objectives; and Member for the purposes of the UK The Chairman and Non-Executive • Ofcom is operating in accordance Corporate Governance Code; and Members of the Ofcom Board are with the highest standards of appointed by the Secretary of State • the Board meets at regular corporate governance. for Culture, Olympics, Media and intervals during the year. The role Sport for periods of between three of executive management is to Ofcom continues to demonstrate and five years. Ofcom’s Nominations implement Board policies. The work strong leadership in the management Committee has assisted the of both the Board and Executive is of risk through the work of the Risk Department by working with it in the informed by the contributions of a and Audit Committee overseen by selection process for the appointment number of advisory bodies. the Board. Ofcom maintains a risk of new Non-Executive Members. register for all of its work, which is Executive Members of the Board are During the year the Ofcom Board reviewed regularly, and the Executive appointed by the Chairman and all reviewed the entire governance Committee, the Operations Board of the independent Non-Executive structure and concluded that Ofcom and Policy Executive are responsible Members, with the Chief Executive’s received substantial value from each for managing and mitigating (where appointment requiring approval by part of the structure. As a result possible and appropriate) all risks the Secretary of State for Culture, Ofcom has maintained and supported arising from specific operational, Olympics, Media, and Sport. Members’ the structure throughout the year. policy and regulatory developments. biographical details are set out on pages 50 to 51. Members’ duties and responsibilities are set out in Board Committees a Members’ Code of Conduct and In the exercise of its powers under a Register of Members’ Interests is the Office of Communications maintained. Both are available on Act, the Board delegates certain the Ofcom website. For the purposes of its responsibilities to the of adopting the principles of the Executives within Ofcom and UK Corporate Governance Code: certain responsibilities to Board Committees with clearly defined • the Board considers all of the authority and terms of reference. Non-Executive Members to be The activities and main functions independent of management of these principal committees are and free of any business or described on pages 54 to 56. Ofcom other relationship which could has a number of other specialist materially interfere with the committees with a governance role exercise of their judgment; or an advisory role to the Board, described below on pages 58 to 60.

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Membership and attendance of the Ofcom Board and Committees

Name Ofcom Board Nominations Remuneration Risk and Audit Committee Committee Committee

Number of meetings 13 1 5 5

Role and attendance

Colette Bowe Chairman, 13 Chairman, 1 Member, 5 Member, 4

Ed Richards Chief Executive, 13

Dame Patricia Hodgson DBE 1 Deputy Chairman, 9 Member Member,1 Chairman, 1 Member, 1

Philip Graf CBE 2 Deputy Chairman, 6 Member, 1 Chairman, 4 Member, 3

Millie Banerjee CBE 3 Member, 3 Member, 1 Member, 2

Lord Blackwell Member, 13 Member, 1 Member, 3

Dame Lynne Brindley DBE 4 Member, 9 Member Member, 2

Tim Gardam Member, 12 Member, 1 Member, 5

Mike McTighe Member, 12 Member, 1 Member, 5 Chairman, 5

Jill Ainscough Member, 8

Stuart McIntosh Member, 13

Peter Teague Member, 5

1 Dame Patricia Hodgson was appointed to Ofcom with effect from 1 July 2011 and became Deputy Chairman of the Ofcom Board and Chairman of the Remuneration Committee with effect from 1 January 2012 2 Philip Graf CBE retired with effect from 31 December 2011 3 Millie Banerjee CBE retired with effect from 30 June 2011 4 Dame Lynne Brindley was appointed to Ofcom with effect from 1 September 2011

The Nominations Committee accordance with the Code established The Remuneration Committee The Nominations Committee by the Office of the Commissioner The Remuneration Committee comprises all the Non-Executive for Public Appointments (OCPA). consists of all the Non-Executive Members of the Ofcom Board. The DCMS, in making such appointments, Members of the Ofcom Board. The Committee works with DCMS on the ensures that a fair and open process Chief Executive, the Chief Operating process for selecting Non-Executive is established and strives to ensure Officer and the HR Director attend Members for the Ofcom Board that a diverse range of candidates will meetings at the invitation of the and makes recommendations on apply. An OCPA-approved independent Remuneration Committee. Executive Member appointments. assessor is always a member of the All appointments of Non-Executive selection panel established by DCMS The Committee advises Ofcom on Members are made by DCMS in for any proposed appointment. the remuneration and terms and conditions of service for the Chief

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Executive, other Executive Members Risk and Audit Committee Risk and Audit Committee – Agenda items during 2011/12 of the Board and Members of the The Risk and Audit Committee Executive Committee. The Committee comprises three Non-Executive also advises Ofcom on the terms Members of the Ofcom Board, Mike Agenda item No. of times and conditions of the part-time addressed McTighe (Chairman), Colette Bowe during Members of the Content Board, the and Dame Patricia Hodgson, and an 2011/12* Communications Consumer Panel, independent external Non-Executive the Advisory Committee on Older and Member, Peter Teague. Peter is a Risk Management 5 Disabled People, the four National qualified chartered accountant and Framework Advisory Committees and other Non- satisfies the requirement under the Executive Members of other bodies UK Corporate Governance Code that ICT Outsourcing Transition 5 in Ofcom’s governance structure. one Member of the Committee has Spectrum Clearance and 5 relevant financial experience. The The Committee oversees the Awards Chief Executive, the Chief Operating process for determining the Officer and the Finance Director are terms and conditions of all other London 2012 Olympic and 5 invited to attend Committee meetings, Paralympic Games Ofcom colleagues. The Committee as are the internal and external also oversees and decides upon auditors. The Chairman of the Risk and Internal Audit Programme 5 issues relating to the pension Audit Committee reports the outcome arrangements established by of Committee meetings to the Ofcom External Audit programme 5 Ofcom for all Ofcom colleagues. Board. The Committee’s functions are Finance Update 4 The remuneration of Non-Executive described in its terms of reference, Members of the Ofcom Board is available on the Ofcom website. Security Update 4 determined by the Secretary of The internal audit function is State for Culture, Olympics, Media Postal Services Integration 2 outsourced by Ofcom to KPMG, and Sport and is set out in detail in and described on page 64. The Note 3 to the Remuneration Report. Litigation Update 1 Risk and Audit Committee believes Should it be necessary for Ofcom to it is appropriate for the internal consider any aspect of Non-Executive * The Risk and Audit Committee met five times auditors, in addition, to provide during 2011/12 Member remuneration a Non- Ofcom with specific advice on Executive Member Remuneration internal risks. The provision of Committee has been established other services by KPMG to Ofcom consisting of the Finance Director, is decided on a case-by-case basis. the HR Director and the Corporation The external audit function is carried Secretary, which will meet and report out by the National Audit Office. directly to the Secretary of State as appropriate. Consequently, no Board During the past year the Committee Member is involved in the setting has, in addition to its main functions, of his or her own remuneration. focused on overseeing Ofcom’s preparations for the London The Remuneration Report on pages 2012 Olympic and Paralympic 66 to 69 sets out Ofcom’s application Games and the risks associated of the relevant principles of the with Ofcom’s role in spectrum UK Corporate Governance Code. management for the Games.

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The Executive Committee development of Ofcom’s policy a performance review annually. All The Executive Committee is the agenda. It helps set the direction new Members of the Board receive a senior executive team responsible of policy and provides a weekly detailed induction into the operation for overseeing the management of opportunity to discuss and validate of the Board, its responsibilities and Ofcom. Its core focus is on setting policy issues as they arise before such the strategic issues the Board needs direction for the organisation, policies are brought formally through to consider. Meetings are arranged financial and administrative the governance structure or subject for all new Board members with decision-making and monitoring. to external scrutiny. The Operations key executives so that all aspects of It met 11 times during the year. Its Board meets fortnightly and is chaired Ofcom’s remit and responsibilities policy-making responsibilities are by the Chief Operating Officer. It has can be explained to them. limited to management policy. senior representatives from all parts of Ofcom, and deals with all operational matters for the organisation. It reports Accountability Ed Richards (Chairman) to the Executive Committee monthly. Ofcom’s Annual Report is sent to the Chief Executive Department for Culture, Media and Effectiveness Sport (DCMS), which lays copies of it Jill Ainscough before each House of Parliament. The Chief Operating Officer The Board meets formally at least Board is responsible for ensuring that monthly; it is provided with regular proper records are maintained, which Stuart McIntosh strategic updates, briefings on the disclose with reasonable accuracy Group Director, Competition markets Ofcom regulates, the activities at any time the financial position of of key stakeholders and reports Ofcom and enable it to ensure that H. Nwana on Ofcom’s operational and policy the Statement of Accounts complies Group Director, Spectrum Policy activities. In addition, all Members with the Companies Act 2006. In have access to the Secretary to the addition, the Board is responsible Claudio Pollack Corporation to assist them with the for safeguarding Ofcom’s assets and Group Director, Consumer provision of information and the hence for taking reasonable steps Steve Unger making of arrangements for informal for the prevention and detection Group Director, Strategy, Chief Economist meetings with executives within of fraud and other irregularities. and Technology Ofcom to gain greater knowledge of specific issues. An externally-facilitated Compliance with the Corporate Polly Weitzman review of Board effectiveness was Governance Code General Counsel carried out in spring 2012. Key items Ofcom is not subject to the UK discussed in the review were: Christopher Woolard Corporate Governance Code published Group Director, Content, International • the effectiveness of the Board; by the Financial Reporting Council. and Regulatory Development • the mix of skill and However, its principles provide a useful

Other senior Ofcom colleagues are invited to attend experience on the Board; benchmark for all bodies wishing meetings of the Committee on an ad-hoc basis. to make a statement about their • the development of the corporate governance performance. organisation’s strategy; To this end, Ofcom will continue to The Chief Executive also chairs a • the effectiveness of Board adopt the principles of the Code weekly meeting of Policy Executive, procedures and processes; and where it is appropriate to do so. In which consists of the members of this regard Ofcom has complied with the Executive Committee and other • each Member’s performance. the principles of the UK Corporate senior executives by invitation. Governance Code during the period Policy Executive is designed to be an The performance of individual Board 1 April 2011 to 31 March 2012. internal forum for senior executives members is also assessed by the to scrutinise and oversee the internal Chairman and each member receives

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Transparency Ofcom also engages with its Ofcom continues to review its governance structure during all publication scheme and make a consultations. Advice and challenge wider range of information readily is welcomed from all Boards, Panels accessible on its website. During the and Committees which form part of period under review, Ofcom received the governance structure, and Ofcom’s 598 requests for information under executive will appear at appropriate the Freedom of Information Act 2000 meetings to outline, and discuss, and, in keeping with the Act’s purpose projects that are both out for, or to foster a culture of openness, it being considered for, consultation. provided all or part of the information The membership of the bodies requested in 83 per cent of cases. that form part of the governance Ofcom also received 27 requests for structure have been designed to offer information under the Data Protection specific levels of expertise so that Act 1998 and provided the requested Ofcom’s policies and projects can information in 96 per cent of cases. be tested and challenged robustly before decisions are reached. This engagement is increasingly important Engagement in the devolved nations of the UK, Ofcom’s actions will affect people where the role of the National and organisations across the UK. As a Advisory Committees is immensely result, it is very important that it takes valuable in helping Ofcom take into decisions at the right time and in the account specific issues in its policy right way. These decisions must be formulation and implementation. based on evidence and Ofcom needs Ofcom also engages with other to take into account, when making national regulatory authorities, these decisions, the views of those European institutions and global who have an interest in the outcome. bodies so that decisions taken in Consultation plays an important international fora are practical, part in obtaining this evidence. It proportionate and reflect the interests allows those who could be affected of citizens and consumers in the UK. by or concerned about a particular issue to give us their views before we decide on a course of action.

Consequently, Ofcom consults publicly on all its major strategic priorities before making decisions. More details about Ofcom’s method of consultation and the consultations that took place during the year are set out on pages 40 to 42.

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Board Committees Broadcasting Review Committee, Election Committee The Content Board Broadcasting Sanctions Committee Section 333 of the Communications Act requires Ofcom to ensure that Party The Content Board is a committee of Until the changes to complaint-handling 1 Political Broadcasts (including Party Election the main Ofcom Board, with delegated procedures , these Committees were Broadcasts) and Referendum Campaign and advisory responsibility for a wide responsible for the outcome of complaints Broadcasts are included in the UK regional range of content issues, predominantly investigations. Further details of this ITV, Channel 4, Five, Classic FM, talkSPORT dealing with broadcasting. It is set work are given in the Annex on pages and Virgin 1215 services. Unresolved disputes up under statute, specifically section 112 to 114. Membership was drawn from between any licensee and any political party, 121 of the Communications Act. the Content Board. as to the length, frequency, allocation or The Ofcom Board will seek advice and Radio Licensing Committee scheduling of broadcasts, are brought to Ofcom for resolution. The Ofcom Board has recommendations from the Content Board on The Radio Licensing Committee has delegated delegated the adjudication on such disputes any content-related aspects of decisions it has authority from the Ofcom Board to discharge to a committee known as the Election reserved for itself. All other content-related Ofcom’s functions in relation to radio (sound) Committee. The Committee meets as and decisions are delegated to the Content Board. broadcast licensing. The Committee’s when required and consists of members responsibilities include decisions on the award drawn from the Content Board. The Content Board serves as Ofcom’s of new and re-advertised radio licences, and primary forum for the regulation of on licence variations and revocations. During The Spectrum Clearance television and radio quality and standards. 2012 its remit will expand to include Local Finance Committee It is charged with understanding, analysing Television licensing, and it will be renamed and championing the voices and interest the Broadcast Licensing Committee. The The Spectrum Clearance and Awards of the viewer, the listener and the citizen. membership of the Committee will be on a Programme was established to bring together rolling basis and will involve all Content Board all the projects associated with the clearance Members of the Content Board are members from time to time. and award of the 800 MHz and 2.6 GHz also Members of the Radio Licensing spectrum bands under a single programme Committee, the Election Committee and, Community Radio Fund Panel management structure. In order to ensure during the period under review, the that appropriate financial controls are in Section 359 of the Communications Act Broadcasting Sanctions Committee and place and to consider proposals for spectrum makes it possible for a fund for community the Broadcasting Review Committee. clearance grants, the Ofcom Board has radio operators to be set up, and for delegated to this Committee responsibility Ofcom to administer it and “make such Members for making grants on spectrum efficiency grants as they consider appropriate” to Tim Gardam (i) (Chairman) grounds for any proposed spectrum clearance community radio licensees. The Panel (i) under section 1(5) of the Wireless Telegraphy Philip Graf CBE meets as required to examine applications Act 2006 and the terms and conditions Millie Banerjee (ii) and make awards from the Fund. It is on which grants are made: grants and the (iii) independent of the Radio Licensing Lord Blackwell terms and conditions require the consent Committee (see above), which awards Dr David Levy (iv) of the Treasury. The Committee met 12 community radio licences. The Panel has times in the year to consider 83 proposals Anthony Lilley OBE three Non-Executive Members: Kevin Carey for clearance grants. In total payments Iseabail Mactaggart (iv) (Chairman), Richard Hilton and Thomas Prag. against grants awarded in the year by (iv) Glyn Mathias the Committee for 2011/12 was £41m. Dr Paul Moore Joyce Taylor Members Janey Walker (iv) Sir David Brown (Chairman) Christopher Woolard (v) Peter Teague (Deputy Chairman) Peter Davies (i) i Philip Graf CBE retired with effect from 31 December 2011 and was succeeded H. Nwana (i) as Chairman by Tim Gardam. Kate Stross ii Millie Banerjee retired with effect from 30 June 2011. i Executive Members iii Lord Blackwell was appointed to the Content Board with effect from effect from 1 January 2012. iv Dr David Levy, Iseabail Mactaggart, Glyn Mathias and Janey Walker were appointed to the Content Board with effect from 1 May 2011. v Christopher Woolard is currently the only Executive Member

1 In June 2011, Ofcom published new procedures for handling broadcasting complaints, investigations and sanctions. The new procedures removed the Broadcasting Sanctions Committee and the Broadcasting Review Committee. However, Content Board members continue to play a role in content and standards decision making, and sanctions. For further information, please see: http://stakeholders.ofcom.org.uk/broadcasting/guidance/complaints-sanctions

58 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

The DTT Allocation Committee The Advisory Committees for Particular issues that the Committees The Ofcom Board has delegated the the Nations have advised on during the past year are: discharge of its functions in relation to Section 20 of the Communications Act continuing problems with broadband roll-out allocation capacity on digital terrestrial requires Ofcom to establish Advisory and speeds, specifically in more rural areas; multiplex B, pursuant to an order from the Committees for each of the UK nations. mobile availability, competition, ‘not-spots’ Secretary of State dated 2 July 2008, to this The function of each Committee is to provide and roaming; the proposed auction of 800 Committee which is chaired by a Non- advice to Ofcom about the interests and MHz and 2.6 GHz spectrum; local, regional Executive Member of the Ofcom Board. opinions, in relation to communications and national television; and Ofcom’s research matters, of people living in the part of in each nation. Each Committee met five The Committee did not meet during the year. the UK for which the Committee has times during the year. The membership been established. Since 2011 this advice of each Committee is as follows: Ofcom in the Nations now includes advice on postal matters. Nations Committee The Nations Committee is a direct Committee of the Ofcom Board, whose Chairman is England Scotland Wales Northern Ireland an Ofcom Board Non-Executive Member. It met five times during the year. This Committee oversees the four National Chairman Professor William Professor Philip Ian Clarke 2 Professor Wallace Advisory Committees and co-ordinates their Dutton Schlesinger Ewart OBE activities. Its role includes: understanding the political dynamics in each nation of the Members Graham Creelman Laura Alexander Julie Barton Isolde Goggin UK and advising on Ofcom’s engagement in OBE each nation; agreeing appropriate processes for Ofcom’s engagement with each National Helen Foster Dr Franck Kim Brook Lesley Holmes Advisory Committee; monitoring stakeholder 1 events in each nation and overseeing the Chevalier involvement of, and engagement of, the Ofcom Board in each nation. Its membership Olwyn Hocking Iseabail Glyn Mathias 2 Libby Kinney comprises two Non-Executive Members Mactaggart of the Ofcom Board, Lynne Brindley (Chairman) and Patricia Hodgson, and Wendy Pilmer Mairi Mcleod John Davies Dr Paul Moore the Chairmen of the National Advisory Committees. The Executive Directors of each Anne Scorer Thomas Prag Simon Gibson OBE Ben Preston nation, together with the Group Director, Content, International and Regulatory Development and the Director, Regulatory John Varney Development and Nations, are invited to attend Nations Committee meetings. Robert Watson

1 Dr Franck Chevalier resigned with effect from 31 March 2012 2 Glyn Mathias resigned as Chairman with effect from 31 March 2012 and was succeeded by Ian Clarke

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Non-Board Committees The Advisory Committee on Older The Ofcom Spectrum Advisory Board The Communications and Disabled People The Ofcom Spectrum Advisory Board Consumer Panel Section 21(1) of the Communications (OSAB) was established in 2004 to provide Section 16 of the Communications Act Act requires Ofcom to establish a independent advice to Ofcom on strategic requires Ofcom to establish a Consumer Committee to advise Ofcom on issues spectrum management issues. OSAB Panel. The Panel acts as a ‘critical friend’ in the communications sector that met four times in the year. OSAB’s annual to Ofcom, providing advice that is robust particularly affect older and disabled report, covering its activities during and independent, but at the same people. The Advisory Committee on Older the year, will be published on the time pragmatic and constructive. and Disabled People (ACOD) met four OSAB website at www.osab.org.uk. times during the year and undertakes Through the advice that it gives, the Members Communications Consumer Panel seeks to specific pieces of work in sub-groups. persuade Ofcom, the UK Government and David Meyer (Chairman) ACOD continued to advise Ofcom to industry to look at issues through the eyes Professor Linda Doyle of consumers and protect and promote their ensure that older and disabled people Robin Foster interests. The Panel pays particular attention are equal players, and full participants, to the needs of older people and people with in current and emerging convergent Philippa Marks telecommunications and broadcasting disabilities, to the needs of people in rural Philip Marnick areas and people on low incomes, and to the technologies, new media platforms, Dr Robert Pepper needs of small businesses, which face many of digital and traditional broadcast media. the same problems as individual consumers. Jean-Jacques Sahel The Committee provided guidance to Ofcom Professor Simon Saunders Independent of Ofcom, the Panel is made on a range of topics including the Relay up of independent experts, including Services Review, Access Services Review and Simon Towler (Ex Officio) representatives from Scotland, Wales, Ofcom’s Draft Annual Plan for 2012/13. Mike Walker Northern Ireland and England with Professor William Webb experience in many different fields. The In the autumn ACOD published research Panel met 11 times during the year. The into the products and services which might Gavin Young Communications Consumer Panel’s annual benefit older and disabled people across report, covering its impact in 2011/12 and superfast broadband networks. ACOD has priorities for 2012/13, can be found at also, since late 2011, begun advising Ofcom www.communicationsconsumerpanel.org.uk. on the impact of its new postal services regulation on older and disabled people. Members Bob Warner CBE (Chairman) Members Fiona Ballantyne Jo Connell, OBE (Chairman) Colin Browne Liz Atkins (i) Roger Darlington Dr Maurice Mulvenna Dr Maureen Edmondson OBE (i) Suneel Shivdasani Kim Brook Bob Twitchin

Chris Holland i Dr Maurice Mulvenna retired on 30 June 2011. i Dr Maureen Edmondson resigned with effect from 31 March 2012.

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The control framework By carrying out impact assessments • a series of personal governance (as required under the Communications presentations, delivered to Ofcom’s control framework underpins Act), which evaluate the impact of all colleagues, covering data the governance structure and is any potential regulatory decision protection, freedom of information, designed to support the delivery across the range of stakeholders, security, fraud and bribery; of its statutory duties and the the consideration of risk sits at • successful disaster recovery tests achievement of its objectives while the very centre of our activities. safeguarding public funds. The of the ICT infrastructure and control framework is built around During the year, a number of the operational back-up site; three clear areas of responsibility: initiatives were implemented as • a review of the existing Expenses part of the ongoing programme Policy and the Financial • management and internal control; to review and enhance the existing Authorities Framework; and • risk management; and internal control framework. • a review of the Security Policy, which These have included: • independent assurance. includes information security, to • further improvements to the ensure that it adequately reflects Each of these areas of responsibility planning and performance Ofcom’s organisational requirements. is embedded across the organisation measurement process, which and they come together to provide A robust financial control framework have included the introduction the Executive and the Board with remains central to the organisation. of enhanced planning tools and the assurance needed to effectively As a result of the 2010 Spending reporting to the Executive, the manage the business (see Figure 9). Review, Ofcom is required to reduce Board and the organisation. its spending cap by 28.2 per cent, in This improved suite of reporting real terms, over the four-year period Management and internal control brings together priorities, risks to 2014/15. This settlement included Responsibility for operating and and outcomes. This process is an agreement to deliver a significant monitoring the internal control now supported by a planning proportion of the savings during the system is delegated by the Ofcom and performance team based first year of the Spending Review period. Board through a hierarchy of Boards within the Finance Department; In line with the annual planning round, and Committees to Group Directors • the introduction of an Anti- the 2011/12 budget was set within and senior managers. This scheme of Bribery Policy in response to the the spending cap agreed with the delegation is outlined in the Financial implementation of the Bribery Treasury. Quarterly budget re-forecasts, Authorities Framework, which is Act 2010. Alongside the Policy a together with regular reports to the reviewed periodically to ensure that mandatory e-learning course was Board and the Executive regarding the it is consistent with the priorities of launched, covering both our anti- ongoing programme to deliver the the organisation and its appetite for bribery and counter-fraud policies. agreed savings, have ensured that the risk. Group Directors are asked to 2011/12 outturn is below the agreed provide assurance that the system of target and within the budget set. internal controls is working effectively within their area of responsibility by completing an annual internal control assurance statement. Additionally, OFCOM BOARD assurance is taken from the work carried out by specialist teams across the organisation including POLICY EXECUTIVE RISK & AUDIT the Security Committee, the Health EXECUTIVE COMMITTEE COMMITTEE and Safety Committee, the Diversity and Equality Working Group and a group overseeing crisis management and business continuity planning. MANAGEMENT & RISK INDEPENDENT INTERNAL CONTROL MANAGEMENT ASSURANCE

Figure 9: Ofcom Control Framework

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Protected personal During the year, the Board launched The table on pages 36 to 37 of this data incidents an exercise to review the organisation’s report highlights some of the key During 2011/12 no protected personal existing risk appetite statements. risks and challenges we have faced The updated statements, which will data-related incidents were reported to during the year as we delivered the be aligned with Ofcom’s strategic the Information Commissioner’s Office. objectives set out in our Annual Plan. priorities and reflect the type of In the sections below, we take the risk faced by the organisation, will Risk Management be embedded within the decision- opportunity to outline in a little more detail, how our governance structure Ofcom continues to demonstrate making process during 2012/13. strong leadership of the management and control framework seek to ensure The strategic risk register is reviewed of risk through the work of the that we achieve our objectives in monthly by the Board and the Board and its Committees. In an effective and efficient manner. Executive Committee. All identified providing support to the Board risks are assigned an owner, usually and the Executive Committee, a Group Director, who is accountable Spectrum Clearance and the Operations Board and Policy for the management of the risk. Awards Programme Executive are responsible for providing Mitigating actions are assigned to leadership on the management of each risk and as part of the monthly During the year, Ofcom continued risks arising from specific operational review cycle, consideration is given to to deliver the programme to clear and regulatory development. both the current and residual (post- and award spectrum in the 800MHz As part of the continual process mitigation) risk exposure. Group-level and 2.6GHz bands. Recognising the to improve its risk management risks are reviewed with the Risk and strategic importance and complex capability, Ofcom conducts an annual Insurance Manager on a monthly nature of the work, together with review of its risk management cycle and escalated onto the Strategic the requirement to manage a Risk Register where appropriate. framework. This review includes number of interdependent projects an exercise to benchmark the Senior managers are responsible for with multiple stakeholders, the framework against the Treasury’s ensuring that colleagues have the Spectrum Clearance and Awards Risk Management Assessment appropriate skill levels to identify, Programme (SCAP) has implemented Framework. The review completed assess and manage risk in line with in March 2012 and endorsed by a robust framework of governance Ofcom’s policy to embed and support the Executive Committee and the and control (see Figure 11). a culture of well-managed risk. In Risk and Audit Committee noted support of the senior managers’ role the continued improvement in the in championing the risk process, the Figure 10: Ofcom Risk Hierarchy framework and also made a number Risk and Insurance Manager, together of recommendations which will with a team of Group Portfolio form the foundations of an ongoing Managers, work across all areas of the improvement plan for 2012/13. The PRIORITIES BUSINESS organisation to promote and integrate findings and recommendations of the risk management process and the annual risk review are considered STRATEGIC to support and inform colleagues. RISK and commented on by KPMG as REGISTER part of Ofcom’s internal audit plan. As part of the ongoing programme Informed by its engagement with to improve the risk management Ofcom during the year, the National framework, a pilot assurance mapping Audit Office observed that Ofcom’s exercise was undertaken during risk management processes “are the year. The aim of this exercise GROUP RISK RISK ESCALATION maturing and well developed and was to provide greater assurance REGISTERS incorporate a number of significant regarding the control environment examples of good practice.” around key business processes and to inform the development of the Ofcom’s risk management policy and internal audit plan. Further work will procedures clearly defines its approach be undertaken during 2012/13. to risk management, its objectives PROGRAMME/PROJECT and its processes as well as identifying RISK REGISTERS specific risk management roles, accountabilities and responsibilities across the organisation.

62 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

The Spectrum Clearance Finance 2011/12, and its recommendations We have rigorously tested our Committee was established as part of have been implemented in capabilities, developed to deliver this framework and more information line with the agreed plan. our obligations during the Games, about its work is set out on page 58. through attendance at all the official Where appropriate (for example, in the The London 2012 Olympic test events, as well as at events such as grants processes for digital terrestrial and Paralympic Games the royal wedding. Ofcom’s readiness television and for programme-making was reviewed in May 2012 by the From the outset, our approach to and special events) we have appointed Government Olympic Executive who the governance and management independent auditors to provide approved it and rated it with a Green of our work in preparation for the assurance regarding the effectiveness status. We have also undertaken a London 2012 Olympic Games and of the control environment. robust, scenario-driven review to Paralympic Games has been informed consider the resilience of our ICT by a very low appetite for risk. The report issued following the systems and related processes. Cabinet Office Gateway™ Review 0: Ofcom’s Board, its Operations Board Strategic Assessment commended and the Risk and Audit Committee We have clearly articulated the risks the Senior Responsible Owners form an integral part of the project’s we currently expect to carry into and the SCAP team “for their good risk management and governance the Games period, developed and approach and progress”. As part structure, which in turn was reviewed our approach with the Risk of the internal audit plan, KPMG, independently reviewed by KPMG as and Audit Committee and the Ofcom Ofcom’s appointed internal auditor, part of the 2011/12 internal audit plan. Board. Work is ongoing to mitigate completed a review of SCAP project any residual risk as fully as possible. management and governance during

Figure 11: SCAP internal governance

Figure 10: Ofcom Risk Hierarchy Ofcom Board (monthly) Risk and Audit Committee (Quarterly)

Review and guide risk and issue Policy Executive (as required) management process

SCAP Management Board (MB) and Senior Responsible Financial Major Oversee programme risk Authority policy Owner (SRO) meetings (monthly) portfolio in line with £5m plus decisions Providing policy guidance and Project Checkpoint corporate process making policy decisions Meeting (fortnightly) Strategic Financial authority – Decision Operational planning Making £250k-0.5m (SRO) Executive Commitee/ Operations Board (as required) Sign-off project brief and Project level risk and issue Quarterly Financial authority expenditure estimate management Progress £0.5m – £5m Review Overall programme risk and issue Manage workstream oversight dependencies Spectrum Clearance Finance Quarterly Commitee Reports Resolve escalated Escalate risk and issues to from Financial authority SCFC operational conflicts SRO/MB as needed for grants

| 63 SECTION C GOVERNANCE

Information, communications and and Postcomm, was established to for both the London 2012 Olympic and technology outsourcing contract oversee the human resources, ICT, Paralympic Games and the Spectrum On 20th July 2010, Ofcom signed facilities and finance elements. Clearance and Awards Programme. an ICT outsourcing contract with Early engagement with the Where appropriate, Ofcom has sought Logica. Although the majority of Department for Business, Innovation independent, third party assurance for our applications had transitioned and Skills (BIS) provided a key business processes. For example, to the new service by April 2011, mechanism to fund the preparatory as part of the Spectrum Clearance an acceptance certificate, with work undertaken in advance of and Awards Programme, the NAO caveats, was not issued until 12th Royal Assent for the Act and a has completed a review of the Digital January 2012 due to the re-planning budget for integration, including Terrestrial Television clearance grant of several transition activities. contingency, was agreed with BIS process, while Deloitte and BDO To oversee the transition, Ofcom and communicated to Royal Mail. have been contracted to provide put in place a dedicated programme Agreement was reached with assurance around relevant processes, team, which included colleagues the Treasury to amend Ofcom’s followed by third parties involved in from Logica. During the year, the original spending cap set under the the spectrum clearance process. programme reported on progress, 2010 Spending Review to include In reviewing Ofcom’s systems in line risks and issues on a regular basis to provision for the regulation of the with the audit plan, Internal Audit the main Board, the Risk and Audit postal services. Additionally, Ofcom has provided reasonable but not Committee and the Operations Board. actively engaged with the Treasury, absolute assurance that it is satisfied Revisions to the delivery timetable BIS, the National Audit Office (NAO) that sufficient internal audit work were managed through a series of and Postcomm to ensure clarity has been undertaken, to form the Correction Plans, which were prepared regarding the accounting treatment opinion that Ofcom has an adequate by Logica and agreed with Ofcom. during and after the integration. and effective risk management, Recognising the strategic importance Postcomm’s corporate risk register was control and governance process of the transition and the ongoing reviewed as part of the integration to manage the achievement of its stability of the service, particularly in programme and where appropriate, objectives. No major weaknesses the light of our preparation for the risks were captured on Ofcom’s were identified, although Internal London 2012 Games, KPMG was asked strategic risk register. An internal Audit’s work identified a number to conduct a review of the programme Postcomm integration review has of opportunities for improving during 2011. The recommendations taken place and lessons learned have controls and procedures, to which contained in KPMG’s report have been captured. Additionally, as part Ofcom has responded positively. been shared with Logica and the of the internal audit plan, KPMG has resulting actions have been agreed. completed a review of the integration. The majority of actions have now been Statement of Accountable Officer implemented and a plan is in place to As Chief Executive and Accountable deliver those that are outstanding. Independent assurance Officer, I have overall responsibility Ofcom outsources its internal audit for Ofcom’s system of internal control End-to-end ICT disaster recovery function to KPMG. KPMG carries and for ensuring its effectiveness. The tests were successfully completed out its work in line with the Annual system is not designed to eliminate between March and June 2012. Audit Plan, which is informed by risk completely. Rather, it is designed an assessment of the strategic risk to ensure that risks are identified Integration of Postcomm register, discussions with the NAO and managed appropriately. In line with the Postal Services Act, and an ongoing consideration of the There were no significant internal Ofcom took over responsibility for environment in which Ofcom operates. control issues during the year. regulating the postal services sector The Plan is approved by the Risk and on 1st October 2011. In order to Audit Committee. During 2011/12, Ed Richards, Chief Executive ensure the efficient integration of a total of 13 internal audits were and Accountable Officer Postcomm, a dedicated project team, completed, including reviews of the 19 June 2012 including colleagues from Ofcom project management and governance

64 | Ofcom Annual Report & Accounts 2011/12 STATEMENT OF RESPONSIBILITIES www.ofcom.org.uk

Statement of Responsibilities

The Board’s Responsibilities The Board is responsible for ensuring by the Secretaries of State. He Under the terms of the Office of that proper records are maintained, must also ensure that proper Communications Act 2002, the Board which disclose with reasonable accounting records are maintained is required to prepare a Statement of accuracy at any time the financial and must sign the accounts. Accounts for each financial year. This position of Ofcom and enable it to As a Member of the Board, the Chief conforms with the Accounts Direction ensure that the Statement of Accounts Executive has to ensure that his issued by the Secretaries of State for complies with the Companies Act accountability responsibilities do not Business, Innovation and Skills and for 2006. In addition, the Board is conflict with those as a Board Member. Culture, Media and Sport. The Board responsible for safeguarding Ofcom’s The Chief Executive may also be called is also responsible for sending a copy assets and hence for taking reasonable upon by the Committee of Public of the Statement of Accounts to the steps for the prevention and detection Accounts and other Parliamentary Comptroller and Auditor General. of fraud and other irregularities. committees to give evidence on the discharge of his duties. This Statement of Accounts is Chief Executive’s Responsibilities prepared, in so far as applicable, The Chief Executive is appointed in accordance with the Companies by the Board, which delegates Act 2006 and the United Kingdom’s responsibility to him for the day-to- generally accepted accounting day management of Ofcom. The standards, and on an accruals basis. Secretaries of State for Business, It must give a true and fair view of Innovation and Skills and for Culture, the state of affairs of Ofcom as at Media and Sport have designated the end of the financial year and the Chief Executive as Ofcom’s of its income and expenditure, Accountable Officer. He is not formally recognised gains and losses and appointed as the Accounting Officer cash flows for the financial year. in Government terms; however, the The Board confirms that in preparing appointment carries with it duties of this Statement of Accounts it has responsibility in respect of regularity, observed the relevant accounting propriety, value for money and and disclosure requirements, applied good financial management and suitable accounting policies on a the safeguarding of public funds. consistent basis, made judgements The Chief Executive has specific and estimates on a reasonable basis, responsibilities for ensuring followed applicable accounting compliance with the terms of the standards and prepared the statement Financial Memorandum issued of accounts on a going-concern basis.

| 65 SECTION C REMUNERATION REPORT

Remuneration Report

In preparing the Remuneration public body, provide rewards which Performance related payments Report, and establishing its will attract and retain the high-calibre Each Executive Member and Group remuneration policy, the Board management necessary to enable Director participates in a performance has given consideration to, and Ofcom to fulfil its statutory remit bonus scheme, which is calculated adopts the provisions of, the UK and responsibilities. The overall as a percentage of salary based on Corporate Governance Code, where policy approach is not expected the individual’s performance, up to appropriate and applicable and for to change in the coming year. a maximum of 20 per cent of salary, compliance with the Government depending upon the individual Financial Reporting Manual. Ofcom Components of concerned. This allows Ofcom to is not required to comply with the recognise the contribution of high Directors’ Remuneration Report remuneration performers in any year without raising Regulations 2002 but has prepared The main components of base salary levels. No element of a this report to be compliant so far Executive Members’ and Group performance bonus is pensionable. as is practicable and appropriate. Directors’ remuneration are: Performance bonuses noted against individuals for the review period 1 April 2011 to 31 March 2012 have Constitution of Salary and flexible benefits been approved by the Remuneration the Remuneration The basic salary for each Executive Committee and accrued but Committee Member and Group Director is not paid as at the year end. determined by taking into account The constitution of the Remuneration each colleague’s responsibilities, Committee is set out on page 54. performance and experience, together Pension arrangements with market trends. In addition, Under Ofcom’s pension arrangements, Advisers a flexible benefits allowance is each Executive Member and Group made available to each Executive Director is provided with an allowance, Where necessary, the Remuneration Member and Group Director from determined as a percentage of base Committee takes advice and/or which the individual concerned salary, which the individual can obtains services from specialist may purchase certain benefits. All take as extra salary or invest in a external organisations. basic salaries are reviewed annually pension scheme of their choice. with effect from 1 July each year. The Committee also takes advice No Non-Executive Member received from Ofcom’s HR Director. The Chief a pension benefit from Ofcom Executive and the Chief Operating Standard benefits during the year under review. Officer are normally invited by the Each Executive Member and Group Remuneration Committee to attend Director receives certain standard meetings of the Committee. No benefits: specifically, life assurance, individual is present for any discussion group income protection and the about his or her own remuneration. ability to undertake an annual health check. The total value of group income protection, life General policy assurance and annual health checks In setting Ofcom’s remuneration has not been disclosed in the policy the Remuneration Committee remuneration schedules because believes that Ofcom should, it is not treated by HM Revenue & within the constraints of being a Customs as a taxable emolument.

66 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Guidance to the Ofcom Non-Executive Board Member Remuneration 2011/12 remuneration schedules Name Guidance Note Fees 11/12 Fees 10/11 Details of remuneration received Reference £ £ for the Board, the Content Board and the Executive Committee, Millie Banerjee CBE + 2, 3 8,153 53,424 which have been audited by the Norman Blackwell 3 42,519 42,519 National Audit Office, are set out in the following tables and notes. Colette Bowe 3 180,000 183,333

These schedules refer to remuneration Dame Lynne Brindley DBE + 2, 3 24,803 during the financial year. The schedule Tim Gardam 3 42,519 42,519 reflects remuneration for that part of the year during which individuals were Philip Graf CBE + 2, 3 58,125 99,099 either providing services to, or were Dame Patricia Hodgson DBE + 2, 3 38,760 members of the Board or the Content Board or members of the Executive Mike McTighe 3 42,519 42,519 Committee. Those individuals with the note ‘+’ against their name in the 437,398 463,413 schedules were in their roles for only Annualised costs were £463,413 for 2010/11 and £420,076 for 2011/12. part of 2010/11 or 2011/12. Where individuals are members of more than one Board/ Committee (as set out Ofcom Non-Executive Content Board Member Remuneration 2011/12 on pages 54 to 56) they appear only once in the remuneration schedules, Name Guidance Note Fees 11/12 Fees 10/11 and all the Executive Members Reference £ £ are listed under the Executive Committee. The numbered points Richard Ayre + 2, 3 9,622 against the names of individuals Sue Balsom + 2, 3 5,412 refer to the notes on page 69. Pam Giddy + 2, 3 5,412 As a result of the various changes in membership in 2010/11 and David Levy + 2, 3 9,900 2011/12, an annualised figure is Anthony Lilley OBE 3 10,800 18,937 given below each table, to provide a clearer comparison of total costs. Iseabail Mactaggart + 2, 3 9,900

Glyn Mathias + 2, 3 18,300

Dr Paul Moore 3 10,800 18,937

Adam Singer + 2, 3 7,216

Joyce Taylor 3 15,900 23,745

Janey Walker + 2, 3 9,900

Kath Worrall + 2, 3 5,412

85,500 94,693

Annualised costs were £167,126 for 2010/11 and £89,100 for 2011/12.

| 67 SECTION C REMUNERATION REPORT

Ofcom Executive Committee and Executive Content Board Member Remuneration 2011/12

Name Guidance Salary Pension Flexible Benefits in kind Performance Total Total Note 11/12 entitlement/ benefits 11/12 Bonus 11/12 remuneration remuneration Reference allowance allowance 11/12 10/11 11/12 11/12 £ £ £ £ £ £ £

Jill Ainscough 4 191,586 28,738 15,000 1,859 12,000 249,183 248,301

Chris Banatvala + 4, 5 174,625

Stuart McIntosh 4 230,961 34,644 15,000 1,859 17,500 299,964 294,233

H Nwana 4 186,875 28,031 15,000 1,859 12,000 243,765 237,378

Peter Phillips + 4, 5 123,292

Claudio Pollack 4, 6 148,000 22,200 15,000 1,859 15,000 202,059 183,853

Stewart Purvis + 4, 5 78,031

Ed Richards 1, 4 269,965 53,993 19,956 1,859 20,000 365,773 363,539

Steve Unger 4, 6 159,000 23,850 15,000 1,859 15,000 214,709 190,518

Polly Weitzman 4 206,214 30,932 15,000 1,859 17,500 271,505 263,065

Christopher Woolard 4 175,646 35,129 15,000 1,859 12,000 239,634 231,431

1,568,247 257,517 124,956 14,872 121,000 2,086,592 2,388,266

Annualised costs were £2,186,943 for 2010/11 and £2,086,592 for 2011/12.

Public sector organisations (£306,546 in 2010/11). This was and in 2010/11 from £19,738 are required to disclose the 6.14 times (6.17 times in 2010/11) to £306,546. For comparison relationship between the the median remuneration of purposes, total remuneration remuneration of the highest-paid Ofcom’s workforce, which was includes base salary, performance director in their organisation and £50,759 in 2011/12 (£49,657 in bonus, flexible benefits and the median remuneration of the 2010/11). No employees received benefits in kind. It does not organisation’s workforce. The remuneration in excess of the include any pension allowance, remuneration of the highest paid highest-paid director. in line with the Treasury director in Ofcom in the financial In 2011/12, remuneration ranged Financial Reporting Manual. year 2011/12 was £311,780 from £18,260 to £311,780

68 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Notes to the to reflect her additional work and The Remuneration Committee has responsibility for standards work). considered the notice period and remuneration tables The Non-Executive Members of the termination arrangements in the light 1. In addition to the remuneration Ofcom Board and the Content Board of the UK Corporate Governance Code shown in the table, Ed Richards Members received no additional and believes them to be appropriate. earned £45,000 in fees for services remuneration from Ofcom as a Non-Executive Director of beyond their fees, other than the The Non-Executive Members are Thames Water Utilities Ltd, which entitlement for the Non-Executive all on fixed-term appointments for were paid direct to Ofcom. He did Members of the Ofcom Board only, a set time commitment to Ofcom not retain any part of these fees. to the provision of IT equipment of up to two days per week (with for home working. Not all Non- the exception of Colette Bowe and 2. The fees for Philip Graf, Millie Executive Members of the Ofcom Patricia Hodgson who currently Banerjee, Patricia Hodgson, Lynne Board took up the entitlement commit up to 3 days per week and Brindley, Iseabail MacTaggart, during the period under review. 2.5 days per week respectively). Janey Walker, Glyn Mathis and David Levy reflect that they were 4. Total annual remuneration shown members of the Ofcom Board or for the Ofcom executives (Executive Compensation from Content Board for only part of the Members of the Ofcom Board, early termination year. Adam Singer, Kath Worrall, Executive Members of the Content The arrangements for early Sue Balsam, Pam Giddy and Richard Board and Group Directors on the termination of a contract of Ayre were members of the Content Executive Committee) includes basic employment for an Executive Member Board for part of 2010/11. Glyn salary, performance bonus, a cash of the Ofcom Board, Content Board Mathias also received additional allowance for flexible benefits and or Group Director are decided by the fees during the year whilst he a percentage of basic salary paid as Remuneration Committee and will be was Chairman of the National a pension allowance. The ‘benefits made in accordance with the contract Advisory Committee for Wales. in kind’ column reflects the cost to of employment of the relevant Ofcom of the provision of private Executive Member or Group Director. 3. The fees for all the Non-Executive medical insurance for each Executive. Members of the Ofcom Board are Each contract of employment provides fixed in agreement with DCMS for 5. Chris Banatvala, Peter Philips for a payment in lieu of notice on early the duration of their appointment. and Stewart Purvis are shown termination at Ofcom’s discretion. The fees shown represent the full in the Executive table for Non-Executive Members have no year under review. The basic fee of comparison purposes only; none entitlement to compensation in the Non-Executives of the Ofcom of them were employed by Ofcom the event of early termination. Board (with the exception of the during any part of 2011/12. Chairman and the Deputy Chairman) has been £42,519 per annum since 6. Steve Unger and Claudio Pollack Outside directorships 1 April 2008. The fees for the Non- received increases to their basic No Executive Member of the Executive Members of the Content salary on their promotion to Group Ofcom Board may accept a non- Board are fixed by the Ofcom Director in December 2010. executive appointment without Board. The fees shown represent the prior approval of the Board a full year or, where appropriate, Contract of employment to ensure that it does not give part of the year if the relevant rise to conflicts of interest. Non-Executive Member joined or With the exception of the Chief retired from the Content Board Executive, who has a notice period On behalf of Ofcom, during the period under review. of 12 months, no Executive Member Dame Patricia Hodgson, The basic fee of the Content Board of the Ofcom Board or other Chairman of the Remuneration Members is £10,800 per annum Ofcom colleague has a contract of Committee (the exception being the fee paid to employment containing a notice 19 June 2012 Joyce Taylor of £15,600 per annum period exceeding nine months.

| 69 SECTION D OPERATING AND FINANCIAL REVIEW

Operating and Financial Review

In 2011/12 we delivered the lowest across Ofcom. The team support Ofcom must also apportion its annual running cost for Ofcom, of the organisation by obtaining value common operating costs (those which £108.7m. This included the cost for money through commercial do not relate directly to any one of taking over the responsibility procurement processes, timely and sector) in a proportionate manner for regulating postal services accurate budgeting and forecasting across each of those sectors. from the previous regulator, of expenditure, prioritisation of The Postal Services Commission resources and activity, comprehensive Ofcom raises its funds from (Postcomm), in October 2011. management reporting, risk the following sources: management, transactional processing • television broadcast licence fees; This surpasses the large savings made and compliance with key controls. last year when we initiated a rigorous • radio broadcast licence fees; and comprehensive review of our cost Financial performance • administrative charges for base as part of our four year spending and highlights electronic networks and services review. The aim of this was to identify and the provision of broadcasting significant expenditure savings, while Ofcom originally set a budget of and associated facilities; continuing to fulfil our strategic £115.8m for the year to 31 March 2012. purposes and delivering high-quality, This was increased to £119.5m • administration charges effective and targeted regulation. to accommodate the cost of postal for postal regulation; service regulation from October 2011, In addition, Ofcom invoiced and following transfer of responsibility • funding to cover Ofcom’s operating collected a total of £279.5m for the to Ofcom. Against this new costs for spectrum management, public purse in the year from Wireless budget, Ofcom has made savings in the form of grant-in-aid from Telegraphy Act licensees, additional of £10.8m, delivering an actual the Department for Culture, payments from broadcasting operating outturn of £108.7m. Media and Sport (DCMS); licensees and the levying of fines • funding from DCMS to cover costs For 2012/13, Ofcom has set a budget and penalties on stakeholders. for clearing spectrum as part of the of £121.4m, which includes £7.2m for This was £92.3m higher than the 800 MHz and 2.6GHz project; and sum collected in 2010/11. the new duty of regulating the postal services sector. Compared to Ofcom’s • grant-in-aid funding to cover Ofcom’s budget for 2012/13 shows and Postcomm’s1 combined budgets statutory functions and duties, a further real terms reduction of 6.1 for 2011/12, this is a 6.1 per cent which Ofcom must discharge, per cent in the total budgeted cost real terms reduction. but for which there is no of regulation against 2011/12. matching revenue stream. Financial framework Ofcom also receives rental income Under Paragraph 8(1) of the Schedule Financial management from sublet office space, bank to the Office of Communications A thorough understanding of interest in respect of bank balances, Act 2002, Ofcom is required to our costs and sound financial and income from services incidental balance its expenditure with its management is critical to allow Ofcom to Ofcom’s statutory duties. income in each financial year. to fulfil its strategic purposes while Grant-in-aid funding, previously meeting the challenging targets set Sections 38 and 347 of the received from the Department as part of our expenditure review. Communications Act 2003 also require for Business, Innovation and Ofcom to raise income from each In order to aid this, the finance team Skills (BIS), was received from of the sectors it regulates, such that continue to focus on effective business DCMS from 1 April 2011. it covers the costs to be incurred by partnering with the various Groups Ofcom in regulating that sector.

1 £8.9m Postcomm + £115.8m Ofcom = £124.7m.

70 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Operating income sector from Postcomm to Ofcom relating to prior years. This review Ofcom’s total operating income from October 2011. Of this sum, also resulted in a reduction in the in the Statement of Income and a total of £1.2m was in respect charge for 2011/12, and for future Expenditure seperates out the income of the integration of Postal years. In addition, there was an received relating to the Spectrum Services regulation into Ofcom. increased utilisation of the onerous lease provision and incremental Clearance and Awards Programme • A decrease of £3.1m in grant- subletting of office space. (SCAP) as this is an additional duty in-aid income to cover other outside our core operating budget. statutory duties. This is largely • A reduction in expenditure on due to the re-phasing of planned audience and consumer research Total income inclusive of SCAP for work on online copyright of £0.8m, as a consequence of the 2011/12 was £158.5m (2010/11: infringement. Publication of comprehensive expenditure review. £144.2m). Significant changes the Code was delayed by a from the previous year include: These were partially offset by: Judicial Review of the Digital • An increase of £31.3m in spectrum Economy Act and by difficulties • An increase in spend on professional clearance and award grant-in-aid securing approval for the Code. fees of £1.1m across a number of claims, as SCAP moved from design • A decrease of £1.0m in other areas, including defined benefit into delivery phase. The purpose of activities, the majority of pension work on ceasing future this programme is to clear which is as a consequence of accruals, reducing the risk on 800 MHz and 2.6 GHz spectrum ceasing commercial spectrum the plans and the integration bands for the competitive provision interference work. of colleagues transferring from of next generation wireless Postcomm. Additional professional broadband services across the Operating expenditure fee expenditure on a number of UK. Funding primarily relates to Ofcom’s total operating expenditure consumer-focused projects. third party grant applications. in the Statement of Income and • An increase in depreciation of Expenditure separates out the costs • A decrease of £12.3m in spectrum £0.8m due to the capitalisation of of work relating to the Spectrum management grant-in-aid, largely IT equipment purchased as part Clearance and Awards Programme due to reprioritisation and of the appointment of Ofcom’s (SCAP), as this is an additional duty rescheduled spend on spectrum outsourced ICT provider at the end outside our core operating budget. projects, information technology of 2010/11. 2011/12 was the first The significant increase in SCAP savings realised from outsourcing full year of the depreciation charge. expenditure for 2011/12 is principally our Information, Communications due to compensation grants of £41.0m • An increase in expenditure on travel and Technology (ICT) support (2010/11: £11.8m) being made and subsistence of £0.5m was largely function in 2010/11, and a share of to licensees to clear the 800 MHz due to requirements from Ofcom’s one-off savings in premises costs. and 2.6 GHz spectrum bands. programme of work for the London • A decrease of £1.9m and £2.9m 2012 Olympic Games and Paralympic in regulatory charges to the Other operating costs relating Games. This included the utilisation broadcasting and network services to Ofcom’s core responsibilities of European resources for test and sector respectively. This is a have reduced by £3.0m in training events. In addition, Ofcom consequence of the 2011/12 fees 2011/12 to £49.7m (2010/11: was appropriately represented at the being materially reduced by the £52.7m). Significant reductions World Radio Conference in Geneva. early delivery of benefits through to the previous year include: Staff costs have fallen by £9m. 2010/11 the four year savings programme. • A reduction in premises costs of staff costs included restructuring costs • An additional income stream of £4m. This was largely due to a of £6.1m, of which £5.4m related £4.4m from the postal services review of the rateable value of to our expenditure review project, sector. The Postal Services Act our principal office space. The and the plan to reduce headcount 2011 transferred regulatory result was a revised charge and a by around 170 roles by 2014/15. The duties for the postal services reduction in costs totalling £2.8m reduction in staff costs is also due in

| 71 SECTION D OPERATING AND FINANCIAL REVIEW

part to vacancies remaining unfilled Additional funds collected on back to stakeholders in 2012/13, throughout the year. The reduction behalf of HM Treasury as part of the regulatory tariffs, or was partially offset by the transfer In 2011/12, Ofcom invoiced and in reduced grant-in-aid claims. of 48 roles to Ofcom, of which 27 collected £279.5m (2010/11: £187.2m). Ofcom’s budget for 2012/13 is were taken up by ex Postcomm These funds have been passed on £121.4m. This includes £7.2m for colleagues, after Ofcom took over to the public purse. The revenue Ofcom to fulfil its new duties to the responsibility for regulating is collected from three sources: postal services in October 2011. regulate the postal services sector. • Wireless Telegraphy Act licence fees; This represents a 6.1 per cent real terms reduction in the total annual Surplus for Financial Year • Additional payments from television cost of regulation for the sectors. and radio licensees; and In any financial year there may The budget is based on an adjusted be two types of surplus. • Financial penalties. cash basis, which includes capital expenditure and actual payments Funding surplus Ofcom prepares a separate set to pension schemes, but excludes of Financial Statements for the A funding surplus is created where depreciation and amortisation. income from stakeholders and grant- purposes of Section 400 of the in-aid funding is greater than actual Communications Act 2003. Despite the decrease in the budgeted expenditure incurred. The operating cost of regulation, the tariffs for revenue required by Ofcom to fulfil 2012/13 Tariffs 2012/13 have increased compared to its duties for any financial year is On 29 March 2012, Ofcom published last year for some sectors. Last year’s calculated on the basis of Ofcom’s the Tariff Tables for 2012/13, tariffs were materially reduced as a statement of charging principles. which were based on an estimated result of early savings delivered as part This approach specifies the actual operating expenditure outturn of our four year savings programme. funds that need to be collected to for 2011/12 of £108.7m. A total of discharge cash liabilities during the Notwithstanding this year’s increase, £10.8m, the difference between the tariffs remain considerably lower year. Any surplus funds arising at the adjusted budget of £119.5m, and end of the financial year are returned than those set prior to the start the estimated operating expenditure of the savings programme. The to stakeholders through a reduction outturn, is already being passed in the annual tariffs raised in the graph below depicts the funding two proceeding financial years. trend over the past five years.

The funding surplus for the financial year was £10.8m. Figure 12: Funding trends

Accounting surplus 80 The accounting surplus is required to £75.2m £74.2m £75.3m cover expenditure not reflected in the 70 £64.1m Statement of Income and Expenditure, £61.7m including capital expenditure and 60 necessary payments in respect of the 50 two defined benefit pension plans. 40 £33.6m £28.1m £28.1m £27.2m

The accounting surplus for the (£) Millions 30 £23.7m financial year after tax, recorded £25.5m £21.2m 20 in the Statement of Income and £21.3m £12.8m Expenditure for the year under £16.0m 10 £6.0m £5.4m £2.8m £2.6m £2.6m review, was £6.8m (2010/11: £9.2m). £1.8m £1.5m 0 2008/9 2009/10 2010/11 2011/12 2012/13

Spectrum Telecoms TV Radio Post

72 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Integration of Postcomm preparatory work, professional fees for the organisation of the Games Under the Postal Services Act 2011, and staff costs, and these were funded and the waiving of fees otherwise the responsibility for the regulation by DCMS as the budget holder. payable for that spectrum by of postal services transferred from members of the Olympic Family. SCAP represents a significant Postcomm to Ofcom with effect programme of work for Ofcom and Our large-scale trial events began in from 1 October 2011. The assets includes co-ordination of multiple, the summer of 2010. Integrated cross- and liabilities of Postcomm were complex projects to a challenging organisational test events continued transferred to Ofcom in line with timescale. The programme manages throughout 2011/12 and will continue the Treasury guidelines under an dependencies and risks across up to Games time. Ofcom has approved transfer scheme. Postcomm many disparate stakeholders and participated fully in these test events. has prepared its final Annual Report will run through to 2014/15. In and Accounts for 2011/12. order to provide transparency, The costs of the programme are funded by DCMS through spectrum Looking forward, the regulation costs relating to this programme management grant-in-aid, and form of postal services is now fully of work have been separated out part of our core operating budget. integrated within Ofcom, with from Ofcom’s core responsibilities The programme remains on track to income from relevant stakeholders. in the financial statements. deliver within the full programme budget agreed with the Government. Spectrum clearance and London 2012 Olympic Games awards programme and Paralympic Games Pensions During 2011/12, expenditure on The 2011/12 accounts include the Ofcom’s means of providing pension the Spectrum Clearance and Awards third full year of Ofcom’s programme benefits is through a defined Programme (SCAP) has continued. of work for the London 2012 Olympic contribution pension allowance that The objectives of SCAP are to make Games and Paralympic Games, which is available to all colleagues. Ofcom the 800MHz and 2.6GHz spectrum will take place between 27 July colleagues are employed on terms bands available, by clearing existing and 9 September 2012. with access to a stakeholder pension users and holding an auction for new Ofcom is responsible for organising plan. The allowance may be used licences, to enable the competitive a full spectrum plan for the Games, to contribute to the Ofcom defined provision of next generation wireless for arranging all the licences in good contribution stakeholder pension plan. broadband across the whole of the UK. time, in support of the plan; and for Colleagues who joined Ofcom from Payments to existing users are made ensuring key wireless services are legacy regulators were entitled to through compensation grants and free from harmful interference. These retain membership of one of two funded by DCMS, as the budget responsibilities are being carried defined benefit (DB) pension plans. holder, with approval from the out in line with the two guarantees Both of these plans remain closed Treasury. Payments are made by given by the UK Government to the to new entrants and benefits accruals Ofcom to grant applicants and, in International Olympic Committee ceased on 31 May 2011. Notes 1K the year 2011/12, totalled £41m. (IOC) in support of London’s bid for and 22 to the accounts provide SCAP incurred a further £7m of costs the Games. These guarantee the further detail. for research, legal fees, auction allocation of the spectrum required

| 73 SECTION D OPERATING AND FINANCIAL REVIEW

Following consultation with plan Ofcom has made cash payments Looking forward members, Ofcom decided to close to the Ofcom Defined Benefit Plan Ofcom remains committed to both DB plans to future accruals from and the Ofcom (former ITC) Pension delivering high-quality, effective and 31 May 2011. Members were informed Plan on the basis of the actuarial targeted regulation while continuing of the intention to cease benefits valuations. Cash payments, rather to deliver the efficiencies identified accruals in February 2011. Affected than the amount charged to operating to date to meet the spending colleagues became deferred members surplus as calculated under IAS19, are targets agreed with the Treasury of the relevant DB pension plan on included in operating expenditure in 2010/11. Ofcom has made very 1 June 2011 and these colleagues have outturn used to calculate the tariffs good progress on delivering planned had access to the Ofcom stakeholder charged to stakeholders each year. savings and remains on track to pension plan from this date. deliver the 28.2 per cent real terms During the year, payments to the reduction in our budget by 2014/15. The latest actuarial valuations for two DB plans amounted to £2.6m, both schemes as at 31 March 2009 together with £0.5m transferred There are a number of high-profile highlighted a combined funding from the feeder trust account. Funds projects for 2012/13 which include: deficit of £21.9m. Since the finalisation transferred to, and held in, the trust of the actuarial valuations in 2010, account can only be paid into either The London 2012 Olympic Games a total of £14.7m in respect of deficit of the two DB pension plans. and Paralympics Games will be repair payments have been made to completed in September 2012 and the DB plans in accordance with the As part of the integration of Postcomm Ofcom remains on target to deliver respective schedules of contributions. in October 2011, Ofcom was obliged the agreed objectives within budget. to offer transferring Postcomm However, the 2011/12 financial colleagues, who were members of a The SCAP project continues, with statements show a surplus of £32.4m, defined benefit plan, the opportunity clearance of the 800 MHz and in part because the pension liabilities of access to a broadly comparable 2.6 GHz spectrum continuing under the financial statements pension scheme. However, all former throughout 2012/13, and the are prepared on the basis that the Postcomm colleagues elected to spectrum auction process expected liabilities are discounted in line take the standard Ofcom terms to commence by the end of 2012. with the yields on high-quality and receive a defined contribution The planning is under way for bonds which, under current market pension allowance which may be delivering the Ofcom objectives for conditions, differ significantly from used to contribute to the Ofcom the Glasgow 2014 Commonwealth the approach used for determining stakeholder pension plan. Games and during 2012/13 we Ofcom’s contributions. This also will leverage value from our reflects the significant movements The next formal triennial actuarial lessons learned, investments and in financial markets since the date valuation for both plans will be developments from the London 2012 of the actuarial valuations and the as at 31 March 2012 and must Olympic Games and Paralympic Games contributions made by Ofcom. conclude by 30 June 2013. team, albeit on a smaller scale, with As part of the ongoing activity dedicated budgets, and funding. to manage and mitigate risks of the plans, a further insurance- backed benefit buy-in in respect of pensioner members was completed via annuity purchase during the course of 2011/12.

74 | Ofcom Annual Report & Accounts 2011/12 THE CERTIFICATE AND REPORT OF THE COMPTROLLER AND AUDITOR GENERAL TO THE HOUSES OF PARLIAMENT www.ofcom.org.uk

The certificate and report of the Comptroller and Auditor General to the Houses of Parliament

I certify that I have audited the Communications’ circumstances and Opinion on other matters financial statements of the Office of have been consistently applied and In my opinion: Communications for the year ended adequately disclosed; the reasonableness • the part of the Remuneration Report to 31 March 2012 under the Office of of significant accounting estimates made be audited has been properly prepared Communications Act 2002. These by the Office of Communications; and in accordance with Secretaries of State comprise the Statement of Income the overall presentation of the financial directions made under the Office of and Expenditure, the Statement of statements. In addition, I read all the Communications Act 2002; and Financial Position, the Statement financial and non-financial information of Cash Flows, the Statement of in the Annual Report to identify material • the information given in the Changes in Equity, and the related inconsistencies with the audited Operating and Financial Review for the notes. These financial statements have financial statements. If I become aware financial year for which the financial been prepared under the accounting of any apparent material misstatements statements are prepared is consistent policies set out within them. I have or inconsistencies I consider the with the financial statements. also audited the information in the implications for my certificate. Matters on which Remuneration Report that is described I report by exception In addition, I am required to obtain in that report as having been audited. I have nothing to report in respect evidence sufficient to give reasonable of the following matters which Respective responsibilities of the assurance that the expenditure and I report to you if, in my opinion: Accountable Officer and auditor income reported in the financial As explained more fully in the Statement statements have been applied to the • adequate accounting records have of Accountable Officer’s Responsibilities, purposes intended by Parliament and not been kept or returns adequate for the Accountable Officer is responsible the financial transactions conform to my audit have not been received from for the preparation of the financial the authorities which govern them. branches not visited by my staff; or statements and for being satisfied Opinion on regularity that they give a true and fair view. My • the financial statements and that part responsibility is to audit, certify and In my opinion, in all material respects of the Remuneration Report to be report on the financial statements the expenditure and income have audited are not in agreement with in accordance with the Office of been applied to the purposes the accounting records or returns; or Communications Act 2002. I conducted intended by Parliament and the • I have not received all of the my audit in accordance with International financial transactions recorded in the information and explanations Standards on Auditing (UK and Ireland). financial statements conform to the I require for my audit; or Those standards require me and my staff authorities which govern them. • The Governance Statement to comply with the Auditing Practices Opinion on financial statements does not reflect compliance Board’s Ethical Standards for Auditors. In my opinion: with the Treasury’s guidance Scope of the Audit of the • the financial statements give a true Report Financial Statements and fair view of the state of the Office I have no observations to make An audit involves obtaining evidence of Communications’ affairs as at 31 on these financial statements. about the amounts and disclosures March 2012 and of its net operating in the financial statements sufficient surplus for the year then ended; and Amyas C E Morse to give reasonable assurance that the • the financial statements have been Comptroller and Auditor General financial statements are free from properly prepared in accordance with 20 June 2012 material misstatement, whether caused the Office of Communications Act National Audit Office by fraud or error. This includes an 2002 and Secretaries of State directions 157-197 Buckingham Palace Road assessment of: whether the accounting issued thereunder. policies are appropriate to the Office of Victoria, London, SW1W 9SP

| 75 SECTION D STATEMENT OF INCOME AND EXPENDITURE

Statement of income and expenditure For the year ended 31 March 2012

Notes Year ended Year ended 31 March 2012 31 March 2011 £’000 £’000

Income 3 109,296 126,245

Spectrum Clearance and Awards 3 49,229 17,939

Operating expenditure

Staff costs 4 (54,357) (65,356)

Other operating costs 6 (49,727) (52,699)

Spectrum Clearance and Awards 4, 6 (48,826) (17,893)

Operating surplus 5,615 8,236

Vacant property income/(cost) 7 150 (1,455)

Finance income 199 177

Finance costs 8 – –

Other finance income/(cost) 17,22 925 2,222

Surplus on ordinary activities for financial year before tax 6,889 9,180

Taxation 9 (53) 112

Surplus for financial year after tax 6,836 9,292

The accounting policies and notes on pages 80 to 106 form part of these financial statements.

76 | Ofcom Annual Report & Accounts 2011/12 STATEMENT OF FINANCIAL POSITION www.ofcom.org.uk

Statement of financial position As at 31 March 2012

Notes As at As at 31 March 2012 31 March 2011 £’000 £’000

Non-current assets

Property, plant and equipment 10 13,635 15,837

Intangible assets 11 7,379 11,713

Deferred tax asset 9 2,601 2,654

Trade and other receivables 13 1,116 1,339

Retirement benefit asset 22 31,329 20,362 Total non-current assets 56,060 51,905

Current assets

Trade and other receivables 12 8,944 8,150

Cash and cash equivalents 14 13,677 26,944 Total current assets 22,621 35,094

Total assets 78,681 86,999

Current liabilities

Trade and other payables 15 23,324 35,179

Provisions for liabilities and charges 17 499 342 Total current liabilities 23,823 35,521

Non-current liabilities

Trade and other payables – amounts falling due after more than one year 16 7,610 9,631

Provisions for liabilities and charges 17 3,392 4,266 Total non-current liabilities 11,002 13,897

Total liabilities 34,825 49,418

Assets less liabilities 43,856 37,581

Equity

Reserves 43,856 37,581 Total equity 43,856 37,581

The accounting policies and notes on pages 80 to 106 form part of these financial statements. These financial statements were approved by the Board on 19 June 2012. Colette Bowe Ed Richards Chairman Chief Executive

| 77 STATEMENT OF CHANGES IN EQUITY

SECTION D STATEMENT OF CHANGES IN EQUITY

Statement of changes in equity For the year ended 31 March 2012

Notes Reserve £’000

Balance as at 1 April 2010 17,227

Changes in equity for 2010/11

Actual return less expected return on plan assets 22 290

Experience gains on pension scheme liabilities 22 (143)

Changes in assumptions underlying the present value of pension scheme liabilities 22 2,395

Decrease in minimum funding requirement liability 22 8,520

Surplus for year 9,292

Total recognised income and expense for 2010/11 20,354

Balance as at 31 March 2011 37,581

Changes in equity for 2011/12

Actual return less expected return on plan assets 22 2,360

Experience gains on pension scheme liabilities 22 (2,879)

Changes in assumptions underlying the present value of pension scheme liabilities 22 (4,686)

Decrease in minimum funding requirement liability 22 4,640

Actuarial adjustment to Postcomm unfunded pension liability 167

Postcomm transfer as at 30 Sep 2011 (163)

Surplus for year 6,836

Total recognised income and expense for 2011/12 6,275

Balance as at 31 March 2012 43,856

Further details on pensions are found in Note 22. The accounting policies and notes on pages 80 to 106 form part of these financial statements.

78 | Ofcom Annual Report & Accounts 2011/12 STATEMENT OF CASH FLOWS www.ofcom.org.uk

Statement of cash flows For the year ended 31 March 2012

Notes Year ended Year ended 31 March 2012 31 March 2011 £’000 £’000

Cash flows from operating activities

Operating surplus 5,615 8,236

Postcomm transfer as at 30 Sep 2011 and actuarial pension adjustment 4 –

Adjustments for non-cash transactions

Amortisation 11 5,085 5,278

Depreciation 10 3,693 2,849

Loss on disposal of property, plant and equipment 6 136 88

Decrease/increase in trade and other receivables 12,13 (571) 3,251

Decrease in trade and other payables 15,16 (13,876) (12,748)

Decrease in provisions 17 (675) (1,287)

Increase in pension assets 22 (10,499) (5,403)

Net cash (outflow)/inflow from operating activities (11,088) 264

Cash flows from investing activities

Interest received 199 177

Interest paid 8 – –

Purchases of property, plant and equipment 10 (1,646) (6,713)

Purchases of intangibles 11 (751) (2,184)

Proceeds from sale of property, plant and equipment 19 52

Net cash outflow from investing activities (2,179) (8,668)

Cash flows from financing activities

Repayment of borrowings – –

Net cash (outflow)/inflow from financing activities – –

Decrease in cash and cash equivalents in the year (13,267) (8,404)

Cash and cash equivalents at beginning of year 14 26,944 35,348

Decrease in cash and cash equivalents in the year (13,267) (8,404)

Closing net funds 14 13,677 26,944

The accounting policies and notes on pages 80 to 106 form part of these financial statements.

| 79 SECTION D NOTES TO THE ACCOUNTS

Notes to the accounts for the year ended 31 March 2012

1. Basis of Presentation Amounts in the Financial • IAS 27 Consolidated and Separate Statements are stated in pounds Financial Statements (Amendment) and Principal sterling, which is the functional effective 1 January 2013 Accounting Policies currency of the organisation. The following new standards, The Office of Communications (Ofcom) amendments and interpretations is an organisation that provides a A) Adoption of new and to existing standards are broad range of regulatory services, revised standards effective in 2012: and is domiciled in the United Certain new standards, Kingdom. The financial statements of amendments and interpretations • IFRS 7 Financial Instrument the Organisation for 31 March 2012 to existing standards have been Disclosures (Amendment) have been prepared in accordance published but are not effective effective 1 July 2011 with the International Financial on Ofcom’s accounting period. • IAS 12 Income Taxes (Amendment) Reporting Standards (IFRS) issued effective 1 January 2012 by the International Accounting The following new standards, Standards Board (IASB) as well amendments and interpretations The Board anticipate that the as interpretations issued by the to existing standards are not adoption of these standards and International Financial Reporting yet effective and have not been interpretations in future periods Interpretations Committee (IFRIC) early adopted by Ofcom: will have no material impact on the as endorsed by the European Union. financial statements of Ofcom. • IFRS 7 Financial Instruments (Amendment): Disclosures These financial statements have B) Income recognition been prepared under the historical effective 1 January 2013 Income comprises the fair value cost convention modified by the • IFRS 9 Financial Instrument of the consideration received or revaluation of certain non-current (New) effective 1 January 2015 receivable in the ordinary course assets, on a going concern basis, in of Ofcom’s activities. Income is accordance International Financial • IFRS 10 Consolidated shown net of value-added tax, Reporting Standards (IFRS). The Financial Statements (New) returns, rebates and discounts. financial statements are prepared effective 1 January 2013 on the basis of all IFRS accounting • IFRS 12 Disclosure of Interest Ofcom recognises income when standards and interpretations and in other entities (New) the amount of income can in accordance with the Companies effective 1 January 2013 be reliably measured and it is Act 2006 applicable to companies • IFRS 13 Fair Value Measurement probable that future economic reporting under IFRS and Article 4 of benefits will flow to the entity. the European Union IAS Regulation, (New) effective 1 January 2013 except where these are overridden • IAS 1 Presentation of Financial Grant-in-aid by the Office of Communications Act Statements (Amendment) This income comprises grant-in-aid 2002. These financial statements are effective 1 July 2012 from DCMS to meet the costs of prepared under the accounts direction spectrum management, spectrum • IAS 19 Employee Benefits from the Departments for Business, awards, spectrum clearance, ex (Amendment) effective Innovation and Skills (BIS) and Culture, post competition, public interest, 1 January 2013 Media and Sport (DCMS) issued on integration of postal services, 16 January 2008 which forms part • IAS 32 Financial Instruments: local media assessments, digital of the Financial Memorandum (FM) Presentation (Amendment) participation, website blocking, online as approved by BIS and DCMS. effective 1 January 2014 copyright infringement and media

80 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

literacy. Grant -in-aid received from Application fees received under operating leases are DCMS is allocated and matched to One-off Broadcasting and Networks recognised in Income or Expenditure costs in the year to which it relates. and services application fees are on a straight-line basis over the non-refundable and accordingly term of the lease. Lease incentives The Spectrum Clearance and Awards are recorded as income on receipt are recognised as an integral part Programme (SCAP) oversee the of the stakeholder application. of the total lease value, over the clearance (including mitigation of non-cancellable term of the lease. potential interference) and auction Other income of 800MHz and 2.6GHz spectrum. Other income is accounted E) Property, plant and equipment Clearance is undertaken by 3rd parties for on an accruals basis and is Property, plant and equipment who are funded by way of a capital matched with the expenditure include the purchase of new assets grant which has been considered towards which it contributes. and approved by the Spectrum and extensions to, enhancements to, Clearance Finance Committee. or replacement of existing assets. SCAP is funded via Grant-in-aid. C) Receipts collected by Ofcom within the scope of Section 400 A Treasury direction on property, The grant recipients request of the Communications Act 2003 plant and equipment allows Ofcom funding from Ofcom once the grant In accordance with Section 400 to use depreciated historical cost as a conditions have been satisfied. of the Communications Act 2003, proxy for current valuation for non- Ofcom recognises grant costs upon Broadcasting Act Additional property assets of a short useful life receipt of the request for funding. Payments and penalties and fines or low value. All Ofcom assets fall in All other costs are recognised as levied by Ofcom are remitted to this category. Historical cost includes activity is undertaken by Ofcom. the Consolidated Fund. Licence expenditure that is directly attributable fees levied by Ofcom arising from to the acquisition of the items. Networks and services the issue or renewal of licences administrative fees Property, plant and equipment is under the Wireless Telegraphy (WT) recorded at cost or deemed cost, less Income which comprises Acts are also remitted to DCMS for accumulated depreciation and any administrative fees invoiced by payment to the Consolidated Fund. Ofcom is accounted for on an impairment losses. Property, plant and accruals basis. Income in excess of No entries are made in these equipment over £2,500 are capitalised. networks and services’ cash costs Financial Statements in respect of Subsequent costs are included in the is classified as deferred income on Section 400-related transactions, asset’s carrying amount or recognised the Statement of Financial Position. unless payments and fees have been as a separate asset, as appropriate, Cash costs in excess of income collected and deposited into Ofcom’s only when it is probable that future received are classified as a receivable main bank account at the end of the economic benefits associated with at the end of the reporting date. reporting date. These are shown as the item will flow to Ofcom and the due to the Consolidated Fund within cost of the item can be measured Broadcasting licence fees Payables due within one year. Income from broadcasting licence reliably. The carrying amount of the fees represents the amount invoiced Ofcom prepares a separate set of replaced part is derecognised. All to licensees and is accounted for financial statements to 31 March other repairs and maintenance are on an accruals basis. Income in each year for the purposes of Section charged to the Statement of Income excess of Broadcasting’s cash costs 400 of the Communications Act 2003 and Expenditure during the financial is classified as deferred income on which are laid before Parliament. period in which they are incurred. the Statement of Financial Position. Property, plant and equipment are Cash costs in excess of income D) Leases depreciated, on a straight-line basis, received are classified as a receivable Leases in which a significant portion of at rates estimated to write off their at the end of the reporting date. the risks and rewards of ownership are book values over their estimated retained by the lessor are classified as useful lives. In assessing estimated operating leases. Payments made and useful lives, which are reviewed on an

| 81 SECTION D NOTES TO THE ACCOUNTS

annual basis, consideration is given Internally generated intangible non- G) Impairment of assets to any contractual arrangements current assets, such as computer Impairments of assets are calculated and operational requirements software, are recognised only if an as the difference between the relating to particular assets. asset is created that can be identified; carrying value of the asset and its it is probable that the asset created recoverable amount, if lower. Depreciation is calculated from the will generate future economic month following that in which an benefits; and that the development Recoverable amount is defined as asset is brought into service over cost of the asset can be measured the higher of fair value less costs the estimated useful life of the reliably. Where no internally generated to sell and estimated value in use asset. Unless otherwise determined intangible asset can be recognised, at the date the impairment review by operational requirements, development expenditure is recorded is undertaken. For the purposes of the depreciation periods for the as an expense in the period in assessing impairment, assets are principal categories of property, which it is incurred. Development grouped at the lowest levels for plant and equipment are, in general, expenditure previously recognised which there are separately identifiable as shown in the table below: as an expense is not recognised as cash flows (cash-generating units). an asset in a subsequent period. An asset’s carrying amount is Fixtures & Fittings – Period of Directly attributable costs that written down immediately to its Leasehold Improvements the lease are capitalised as part of the recoverable amount if the asset’s Fixtures & Fittings – 7 years software product include the carrying amount is greater than its Furniture software development employee estimated recoverable amount. Office and Field Equipment 4 to 7 years costs and an appropriate portion An impairment loss is recognised Computer Hardware 3 to 5 years of relevant overheads. for the amount by which the Motor Vehicles 5 years Amortisation on capitalised asset’s carrying amount exceeds development costs is charged to the its recoverable amount. income statement on a straight-line At each reporting date, the carrying The assets’ residual values and basis, from the month following that value of non-current assets is useful lives are reviewed, and in which an asset is brought into reviewed to determine if there is adjusted if appropriate, at the service, over the estimated useful some indication that the carrying end of each reporting period. life of the asset. The estimated value of the assets may have been useful life is three to five years. Gains and losses on disposals are impaired. Material impairments determined by comparing the Development expenditure comprises are recognised separately in the proceeds with the carrying amount costs incurred in developing computer Statement of Income and Expenditure. and are recognised within ‘Loss/ systems, which will replace some Assets that suffered impairment are (Profit) on disposal of non-current of the current applications. Assets reviewed for possible reversal of the assets’ ‘Other operating costs’ per the under construction comprises of impairment at each reporting date. Statement of Income and Expenditure. technical field equipment in the process of being constructed. H) Trade receivables Research expenditure is written F) Intangible assets Trade receivables are amounts due off as incurred to the Statement Intangible assets are stated at cost less from stakeholders for licenses, of Income and Expenditure. No accumulated amortisation using the fees and charges. If collection is amortisation or depreciation is revaluation model where the impact expected in one year or less (or in provided on assets in the course of revaluation is material, and are the normal operating cycle of the of development or construction. reviewed annually for impairment. business if longer), they are classified Expenditure capitalised includes the as current assets. If not, they are costs of software applications and presented as non-current assets. development and related licences fees.

82 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Trade receivables are recognised the service that gives rise to the Ofcom participates in two defined initially at fair value and subsequently obligation. Prepaid contributions are benefit pension schemes which relate measured at amortised cost using recognised as an asset to the extent to staff that transferred to Ofcom the effective interest method, that a cash refund or a reduction from legacy organisations. These less provision for impairment. in future payments is available. schemes are closed to new members and following consultation with New staff may join a stakeholder I) Cash and cash equivalents Plan members has been closed for pension scheme, which is a future accrual as from 1 June 2011. Cash and cash equivalents include defined contribution scheme. cash in hand, deposits held at call The first Ofcom Defined Benefit Defined benefit plans with banks and rent deposits. Pension Plan provides benefits that A defined benefit plan is a post- are broadly equivalent to the Principal J) Trade payables employment benefit plan other than Civil Service Pension Scheme (PCSPS). a defined contribution plan. Ofcom’s Trade payables are obligations Ofcom jointly participates with the net obligation in respect of defined to pay for goods or services that Advertising Standards Authority in benefit pension plans is calculated have been acquired in the ordinary the scheme. The second scheme separately for each plan by estimating course of business from suppliers. is the Ofcom (Former ITC) Staff the amount of future benefit that Accounts payable are classified Pension Plan where Ofcom is one employees have earned in return for as current liabilities if payment is of four participating employers. The their service in the current and prior due within one year or less (or in assets of this scheme are held in periods; that benefit is discounted the normal operating cycle of the a separately administered trust. to determine its present value. Any business if longer). If not, they are unrecognised past service costs IAS19 requires that, where a scheme presented as non-current liabilities. and fair value of any plan assets are is in surplus according to the IAS19 Trade payables are recognised deducted. The discount rate is the assumptions, the surplus can initially at fair value and subsequently yield at the reporting date on AA only be recognised on an entity’s measured at amortised cost using credit-rated bonds that have maturity Statement of Financial Position if an the effective interest method. dates approximating the terms of economic benefit is “available” to Ofcom’s obligations and that are the entity as a result of the surplus. denominated in the same currency K) Employee Benefits IFRIC 14 applies to all post in which the benefits are expected to Pension Schemes employment defined benefits be paid. The calculation is performed and other long term employee Ofcom has a range of pension annually by a qualified actuary using defined benefits. Ofcom follows the schemes which include defined the projected unit credit method. interpretation of this standard. contributions plans, defined benefit When the calculation results in a plans and unfunded plans. benefit to Ofcom, the recognised Unfunded schemes asset is limited to the net total of any Defined contribution plans Ofcom also has liabilities in respect unrecognised past service costs and A defined contribution plan is a post- of pension payments to three the present value of any future refunds former chairmen of the Independent employment benefit plan under which from the plan or reductions in future an entity pays fixed contributions Television Commission, two former contributions to the plan. Actuarial chairmen of the Radio Authority, into a separate entity and will have gains and losses are recognised in no legal or constructive obligation to two former Directors General of The full in the period in which they occur. Office of Telecommunications and pay further amounts. Obligations for They are recognised outside income contributions to defined contribution two former chairmen of Postcomm. and expenditure and presented in These are unfunded schemes and pension plans are recognised as an the Statement of Changes in Equity. employee benefit expense in income are accounted for under IAS 19 with and expenditure in line with a provision included in Ofcom’s balance sheet for the actuarial valuation of the liabilities.

| 83 SECTION D NOTES TO THE ACCOUNTS

Other Employee Benefits L) Provisions N) Foreign exchange Early retirement costs Provisions for early retirement and Transactions designated in foreign The Radiocommunications Agency and vacant property are recognised currencies are translated into sterling Oftel operated an Early Retirement when: Ofcom has a present legal or at the rate of exchange prevailing Scheme which gave retirement constructive obligation as a result at the transaction date. Monetary benefits to certain qualifying of past events; it is probable that an assets and liabilities designated in employees. These benefits conform outflow of resources will be required foreign currencies are translated at to the rules of the PCSPS. The liability to settle the obligation; and the the rates prevailing at the reporting of the Agency and Oftel to bear the amount has been reliably estimated. date with the resulting profit or costs of these benefits transferred to Provisions are not recognised loss recognised in the Statement of Ofcom on 29 December 2003. The for future operating losses. Income and Expenditure for the year. liability remains until the normal Ofcom provides for obligations relating retirement age of the employees O) Financial instruments to excess leased space in its properties, retired under the Early Retirement and credit risk discounted by the Treasury discount Scheme. These additional costs rate, currently set at 2.2 per cent. The Borrowings are based on the discounted value provisions represent the net present Ofcom has limited powers to of the annual amounts payable value of the future estimated costs borrow money to fund short- at the reporting date and are after recognising reasonably certain term fluctuations in cash flow. included in provisions. The actual future rental income. The unwinding amounts payable increase annually Cash and cash equivalents of the discount is included within in accordance with PCSPS rules. other finance costs in the Statement Cash and cash equivalents include Colleague Leave Liability of Income and Expenditure. cash in hand, deposits held at call with banks and rent deposits. Under IAS 19 Employee Benefits, Where there are a number of similar Interest income receivable on all costs must be recorded as an obligations, the likelihood that an cash and cash equivalents is expense as soon as the obligation outflow will be required in settlement recognised as it is earned. to pay employees arises. This is determined by considering the includes the cost of any untaken class of obligations as a whole. A Trade Receivables leave as at the year end. provision is recognised even if the Trade and other receivables are non-interest bearing and stated at Colleagues who have completed likelihood of an outflow with respect fair value. Provision is made where five years of continuous service are to any one item included in the same there is evidence that the balances entitled to a paid sabbatical of five class of obligations may be small. will not be recovered in full. weeks and thereafter accrue one week for each additional year of M) Settlement of claims Trade payables service subject to a maximum of Provision is made for estimated third Trade payables are not interest bearing ten weeks. An accrual, based on party legal costs and damages in and are stated at their fair value. management’s best estimates using respect of challenges to regulatory current salary data and churn rates decisions of Ofcom and legacy is included as part of accruals. As organisations where it is judged from 1st January 2008, this benefit probable that these will be payable. was withdrawn for new employees.

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P) Current and deferred Income Tax Recognition of deferred Tax assets to provide information on costs HM Revenue and Customs has The carrying amount of deferred tax and fees, Note 3 to these financial ruled that Ofcom’s regulatory assets is reviewed at each reporting statements presents the Statement functions do not constitute a trading date. When assessing the probability of Income and Expenditure for business. Consequently, Ofcom is of a taxable profit being available, the year under review by sector. unable to recover VAT on expenditure account is taken of prior year results, which it incurs as part of its forecast future results and non- R) Areas of judgement and key regulatory activities. recurring items unlikely to occur in sources of estimation uncertainty the future. As such, the assessment The preparation of financial Corporation Tax is assessable of the Organisation’s ability to utilise statements requires management on interest received, and in tax losses carried forward is to a large to make estimates and assumptions respect of rental income net of extent judgement based. If future that affect the reported amounts property expenditure arising taxable results prove significantly of assets and liabilities, disclosures from letting surplus property. different to those expected, the of contingent assets and liabilities At the reporting date, Ofcom had carrying amount of deferred tax assets and the reported amounts of unutilised tax losses available for will be increased or decreased, with revenue and expenses during the offset against future taxable income. a potentially material impact on the reporting period. Actual results These losses have arisen as a result of Statement of Financial Position and could differ from these estimates. onerous lease provisions on properties Statement of Income and Expenditure. Information about such judgements and estimations is contained in the inherited from predecessor bodies Deferred tax assets are measured accounting policies or the notes to that were excess to requirements at the tax rates expected to apply the financial statements, and the when Ofcom was incorporated. to Ofcom when the asset is key areas are summarised below. Deferred Tax realised based on tax rates enacted or substantially enacted by the Deferred income tax is provided, Areas of judgement that have end of the reporting period. using the liability method, on all the most significant effect on the temporary differences at the reporting amounts recognised in the financial date between the tax bases of assets Q) Segmental analysis statements are as follows: and liabilities relating to taxable A segment is a distinguishable • Revenue recognition and activities, and their carrying amounts component of the organisation that is assessment of unbilled revenue for financial reporting purposes. engaged either in providing products – accounting policy B or services (business segment), or in Deferred tax assets are recognised providing products or services within • Deferred tax asset utilisation in for all deductible temporary a particular economic environment respect of available future taxable differences, carry-forward of unused (geographical segment), and is subject profits – accounting policy P tax assets and unused tax losses, to to risks and rewards that are different the extent that it is probable that from those of other segments. No Key sources of estimation uncertainty future taxable profit will be available analysis of Ofcom’s turnover from that have a risk of causing a material against which they can be utilised. operations by geographical segment adjustment to the carrying amounts or business segment has been of assets and liabilities within the presented as all Ofcom’s activities next financial year are as follows: are carried out in the UK and within the regulatory sector. However, in • Estimation of liabilities for pension order to meet with the requirements and other post-retirement of the Communications Act 2003 benefits – accounting policy K

| 85 SECTION D NOTES TO THE ACCOUNTS

2. Sectoral analysis

The analysis below refers to income by sector for the year ended 31 March 2012, together with attributable costs. This is prepared in accordance with the Communications Act 2003 and not in terms of IFRS 8 Segmental Reporting, as per the accounting policy 1 (Q)

Spectrum Spectrum Spectrum Networks Broadcasting Postal Other 31 March 31 March management clearance awards & services Regulation income 2012 Total 2011 Total £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Revenue

Licence and – – – 26,330 16,932 4,812 – 48,074 53,467 administration fees Application fees – – – 30 652 – – 682 673

Grant-in-aid 60,346 51,046 1,177 – – – 1,952 114,521 102,422

Other income – – – – – 788 – 788 719

Accrued/(Deferred) (702) (2,876) (118) (1,090) 502 (1,599) (214) (6,097) (14,032) income Total revenue 59,644 48,170 1,059 25,270 18,086 4,001 1,738 157,968 143,249

Rental and other 306 – – 129 93 20 9 557 935 Income Operating income 59,950 48,170 1,059 25,399 18,179 4,021 1,747 158,525 144,184

Interest receivable 109 – – 46 33 7 4 199 177

Total income 60,059 48,170 1,059 25,445 18,212 4,028 1,751 158,724 144,362

Loan repayments – – – – – – – – –

Interest payable – – – – – – – – –

Net operating 60,059 48,170 1,059 25,445 18,212 4,028 1,751 158,724 144,362 income Onerous property 1,299 – – 550 394 87 38 2,368 1,059 and accrued rental income Cash income 61,358 48,170 1,059 25,995 18,606 4,115 1,789 161,092 145,420

Total costs (61,358) (48,170) (1,059) (25,995) (18,606) (4,115) (1,789) (161,092) (145,420)

Surplus on cash – – – – – – – – – cost basis

Comparative costs by sector Year ending 31 (61,358) (48,170) (1,059) (25,995) (18,606) (4,115) (1,789) (161,092) March 2012

Year ending 31 (73,198) (15,250) (2,689) (28,639) (20,329) – (5,316) (145,420) March 2011

86 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Other income comprises:

- grant-in-aid funded competition enquiries, media literacy work, public interest test activity, local media assessments, and website blocking activity; - grant-in-aid funded online copyright infringement work; - grant-in-aid funded integration of Postcomm; - commercial activities including spectrum interference work; and - rental income from sub-letting vacant property space.

In accordance with Ofcom’s accounting policies, as set out in note 1(B) to these accounts, grant-in-aid is accounted for in the period in which it is received.

The table opposite is prepared on an adjusted cash basis, which includes capital expenditure and actual contributions to pension schemes, but excludes depreciation.

Ofcom’s licence and administrative fees are based on an estimate of cash costs in accordance with its Statement of Charging Principles. Where in the current year there is an excess of income over expenditure, the surplus will be rebated to the relevant stakeholders, in accordance with Ofcom’s Statement of Charging Principles. Where in the current year there is an excess of expenditure over income, the deficit will be collected from the relevant stakeholders, in accordance with Ofcom’s Statement of Charging Principles.

Reconciliation from operating expenditure to actual operating out-turn

Notes 2012 2011 £’000 £’000

Operating expenditure – Statement of Income and Expenditure 152,910 135,948

Adjustments in respect of pension asset and liability 10,430 5,340

Vacant property costs 17 537 1,101

Capital expenditure less depreciation (6,372) 770

Actual rent payments less expenditure 1,523 1,156

Other adjustments 2,083 1,157

Proceeds from fixed assets (19) (52)

Cash operating expenditure 161,092 145,420

Spectrum clearance (48,169) (15,250)

Spectrum awards (1,059) (2,689)

Non-operating income (3,124) (2,173)

Actual operating costs out-turn 108,739 125,308

| 87 SECTION D NOTES TO THE ACCOUNTS

3. Income

2012 2011 £’000 £’000

Grant-in-aid DCMS

Spectrum management 59,644 71,951

Spectrum awards 1,059 2,689

Spectrum clearance 48,170 15,250

Competition law enforcement 596 900

Public interest test 62 426

Integration of postal service pre Royal Assent (406) 406

Local media assessment 33 91

Digital participation – 271

Website Blocking 79 41

Online Copyright Infringement (OCI) 663 1,788

Media literacy 305 541

Total government grant-in-aid 110,205 94,354

Networks & services administrative and application fees 25,270 28,151

Broadcasting Act licence and application fees 18,086 19,982

Integration of postal service regulation 1,194 –

Regulation of postal services 3,213 –

Rental income 5 191

Other income 552 1,506

Total income 158,525 144,184

The role of sponsor body was re-assigned to DCMS from BIS from 01 April 2011. Apart from media literacy income, all Grant-in-aid income for the 2011 financial year was received from BIS.

88 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

4. Staff costs

Other staff Spectrum Total Other staff Spectrum Total costs Clearance & 2012 costs Clearance & 2011 Awards Awards £’000 £’000 £’000 £’000 £’000 £’000

Staff costs, including fees paid to Board Members, were:

Salaries & benefits 44,411 728 45,139 48,657 51 48,708

National Insurance costs 5,388 89 5,477 5,674 11 5,685

Pension costs 4,365 63 4,428 4,889 3 4,892

Restructuring costs 193 – 193 6,135 – 6,135

Total staff costs 54,357 880 55,237 65,356 64 65,420

The restructuring cost in 2012 follow on from the comprehensive spending review in 2010/11 and includes an accrual for those costs unpaid at year end relating to 2 (2011: 41) employees.

More detailed information in respect of the remuneration and pension entitlements of the directors and senior executives is shown in the remuneration report on pages 65 to 68.

During the year 8 employees were seconded to other organisations and thus this credit is included within the staff costs line in the table above.

Spectrum Clearance and Awards costs have been presented separately from core Ofcom staff costs in order to provide a more meaningful comparison between the years.

5. Employee numbers

2012 2011

The average number of employees 735 832

As at 31 March 2012, Ofcom had 778 employees (2011: 720). The number as at 31 March 2012 reflects a temporary increase due to the Olympics project.

Non-Executive Members of the Ofcom Board, Content Board, Advisory Committees and employees seconded to Ofcom are excluded from employee numbers.

| 89 SECTION D NOTES TO THE ACCOUNTS

6. Other operating costs

Other Spectrum Total Other Spectrum Total Operating costs Clearance & 2012 Operating Clearance & 2011 Awards costs Awards £’000 £’000 £’000 £’000 £’000 £’000

Auditors remuneration – statutory 78 – 78 82 – 82 audit fees

Auditors remuneration – Section 400 14 – 14 16 – 16

Auditors remuneration – Whole of 3 – 3 3 – 3 Government Accounts

Professional fees 7,441 6,375 13,816 6,338 5,320 11,658

Outsourced services 9,828 – 9,828 9,863 – 9,863

Audience and consumer research 4,002 32 4,034 4,857 – 4,857

Technological research and spectrum 1,218 133 1,351 963 545 1,508 efficiency projects

Spectrum clearance scheme – 41,005 41,005 19 11,760 11,779

Temporary staff and recruitment 2,769 340 3,109 3,311 188 3,499

Seconded staff – – – – – –

Travel and subsistence 1,545 37 1,582 1,084 9 1,093

Premises costs 4,022 – 4,022 8,002 – 8,002

Administration and office expenses 6,422 14 6,436 6,407 5 6,412

Information and technology costs 3,029 2 3,031 2,861 0 2,861

Vehicles 517 – 517 532 – 532

Bad and doubtful debt (67) – (67) 147 – 147

Amortisation 5,083 2 5,085 5,279 – 5,279

Depreciation 3,687 6 3,693 2,847 2 2,849

Loss on disposal of non-current assets 136 – 136 88 – 88

Total other operating costs 49,727 47,946 97,673 52,699 17,829 70,528

The costs above include

Operating leases – land and buildings 5,805 – 5,805 6,330 – 6,330

Operating leases – vehicles 352 – 352 376 – 376

Operating leases – other 221 – 221 181 – 181

Spectrum Clearance and Awards costs have been presented separately from core Ofcom operating costs in order to provide a more meaningful comparison between the years.

90 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

7. Vacant property charge

2012 2011 £’000 £’000

Future costs of vacant properties 150 (1,455)

As at 31 March 2012 all floors not occupied by Ofcom in Riverside House have been let. In addition one lease for a smaller regional property has expired.

8. Interest paid

2012 2011 £’000 £’000

Interest paid – –

| 91 SECTION D NOTES TO THE ACCOUNTS

9. Taxation

2012 2011 £’000 £’000

Tax (charge)/credit for the year

United Kingdom Corporation Tax income/(expense) – –

Deferred tax credit/(debit) (53) 112

Tax credited/(charged) to Statement of Income and Expenditure (53) 112

Reconciliation of tax charge 2012 2011 £’000 £’000

Surplus before tax 6,889 9,180

Tax on profit at the UK standard rate of Corporation Tax of 20% (2011: 20%) 1,378 1,836

Income not subject to tax (31,722) (28,799)

Expenses not deductible 30,397 26,730

Increase in/(Utilisation of) brought forward tax losses (53) 233

Tax charge – –

Deferred tax Tax losses £’000

Analysis of movements in the net deferred tax balance during the year Deferred tax asset at 1 April 2010 2,542

Effect of change in applicable tax rate (121)

Increase in brought forward tax losses 233

Deferred tax asset at 1 April 2011 2,654

Utilisation of brought forward tax losses (53)

Deferred tax asset at 31 March 2012 2,601

Deferred tax asset to be recovered within 12 months 16

Deferred tax asset to be recovered after more than 12 months 2,585

2,601

All deferred tax assets relate to brought forward tax losses. Utilisation of the deferred tax asset is dependent on future taxable profits arising.

The assessed losses have arisen predominantly as a result of onerous lease provisions on properties inherited from predecessor bodies that were in excess of requirements when Ofcom was incorporated.

92 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

10. Property, plant and equipment

Leasehold Fixtures & Office & field Computer Motor Assets under Total improvements fittings equipment hardware vehicles Construction £’000 £’000 £’000 £’000 £’000 £’000 £’000

Cost

At 1 April 2010 14,462 828 13,469 3,985 556 – 33,300

Additions during year 365 15 580 5,753 – – 6,713

Impairment – – – – – – –

Disposals (397) (4) (65) (23) (430) – (919)

Transfers 125 – – – – – 125

At 31 March 2011 14,555 839 13,984 9,715 126 – 39,219

Additions during year 432 19 904 25 – 266 1,646

Impairment – – – – – – –

Disposals (452) (4) (765) (1,908) (7) – (3,136)

Transfers – – – – – – –

Cost at 31 March 2012 14,535 854 14,123 7,832 119 266 37,729

Depreciation

At 1 April 2010 8,026 417 9,222 3,106 541 – 21,312

Charge for the year 956 91 1,145 656 1 – 2,849

Impairment – – – – – – –

Disposals (271) (4) (65) (23) (416) – (779)

Transfers – – – – – – –

At 31 March 2011 8,711 504 10,302 3,739 126 – 23,382

Charge for the year 980 83 950 1,680 – – 3,693

Impairment – – – – – – –

Disposals (304) (4) (762) (1,904) (7) – (2,981)

Transfers – – – – – – – Accumulated depreciation at 9,387 583 10,490 3,515 119 – 24,094 31 March 2012

NBV 31 March 2012 5,148 271 3,633 4,317 – 266 13,635

NBV 31 March 2011 5,844 335 3,682 5,976 – – 15,837

All assets set out in the table above are Ofcom-owned assets. Equipment purchased for the Spectrum Clearance and Awards program have been included in Ofcom’s asset registers under Field Equipment. During 2011/12 this costs amounted to £0.4m.

| 93 SECTION D NOTES TO THE ACCOUNTS

11. Intangible assets

Website Software Information Development Total Development licences technology expenditure £’000 £’000 £’000 £’000 £’000

Cost

At 1 April 2010 – 5,167 21,105 1,671 27,943

Additions during year 18 237 349 1,580 2,184

Impairment – – – – –

Disposals – (47) (201) – (248)

Transfers 21 – 503 (649) (125)

At 31 March 2011 39 5,357 21,756 2,602 29,754

Additions during year – 108 246 397 751

Impairment – – – – –

Disposals – (449) (74) – (523)

Transfers – – 1,818 (1,818) –

Cost at 31 March 2012 39 5,016 23,746 1,181 29,982

Amortisation

At 1 April 2010 – 2,630 10,381 – 13,011

Charge for the year 11 965 4,302 – 5,278

Impairment – – – – –

Disposals – (47) (201) – (248)

Transfers – – – – –

At 31 March 2011 11 3,548 14,482 – 18,041

Charge for the year 13 776 4,296 – 5,085

Impairment – – – – –

Disposals – (449) (74) – (523)

Transfers – – – – –

Accumulated amortisation at 24 3,875 18,704 – 22,603 31 March 2012

NBV 31 March 2012 15 1,141 5,042 1,181 7,379

NBV 31 March 2011 28 1,809 7,274 2,602 11,713

All assets set out in the table above are Ofcom-owned assets.

94 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

12. Trade and other receivables – amounts falling due within one year

2012 2011 £’000 £’000

Trade receivables 1,501 1,852

Other receivables 163 210

Prepayments 5,451 4,999

Staff loans and advances 238 213

Accrued income 1,591 876

Total trade and other receivables – amounts falling due within one year 8,944 8,150

Staff loans relate to 173 (2011:168) season ticket loans to colleagues repayable over 12 months.

13. Trade and other receivables – amounts receivable after more than one year

2012 2011 £’000 £’000

Prepayments 277 544

Accrued income 839 795

Total trade and other receivables – amounts receivable after more than one year 1,116 1,339

14. Cash and cash equivalents

2012 2011 £’000 £’000

Commercial banks and cash in hand 13,677 26,942

Balance of funds relating to Section 400 – 2

Total cash and cash equivalents 13,677 26,944

All activities and cash balances relating to Licence Fees and Penalties are separated from the Ofcom accounts and are disclosed in the Section 400 accounts.

| 95 SECTION D NOTES TO THE ACCOUNTS

15. Trade and other payables – amounts falling due within one year

2012 2011 £’000 £’000

Trade payables 1,730 711

Other tax and social security – 1,790

Other payables 580 563

Value added tax payable 88 135

Grant-in-aid BIS – 8,255

Grant-in-aid DCMS 3,932 –

Accruals 10,859 15,886

Lease incentive accrual 1,309 1,337

Deferred income 4,826 6,502

Total trade and other payables – amounts falling due within one year 23,324 35,179

The Government’s target for payments to suppliers is 5 days. In addition to small and medium suppliers, Ofcom also includes large suppliers in this scheme to encourage them to pay their small business suppliers within the shorter timeframe.

For 2011/12 Ofcom achieved on average a performance of 88.30 per cent against these targets (2010/11: 91.29 per cent).

The role of sponsor body was re-assigned to DCMS from BIS from 01 April 2011.

16. Trade and other payables – amounts falling due after more than one year

2012 2011 £’000 £’000

Lease incentive accrual 7,198 8,693

Deferred income 412 938

Total trade and other payables – amounts falling due after more than one year 7,610 9,631

96 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

17. Provisions for liabilities and charges

Early retirement Vacant property Restructuring Total £’000 £’000 £’000 £’000

At 1 April 2010 485 3,581 285 4,351

Discount unwound in year 11 79 – 90

Utilised in year (185) (1,101) (257) (1,543)

Provision increased/(released) 283 1,455 (28) 1,710

At 1 April 2011 594 4,014 – 4,608

Discount unwound in year 17 88 – 105

Utilised in year (158) (537) – (695)

Provision increased/(released) 23 (150) – (127)

Total provisions as at 31 March 2012 476 3,415 – 3,891

Provisions are calculated in accordance with the requirements of IAS 37. Provisions for early retirement are discounted by 2.8 per cent (2011: 2.9 per cent) per annum in accordance with HM Treasury direction; all other provisions are discounted by 2.2 per cent (2011: 2.2 per cent).

Analysis of expected timing of cashflows Early retirement Vacant property Total £’000 £’000 £’000

Current

Not later than one year 117 382 499

117 382 499

Non-current

Later than one year and not later than five years 205 2,713 2,918

Later than five years 154 320 474

359 3,033 3,392

476 3,415 3,891

The provision for early retirement £0.5m (2011: £0.6m) is for early retirement costs of former employees of Oftel, the Radiocommunications Agency and Ofcom and is payable primarily in the years to 2014.

The provision for vacant properties includes one property (2011: two) which are surplus to requirements. Professional advice has been taken in marketing vacant property and future income streams are recognised as and when sub-letting of properties is reasonably certain. The provision is the net present value of the expected cash outflows calculated to the next lease break, net of the discounted value of future income streams secured from committed or reasonably certain future sub-letting agreements.

| 97 SECTION D NOTES TO THE ACCOUNTS

18. Commitments under operating leases

Buildings Vehicles Other Total £’000 £’000 £’000 £’000

The future aggregate minimum lease payments under operating leases are as follows:

Not later than one year 8,347 356 221 8,924

Later than one year and not later than five years 33,040 474 467 33,981

Later than five years 13,056 – – 13,056

Total commitments under operating leases 54,443 830 688 55,961

The rental agreement of Riverside House is until September 2022 with a break option in September 2018. The next rent review will be effective from 29 September 2012.

19. Amounts receivable under operating leases

Buildings 2012 £’000 The future minimum lease payments receivable under non-cancellable operating leases are as follows: Not later than one year 1,643 Later than one year and not later than five years 859 Later than five years – 2,502

Ofcom has entered into sub-lease contracts with regards to unoccupied office space within its main office building.

98 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

20. Subsidiaries

The Broadcast Equality and Training Regulator Limited (BETR)*, set-up as a co-regulatory body with Ofcom its sole member, was incorporated on 6 July 2005 as a response to a requirement of Ofcom under the Communications Act of 2003. In 2010, the Government announced its intention to examine the framework surrounding Ofcom’s duties to promote training and equal opportunities in the broadcasting sector. As a result the BETR was wound up in June 2011 and its responsibilities and duties reverted to Ofcom. The final accounts were prepared for the 15 month period April 2010 to June 2011 with turnover of £0.5m (2009/10: £0.4m), an operating profit after taxation of £0.0m (2009/10: £0.0m loss) and reserves of £0.0m (2009/10 £0.0m). Due to the size and extent of the subsidiary’s operations during the current financial year, the company’s operating results have not been consolidated in this report.

* Broadcast Training & Skills Regulator (BTSR) until 2010.

21. MG Alba

In accordance with Section 210 of the Communications Act 2003 and Section 183 of the Broadcasting Act 1990, the Scottish Ministers paid £11.8m (2011: £12.5m) to Ofcom. This sum has not been reflected in these accounts but has been paid by Ofcom to the Gaelic Broadcasting Fund under the management of the Seirbheis nam Meadhanan Gàidhlig (MG Alba). MG Alba prepares separate reports and accounts to 31 March each year. These are sent by Ofcom to the Secretary of State for Scotland and Scottish Ministers to be laid before the Scottish Parliament.

| 99 SECTION D NOTES TO THE ACCOUNTS

22. Retirement benefit obligations

Ofcom has a range of pension schemes which include defined contributions plans, defined benefit plans and unfunded plans.

2012 2011 £’000 £’000

Defined Benefit pensions – 22B 32,420 21,260

Unfunded pensions liability – 22C (1,091) (898)

Total retirement benefit obligations 31,329 20,362

A) Stakeholder pension plan year ending 31 March 2012 were Following consultation with Plan Ofcom’s primary means of providing £1.0m (2011: £2.6m). An additional members, Ofcom closed both pension benefits to its colleagues is by £8.0m was transferred to the Feeder Plans to future accrual from 1 June contributing to a stakeholder pension Trust account. Ofcom also operates 2011. Ofcom informed members of plan, which is a defined contribution a defined contribution section to their intention to close the Plans in pension plan. Employer contributions the plan and made contributions of February 2011. The results of the of £4.1m were made in the year ended £0.0m in 2012 (2011: £0.1m); and IAS 19 calculations recognises the curtailment gain created by this 31 March 2012 (2011: £3.7m). • the Ofcom (Former ITC) Pension Plan action in full as at 31 March 2011. which Ofcom jointly participates in B) Closed pension plans with three other organisations, S4C, Ofcom operates two closed S4C Masnachol and the Advertising defined benefit pension plans: Standards Authority. The employer contributions made to the Ofcom • the Ofcom Defined Benefit (Former ITC) Pension Plan in 2012 Pension Plan was established on was £1.6m (2011: £4.2m). An 29 December 2003. The employer additional £0.5m was transfered contributions made to the Ofcom from the Feeder Trust account. Defined Benefit Pension Plan for the

Employee benefit obligations

The amounts recognised in the Statement of Financial Position are as follows: 2012 2011 £’000 £’000

Funded status, end of year

Fair value of plan assets 223,489 217,470

Pension fund feeder bank account 14,871 7,380

Benefit obligations (194,570) (187,580)

Funded status 43,790 37,270

Minimum funding requirement liability (11,370) (16,010)

Net funded status 32,420 21,260

100 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

According to IFRIC 14 if an entity’s Plan’s trustees as part of the Statutory its two defined benefit plans are, contributions to its defined benefit Funding Objective to be a “minimum however, determined in accordance scheme are subject to a “minimum funding requirement” which with the Pensions Act 2004 and this funding requirement” it is possible results in a liability. The minimum requires a significantly more prudent that this may limit the ability of the funding requirement relates only measure of the liabilities than IFRS. entity to reduce future contributions to the Ofcom (Former ITC) Pension Pensions Act funding valuations with and/or give rise to a liability if the Plan and the agreed schedule of an effective date of 31 March 2012 required contributions will not be contributions relating to that. are currently in progress for both available to the entity once they defined benefit plans. The results of have been paid. Ofcom regard the The defined benefit obligation has these valuations are not yet known current Schedule of Contributions been calculated in accordance with but, unlike under IFRS, they are agreed between Ofcom and the IFRS. Ofcom’s cash contributions to expected to show a significant deficit.

The amounts recognised in the Statement of Income and Expenditure are as follows:

The amounts recognised in the Statement of Financial Position are as follows: 2012 2011 £’000 £’000

Current service cost 200 1,490

Interest on obligation 10,290 10,520

Expected return on plan assets (11,620) (11,010)

Past service cost 100 560

Curtailment or settlement (gain)/loss – (2,430)

Net (surplus)/cost in income and expenditure (1,030) (870)

Actual return on plan assets 13,980 (11,300)

Changes in the present value of the defined benefit obligation areas:

The amounts recognised in the Statement of Financial Position are as follows: 2012 2011 £’000 £’000

Opening defined benefit obligation 187,580 189,180

Current service cost 200 1,490

Interest cost 10,290 10,520

Plan participants' contributions 50 210

Actuarial (gains)/losses 7,500 (2,270)

Past service cost 100 560

Gains on curtailment – (2,430)

Benefits paid (11,150) (9,680)

Closing defined benefit obligation 194,570 187,580

| 101 SECTION D NOTES TO THE ACCOUNTS

Changes in the fair value of plan assets are as follows:

2012 2011 £’000 £’000

Opening fair value of plan assets 217,470 199,670

Expected return 11,620 11,010

Actuarial gains 2,360 290

Contributions by employer 2,630 6,830

Contributions from Feeder Trust 509 9,140

Plan participants' contributions 50 210

Benefits paid (11,150) (9,680)

Closing fair value of plan assets 223,489 217,470

Employer’s contributions include £2.6m together with £0.5m and additional interest which was transfered from the balance on the Feeder Trust account. A further £8.0m was placed in the Feeder Trust account. Funds transferred to and held in the trust account can only be paid into one of the two Defined Benefit Pension Schemes and are not able to be used for any other purpose.

The major categories of plan assets as a percentage of total plan assets are as follows:

2012 2011 % %

Equities 15 17

Corporate bonds 9 8

Index-linked bonds 13 18

Fixed interest government bonds – –

Annuities 56 52

Other (including assets in the Ofcom Pension Trust) 7 5

100 100

102 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Return on assets (before deduction of expenses):

2012 2011 % %

Equities 6.20 7.75 Corporate bonds 5.25 5.65 Index-linked bonds 3.25 4.75 Fixed interest government bonds 3.25 4.75 Annuities 5.25 5.65 Other (including assets in the Ofcom Pension Trust) 1.00 1.00

The expected return on plan assets is calculated using the plan’s asset allocation at the disclosure date and the expected return on each major asset class that the plan is invested in.

Principal actuarial assumptions at the date of the Statement of Financial Position (expressed in weighted averages):

2012 2011 % %

Discount rate 5.25 5.65 Expected return on plan assets for the year (Ofcom DB Plan) 5.00 6.25 Expected return on plan assets for the year 5.17 5.63 (Ofcom (former ITC) Plan) Future salary increases – – Future pension increases (RPI) 3.15 3.35 Future pension increases (CPI) 2.00 2.25 Retail Price Inflation 3.25 3.50

Principal actuarial assumptions at the date of the Statement of Financial Position (expressed in weighted averages):

Amounts for the current and previous years are as follows: 2012 2011 £’000 £’000

Funded status Fair value of plan assets 238,360 224,850 Present value of defined benefit obligations (194,570) (187,580) Surplus in fund 43,790 37,270

2012 2011 2010 2009 £’000 £’000 £’000 £’000

Experience adjustments on plan liabilities (2,840) (120) 4,610 (1,207) Experience adjustments on plan assets 2,360 290 20,980 (40,390)

IAS 19 requires the above information to be shown for the previous four years; however, as IFRS was adopted from 1 April 2008, historical data from this date only are disclosed.

| 103 SECTION D NOTES TO THE ACCOUNTS

C) Unfunded pension liabilities The pension provision is in respect of the unfunded pension liabilities which fall to Ofcom for former Chairmen of the Independent Television Commission, the Radio Authority and former Directors General of Telecommunications. During the year the unfunded pension liability was increased reflecting the liabilities relating to former chairmen of Postcomm. The pension provision is unfunded, with the benefits being paid as they fall due and guaranteed by Ofcom. There is no fund, and therefore no surplus or deficit. Actuarial advice has been sought to ensure that the provision is set at a realistic level.

Analysis of the amount debited to other finance costs

2012 2011 £’000 £’000

Interest on pension liabilities (49) (49)

Net return (49) (49)

Analysis of the amount recognised in the Statement of Changes in Equity (SOCIE)

2012 2011 £’000 £’000

Experience (losses)/gains arising on the plans’ liabilities (39) (23)

Changes in assumptions underlying the present value of pension scheme liabilities (26) 5

Actuarial loss recognised in SOCIE (65) (18)

Movement in deficit during the year

2012 2011 £’000 £’000

Deficit in plans at 1 April (898) (894)

Total current service cost – –

Employer's contributions (including those unpaid at measurement date) 65 63

Employees' contributions – –

Past service cost (144) –

Other finance costs (49) (49)

Actuarial loss (65) (18)

Deficit in plans (1,091) (898)

104 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

23. Related parties • Programme of spectrum awards become payable within 12 months – £0.1m (2011: £1.5m); of the reporting date have been Ofcom does not consider that omitted from this assessment. its regulatory and licensing role • Online Copyright Infringement creates the relationship of a – £0.2m (2011: £0.2m); related party between itself and • Other sectors – £0.0m (2011: £0.1m) 25. Capital licence holders as defined by IAS commitments 24, ‘’Related Party Disclosures’’. No other related party transactions were entered into At 31 March 2012 there were Members of the Board submit an during the financial year. capital commitments of £0.9m annual declaration confirming that (2011: £0.1m), primarily relating to they have no interests prejudicial development work for a broadcast to their function as a Member of 24. Financial licensing solution and a high Ofcom. There were no transactions instruments availability monitoring solution for between Ofcom and its Members Ofcom has no significant exposure sensors at the Olympic venues. other than remuneration as disclosed to liquidity, interest rate or currency separately in the remuneration report. risks. IAS 32, Financial Instruments: 26. Receipts transferred The Secretaries of State for Presentation requires disclosure of to the Consolidated Fund the Department for Business, the role which financial instruments Innovation and Skills (BIS) and the have had during the year in creating In accordance with Section 400 of the Department for Culture, Media or changing the risks an entity faces Communications Act 2003, Ofcom and Sport (DCMS) are regarded as in undertaking its activities. Because remitted £6.2m (2011: £3.6m) of the controlling related parties of of the nature of its activities and the Broadcasting Act Additional Payments Ofcom under the terms of the Office way in which Ofcom is financed, it is and Fines to the Consolidated Fund. of Communications Act 2002. not exposed to the degree of financial risk faced by business entities. £269.2m (2011: £187.6m) of WT Act Details of all grant-in-aid income licence fees was remitted to DCMS from BIS and DCMS are provided Moreover, financial instruments play for transfer to the Consolidated in Note 3 and Note 15 respectively a limited role in creating or changing Fund. Details on amounts due to of these financial statements. risk as compared to listed companies the Consolidated Fund at 31 March to which IAS 32 mainly applies. Ofcom 2012 are disclosed at Note 14 A defined benefit scheme has very limited powers to borrow or to these financial statements. and two defined contribution invest surplus funds. Financial assets schemes are operated. Refer to and liabilities that are generated by Note 22 for further disclosure. day-to-day operational activities do not change the risks facing Ofcom At 31 March 2012, the following in undertaking its activities. creditors were held in respect of grant-in-aid provided by DCMS: There is no material difference at the reporting date between the • Spectrum management – fair value and the carrying value £0.7m (2011: £3.6m); of financial assets and liabilities. • Spectrum clearance – As permitted by IAS 32, receivables £2.9m (2011: £2.8m); and payables which mature or

| 105 SECTION D NOTES TO THE ACCOUNTS

27. Contingent 28. Whole of 29. Events after the liabilities government accounts reporting period Ofcom has no contingent liabilities At 31 March 2012, Ofcom owed £4.0m There were no reportable events at the end of March 2012. (2011: £10.2m) to central government between the reporting date and bodies. There are no amounts owing the date when the accounts were From time to time, Ofcom will to local authorities, NHS Trusts or certified. The financial statements do be subject to legal challenge and public corporations and trading funds. not reflect events after this date. judicial review of decisions made in the normal course of its business Section 400 shows £4.4m as regulator of the communications (2011: £0.1m) owing to central sector. Legal judgements could give government bodies. rise to liabilities for legal costs. In these cases a provision is made in the financial statements for costs which are quantifiable and to the extent that they are probable. However, in some cases costs cannot be quantified, because the outcome of proceedings is unknown, and there is therefore considerable uncertainty as to the nature and extent of any subsequent liability. For the 2011/12 financial year no provision was required.

106 | Ofcom Annual Report & Accounts 2011/12 ANNEX REGULATORY STATEMENTS www.ofcom.org.uk

Annex Regulatory Statements

List of statements published in on stakeholders has changed as a published during the year resulted 2011/12 including regulatory result of Ofcom’s regulatory decisions in a reduced regulatory burden impact on stakeholders and statements in 2011/12. on our stakeholders; 73% of the The figure below summarises statements saw no change in We have categorised each statement Ofcom’s policy statements regulatory burden, or the work is in the table below as an Annual published during 2011/12. ongoing; 8% saw the introduction Plan Priority or an Ongoing Major of increased or new regulation, It includes a colour-coded key that Work Area, as set out in the while 6% resulted in streamlined indicates how the regulatory burden Annual Plan 2011/12. It shows that or co-regulatory outcomes. 13% of statements and decisions

List of statements published in 2011/12 including regulatory impact on stakeholders

Promote effective and sustainable competition Priority – Promote competition and investment in the delivery of superfast broadband Business Connectivity Market Review – Renewal of BT’s analogue and low bandwidth digital leased lines undertakings Waiver of BT’s price notification requirements for wholesale analogue exchange line (basic and premium) and LLU metallic path facility services rental charges Major Work Area – Enforce competition Fair and reasonable charges for fixed geographic call termination Major Work Area – Implement regulatory proposals and new charge controls WBA Charge Control – Charge control framework for WBA Market 1 services Changes to BT and KCOM’s regulatory and financial reporting 2010/11 update Charge control review for LLU and WLR services Charge control review for LLU and WLR services – Statement LLCC PPC Points of Handover pricing review – Draft Statement on modification of SMP Conditions LLCC PPC Points of Handover pricing review – Final Statement on modification of SMP Conditions Update on FTTC Variation: sections 5.52-5.59 of the Undertakings offered by British Telecommunications plc to Ofcom under the Enterprise Act 2002 Wholesale charges for Number Translation Services and Premium Rate Services Extension to an existing exemption from BT’s Undertakings under the Enterprise Act 2002 for 20CN DSLAMs – Statement Statement on BT’s request for exemption from its Undertakings related to the London 2012 Olympic Games and Paralympic Games Major Work Area – Promote competition and investment in broadcasting Competition issues in the UK: TV advertising trading mechanism Decision

Promote the efficient use of public assets Priority – Auctioning of the 800 MHz and 2.6 GHz spectrum awards Statement on proposal to make 900 MHz, 1800 MHz and 2100 MHz public wireless network licences tradable Statement on variation of 2100 MHz Third Generation Mobile Wireless Telegraphy Act Licences

Increased/new regulation Mixed/no-change/ongoing Streamlined/co-regulatory Reduced regulation

| 107 ANNEX REGULATORY STATEMENTS

List of statements published in 2011/12 including regulatory impact on stakeholders (Continued)

Priority – Deliver the Government’s spectrum guarantee for the London 2012 Olympic & Paralympic Games The Spectrum Plan for the London 2012 Games: Final Update Priority – Develop a future looking spectrum policy work programme taking account of market developments and future demand for spectrum Bespoke licence fees for aeronautical VHF communications frequencies Implementing Geolocation – Summary of consultation responses and next steps Guidelines on the use of battery back-up to protect lifeline services delivered using fibre optic technology Major Work Area – Spectrum licensing Decision to make the Regulations for Recognised Spectrum Access (RSA) for Receive Only Earth Stations in the Bands 1690 – 1710 MHz, 3600 – 4200 MHz, and 7750 – 7850 MHz Decision to make the Wireless Telegraphy (Licence Charges) Regulations 2011 Major Work Area – Effective spectrum licensing work Future access to interleaved spectrum for programme making and special events Ofcom’s decision on changes to the licence exemption of Wireless Telegraphy Devices Major Work Area – Simplify spectrum trading and introduce spectrum leasing Simplifying Spectrum Trading – Spectrum leasing and other market enhancements Major Work Area – Ensure wide availability of telephone number ranges and promote their efficient allocation Geographic telephone numbers

Help communications markets to work for consumers Priority – Develop and implement policies that will improve the ease of switching between Communications Providers for consumers Automatically Renewable Contracts Major Work Area – Ensure the effectiveness of consumer complaints’ handling by ADR Bodies Dispute Resolution Guidelines – Ofcom’s guidelines for the handling of regulatory disputes Major Work Area – Protection from and enforcement against unfair terms and practices by Communications Providers Direction designating geographical conditions and other circumstances as exceptional for the purpose of deliveries Review of Unexpectedly High Bills – Findings and Next Steps Modifying who is subject to the Premium Rate Services Condition – Statement on amending the PRS Condition to mirror the remit of PhonepayPlus under its new Code of Practice Major Work Area – Carry out & publish consumer research Ofcom’s approach to net neutrality

Provide appropriate assurance to audiences on standards Priority – Consider new regulatory approaches to content regulation Regulating the quantity of advertising on television Major Work Area – Ensure efficient and effective programme standards enforcement in particular in relation to the protection of minors Code on the Prevention of Undue Discrimination between Broadcast Advertisers Review of procedures for handling broadcasting complaints, cases and sanctions Major Work Area – Licence Television and Radio services in the UK (potentially including new Local TV services) Now Digital Ltd request to extend the coverage area of the local radio multiplex licence for Exeter & Torbay Television Multiplex Licence Renewals – Statement

108 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Contribute to and implement public policy defined by parliament Priority – Prepare for and fulfil regulatory duties in relation to Post Postal regulation: Transition to the new regulatory framework Postal regulation: Transition to the new regulatory framework – Update statement Statement of Charging Principles: Postal Services Priority – Prepare statutory report to Government on licensing arrangements for channels 3&5 after 2014 BBC Proposals for coverage of the London 2012 Olympic Games Licensing of Channel 3 and Channel 5 – A report from Ofcom to the Secretary of State for Culture, Olympics, Media and Sport Major Work Area – Implement new regulatory duties including those arising from the European Telecoms Framework Changes to General Conditions and Universal Service Conditions – Statement Channel 4 Schedule 9 Arrangements Major Work Area – Support switchover policies in relation to DSO in TV and radio An approach to DAB coverage planning – interim statement – Summary of responses and update on further work Third Statutory Notice of Invitation to Apply for DTT Multiplex B Capacity Major Work Area – Postal Regulation Securing the Universal Postal Service – Decision on the new regulatory framework

Other Other – Business Planning & Management UK Communications Market Report 2011 Ofcom Annual Report 2010/11 Ofcom’s Annual Plan sets out our work programme for 2012/13 Ofcom’s Tariff Tables 2012/13 Other – Customer Contact Direction under Section 106(3) of the Communications Act 2003 applying the electronic communications code in the case of allpay Limited Gigaclear Statement Other – Legal Decision to make the Wireless Telegraphy (Intelligent Transport Systems)(Exemption) Regulation 2011 Decision to make the Wireless Telegraphy (Exemption)(Amendment) Regulations 2011 Decision to make the Wireless Telegraphy (Exemption and Amendment)(Amendment) Regulations 2011 Revising the penalty guidelines

Increased/new regulation Mixed/no-change/ongoing Streamlined/co-regulatory Reduced regulation

| 109 ANNEX REGULATORY STATEMENTS

Ofcom statements published in 2011/12 in which the earlier consultation included an impact assessment

Decision to make the Wireless Telegraphy (Licence Charges) Regulations 2011

Fair and reasonable charges for fixed geographic call termination

Future access to interleaved spectrum for programme making and special events

Changes to General Conditions and Universal Service Conditions – Statement

Statement on proposal to make 900 MHz, 1800 MHz and 2100 MHz public wireless network licences tradable

Simplifying Spectrum Trading – Spectrum leasing and other market enhancements

WBA Charge Control – Charge control framework for WBA Market 1 services

Wholesale charges for Number Translation Services and Premium Rate Services

Modifying who is subject to the Premium Rate Services Condition – Statement on amending the PRS Condition to mirror the remit of PhonepayPlus under its new Code of Practice

LLCC PPC Points of Handover pricing review – Draft Statement on modification of SMP Conditions

Implementing Geolocation – Summary of consultation responses and next steps

LLCC PPC Points of Handover pricing review – Final Statement on modification of SMP Conditions

Geographic telephone numbers

Automatically Renewable Contracts

Decision to make the Regulations for Recognised Spectrum Access (RSA) for Receive Only Earth Stations in the Bands 1690 – 1710 MHz, 3600 – 4200 MHz, and 7750 – 7850 MHz

Guidelines on the use of battery back-up to protect lifeline services delivered using fibre optic technology

Ofcom’s decision on changes to the licence exemption of Wireless Telegraphy Devices

Television Multiplex Licence Renewals – Statement

Charge control review for LLU and WLR services – Statement

Charge control review for LLU and WLR services

Securing the Universal Postal Service – Decision on the new regulatory framework

Ofcom’s Annual Plan sets out our work programme for 2012/13

Decision to make the Wireless Telegraphy (Intelligent Transport Systems)(Exemption) Regulation 2011

Decision to make the Wireless Telegraphy (Exemption)(Amendment) Regulations 2011

Decision to make the Wireless Telegraphy (Exemption and Amendment)(Amendment) Regulations 2011

110 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Ofcom consultations published in 2011/12 which included an impact assessment and where no statement has been published

Price controls for wholesale ISDN30 services

Coexistence of new services in the 800 MHz band with digital terrestrial television

Consultation and information on technical licence conditions for 800 MHz and 2.6 GHz spectrum and related matters

Review of relay services

Review of Premium Rate Services – An application of the analytical framework

Extending spectrum transfer to the maritime and satellite earth station sectors

Licensing Local Television – How Ofcom would exercise its new powers and duties being proposed by Government

Wholesale ISDN30 price control – Further consultation

Second consultation on assessment of future mobile competition and proposals for the award of 800 MHz and 2.6 GHz spectrum and related issues

Notice of proposals to make the Wireless Telegraphy (Licence Charges) (Amendment) Regulations 2012

Changes to BT and KCOM’s regulatory and financial reporting 2011/12 update

Consumer switching – A consultation on proposals to change the processes for switching fixed voice and broadband providers on the Openreach copper network

Second consultation on coexistence of new services in the 800 MHz band with digital terrestrial television

Authorisation regime for GNSS repeaters 1164-1215 MHz, 1215-1300 MHz &1559-1610 MHz

Notice of proposed variation of Everything Everywhere’s 1800 MHz spectrum licences to allow use of LTE and WiMAX technologies

Geographic telephone numbers

Securing long term benefits from scarce spectrum resources – A strategy for UHF bands IV and V

| 111 ANNEX BROADCASTING COMPLAINTS, CASES AND SANCTIONS

Broadcasting complaints, cases and sanctions

Ofcom has a statutory duty under Standards whether there may have been a breach the Communications Act to establish A total of 7,263 cases (21,484 of the Broadcasting Code (or other procedures for the handling and complaints) were about standards in Ofcom codes or licence conditions). resolution of complaints from listeners television and radio programmes. If not, Ofcom will decide not to and viewers about radio and television investigate further and publishes this programmes broadcast on services Previous procedures decision in its Broadcast Bulletin5. licensed by Ofcom, and the BBC Complaints received between 1 and S4C (with certain exceptions). April 2011 and 31 May 2011 were A total of 5,980 cases (13,682 handled under Ofcom’s procedures complaints) were assessed in this All complaints are important to for handling broadcasting complaints way between 1 June 2011 and 31 Ofcom as they help us to understand that were in force at the time. March 2012. Ofcom found that: whether a broadcaster may be failing to comply with rules in the A total of 1,283 cases (7,802 • 277 cases (4,059 complaints) Broadcasting Code1, or other Ofcom complaints) were closed during raised substantive issues that codes or licence conditions. that period. Ofcom found that: warranted further investigation; • 5,203 cases (9,030 complaints) did Individual complaints received by • 140 cases resulted in breaches not require further investigation; and Ofcom are assigned to cases. A case of the Broadcasting Code, other is opened when Ofcom is assessing a Ofcom codes or of licence • 500 cases (593 complaints) fell specific programme or issue and may conditions being recorded; outside Ofcom’s remit. consist of one or more complaints. • 30 cases were resolved3; and Ofcom aims to make an initial A total of 7,551 cases (which assessment of all complaints within compromised 21,772 complaints) were • 1,113 cases were found not to be in 15 working days. In the period closed in the period under review. breach or outside of Ofcom’s remit. between 1 June 2011 and 31 March On 1 June 2011, Ofcom introduced New procedures 2012, Ofcom assessed complaints on revised procedures for the handling Initial assessment of complaints average within 4.5 working days. of broadcasting complaints, cases Complaints received after 1 June 2 and sanctions . Between 1 April 2011 2011 were handled under Ofcom’s Investigations and 31 May 2011, Ofcom handled procedures for investigating If a case raises potentially substantive complaints under its previous breaches of content standards issues, Ofcom will investigate the procedures. For the purposes of clarity 4 for television and radio . matter further to decide whether we have provided a breakdown of a breach of the Broadcasting the complaints handled under the Ofcom assesses every complaint Code (or other Ofcom codes or two separate sets of procedures. it receives. Based on an initial licence conditions) has occurred. assessment of the complaint and a An investigation may consist consideration of the related television of one or more related cases or radio content, Ofcom will consider involving the same broadcaster.

1 Available at: http://stakeholders.ofcom.org.uk/broadcasting/broadcast-codes/broadcast-code 2 For further information about the revised procedures, please see page 22 of the Annual Report. 3 In some cases, for instance where a broadcaster has taken immediate and appropriate steps to remedy a breach, Ofcom may consider it appropriate not to record a breach, and decide that the appropriate outcome is to determine that the case is ‘resolved’. 4 Available at: http://stakeholders.ofcom.org.uk/broadcasting/guidance/complaints-sanctions/standards 5 Available to view at: http://stakeholders.ofcom.org.uk/enforcement/broadcast-bulletins

112 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

A total of 239 investigation cases A total of 127 complaints were Ofcom aims to assess and decide were completed in the period adjudicated upon during that whether to entertain Fairness and between 1 June 2011 and 31 period. Of those complaints: Privacy complaints within 25 working March 2012. Ofcom found that: days of receipt of the complaint and • 16 complaints were upheld (of any further information requested • 104 investigated cases resulted in which three were partially upheld); from the complainant. In the breaches of the Broadcasting Code • 51 complaints were not upheld; period between 1 June 2011 and (or other Ofcom codes or licence 31 March 2012, Ofcom assessed • Four complaints were resolved conditions) being recorded; and decided whether to entertain (following appropriate action • 27 investigated cases Fairness and Privacy complaints on taken by the broadcaster); and were resolved; and average within 16. 8 working days. 56 complaints were not entertained • 108 investigated cases were Adjudications or discontinued after entertainment. not in breach of the codes. If a Fairness and Privacy complaint New procedures Ofcom aims to complete those cases is entertained by Ofcom, it will that it takes forward for investigation Complaints received after 1 June investigate the matter further to within 50 working days. In the period 2011 were handled under Ofcom’s decide whether a breach of the between 1 June 2011 and 31 March Procedures for the consideration Broadcasting Code has occurred and, if 2012, Ofcom completed investigations and adjudication of Fairness so, it will uphold the complaint. Ofcom on average within 34.1 working days. and Privacy complaints6. will then make its final adjudication. Assessment and Entertainment • A total of 28 complaints were Fairness and privacy Ofcom assesses every Fairness and adjudicated upon in the period Fairness and Privacy complaints are Privacy complaint it receives to under review. Ofcom decided that: complaints about unjust or unfair decide whether or not to entertain • Six complaints were upheld (of treatment in programmes, or about the complaint. This assessment is which three were partially upheld); unwarranted infringements of privacy based on whether: the complainant in programmes (or in connection with is the “person affected” and able • 15 complaints were not upheld; the obtaining of material included in to make the complaint; the matter • Two complaints were resolved them). These complaints are normally complained of is the subject of (following appropriate action made by individuals or organisations proceedings in a court of law in the taken by the broadcaster); and participating in or otherwise directly UK; or the complaint is frivolous. affected by programmes as broadcast, • Five complaints were discontinued or in the making of programmes. A total of 161 Fairness and Privacy after entertainment. complaints were assessed in the A total of 288 complaints relating to period between 1 June 2011 and 31 Ofcom aims to complete the Fairness and Privacy were closed. March 2012. Ofcom decided that: consideration and adjudication of Fairness and Privacy complaints Previous procedures • 28 complaints were entertained; and within 90 working days of the Complaints received between complaint being entertained. In the • 133 complaints were not 1 April 2011 and 31 May 2011 period between 1 June 2011 and 31 entertained or discontinued before were handled under Ofcom’s March 2012, Ofcom completed the entertainment. procedures for handling Fairness consideration and adjudication of and Privacy complaints that Fairness and Privacy complaints on were in force at the time. average within 76.0 working days.

6 Available to view at: http://stakeholders.ofcom.org.uk/broadcasting/guidance/complaints-sanctions/fairness

| 113 ANNEX BROADCASTING COMPLAINTS, CASES AND SANCTIONS

Sanctions • Satellite Entertainment Limited • Al Ehya Digital Television Limited Where Ofcom decides that a in respect of its services Essex in respect of its service Noor broadcaster has breached the Babes, Northern Birds and TV – £75,000 and a direction Broadcasting Code or other relevant Live XXX Babes – £90,000; to transmit Ofcom’s statement of findings on one occasion; Ofcom code or licence condition, and • Voice of Africa Radio Limited it considers the breach to be serious, in respect of its community • The Light Academy Limited in deliberate, repeated and/or reckless, radio service Voice of Africa respect of its service Believe it may consider whether to impose a Radio – £1,000; and TV – £25,000 and a direction to statutory sanction on the broadcaster. transmit Ofcom’s statement of More FM Ltd in respect of its findings on one occasion; and The range of sanctions available to local commercial radio service Ofcom include a decision to: issue a Total Star – Bridgwater and West • BBA Media Ltd in respect of its direction not to repeat a programme Somerset – reduce the period for service Westside Radio – £500; and or advertisement; issue a direction to which the licence is to be in force • Neath Port Talbot (NPT) Broadcasting broadcast a correction or a statement by a period of twelve months. C.I.C. (the “Licensee”) in respect of Ofcom’s findings; impose a financial New procedures of its service Afan FM – £500. penalty7; shorten or suspend a licence; and revoke a licence (not applicable Cases considered for the imposition to the BBC, S4C or Channel 4). of a statutory sanction after 1 June 2011 were handled under Ofcom’s Previous procedures procedures for the considerations Cases considered for the imposition of statutory sanctions in breaches of a statutory sanction before of broadcast licences8. 1 June 2011 were handled under Ofcom’s procedures for handling During the period between broadcasting sanctions that 1 June 2011 and 31 March 2012, were in force at the time. Ofcom decided to impose the following statutory sanctions: During the period between 1 April 2011 and 31 May 2011, • Satellite Entertainment Limited the Broadcasting Sanctions in respect of its services Sport Committee decided to impose the XXX Girls, Essex Babes and following statutory sanctions: Northern Birds – £130,000; • Just4Us TV Limited in respect of its • Press TV Limited in respect of service Red Light 1 – £60,000, and its service Press TV – £100,000 Playboy TV UK/Benelux Limited and a direction not to repeat the in respect of its services Red Light material found in breach on any 2 and Red Light 3 – £50,000; future occasion and a direction to transmit Ofcom’s statement of findings on one occasion;

7 All financial penalties imposed by Ofcom are held in an account with Government Banking Services (GBS) for the benefit of the Exchequer. Funds are transferred to the HM Treasury GBS account for direct use by the Exchequer, or distributed to relevant Consolidated Funds. Ofcom neither receives financial benefits from nor makes use of any financial penalties received. 8 Available to view on the Ofcom website at: http://stakeholders.ofcom.org.uk/broadcasting/guidance/complaints-sanctions/procedures-statutory-sanctions

114 | Ofcom Annual Report & Accounts 2011/12 STATISTICAL DATA www.ofcom.org.uk

Statistical data

Broadcast licensing

TV licences issued: Category 2011/12 2010/11 On Issue

TV licences issued 87 125 998* TV licences transferred 48 67

* 910 TLCS licences (which authorises cable, satellite, and internet); 70 DTAS/DTPS (for content on Freeview); 18 public service (regional 3 licences, 4, 5 and Breakfast)

Radio licences issued: Category 2011/12 2010/11 On Issue Local Sound Broadcasting Licence – 1 294 National Sound Broadcasting Licence – – 3 Local Digital Mulitplex (Local Radio Multiplex Service) – – 46 National Radio Multiplex – – 1 Radio Licensable Content Service (RLCS) 10 6 8 (Local) Digital Sound Programme Service (DSPS) 13 12 60 (National) Digital Sound Programme Service (DSPS) 4 3 16 Digital Additional Service (DAS) 1 1 7 Additional Radio Service Licence * – 1 Short Term Restricted Service Licence (RSL) 314 321 – Long Term Restricted Service Licence (RSL) 6 15 89 Audio Distribution System RSL 1 – 11 Community Radio 39 23 198

*The sole licence in this category expired during this period and went on to be re-awarded

Telecoms

Complaints about telecoms services 2011/12 2010/11 Change (%) Automatic contract renewals 650 1,050 (38) Additional charges 4,550 5,650 (19) Broadband speeds 1,400 1,400 0 Charged for cancelled service 3,150 4,500 (30) Complaints handling 14,200 15,750 (10) Migration 2,800 5,300 (47) Mis-selling 12,550 15,300 (18) Silent calls 16,500 10,350 59 Other 46,350 53,450 (13) Total complaints 102,150 112,750 (9)

| 115 ANNEX INVESTIGATIONS PROGRAMME

Investigations programme

Ofcom’s investigations programme deals with complaints about anti-competitive behaviour, breaches of certain regulatory rules and regulatory disputes. The following table shows Ofcom’s activities in conducting enquiries and investigations during 2011/12 and how we have performed against our statutory and published targets. This reflects the picture as at 31 March 2012.

It should be noted that the number of cases recorded in the table tends to be small and the reported KPIs can be volatile as a result. More information on the investigations programme is set out in our six-monthly reports: Ofcom’s Investigations Activity (http://stakeholders.ofcom.org.uk/enforcement/competition-bulletins/six-monthly-roundup-complaints).

In July 2009 Ofcom restructured its investigations activities, splitting this work between the Competition Group Investigations Team and the Consumer Protection Team. The data in the table below cover the performance of both teams.

Activity & target Performance against targets Ongoing activity

Enquiries • 15 enquiries were concluded in 2011/12 (six • One enquiry was ongoing at the year end • Completion within 15 working days led to disputes being accepted, two related and was within target. to determinations required to be issued • Completion within eight weeks for pursuant to an Order made by the CAT, one competition law led to an own-initiative investigation and six resulted in no further action). • Nine of the 15 enquiries (60%) were completed within target.

Disputes • A total of 11 disputes were handled in the • Seven disputes were ongoing at end of • Completion within four months course of the year. the year. • Four disputes were resolved in the year. • Three were within target. • All four (100%) of the resolved disputes • Exceptional circumstances apply to each of were concluded within target. the four other disputes.

Competition law investigations • No investigations were opened or closed • There was one ongoing investigation at the • Completion within six months for during the year. year-end that has exceeded target. non-infringement or 12 months for infringement

Other investigations and • One investigation was opened and six were • There was one ongoing individual enforcement programmes closed in 2011/12. investigation at the end of 2011/12 which • Individual investigations have a target • Five of the six closed investigations were had exceeded its target. of completion within four months for all completed within target (83%). • In addition, there were six ongoing except own-initiative or Enterprise Act • One enforcement programme was opened enforcement programmes. which have a target of completion in six and none were closed in 2011/12. months. Enforcement programmes are not subject to time targets

116 | Ofcom Annual Report & Accounts 2011/12 SPECTRUM ENGINEERING AND ENFORCEMENT – KEY PERFORMANCE INDICATORS www.ofcom.org.uk

Spectrum engineering and enforcement – key performance indicators

Main activities

Work Programme Activity/Incident 2011/12 2010/11 Interference cases received Domestic cases * 988 1,323 Business Cases 1,283 1,103 Not specified 241 544 Baldock: spectrum activities 4,293 4,265 Enforcement cases opened 674 752 Radio system compliance inspections completed 215 235 Successful prosecutions for criminal spectrum activity 12 30 Unsuccessful prosecutions for criminal spectrum activity 0 0

* Domestic Cases relate to interference affecting radiocommunications equipment used in a domestic environment.

At the start of this financial year we KPI1 Time to First Visit: The time KPI 2 Resolution: The time taken introduced new Key Performance take from reporting a complaint from reporting a complaint of Indicators (KPIs) to measure the of interference to the time our interference to the time the customer effectiveness of our Interference engineer arrives on site to diagnose is advised that the case is resolved. Service Delivery. The new KPIs and the problem (for those cases associated targets focus directly where a field visit is required). on customer experience.

Key performance indicators (interference cases)

Case Priority KPI Target Quality of Service Target Achieved

2011/12 2010/11 Priority 1 First Visit 8 hours 90% n/a Resolution 2 calendar days 100% n/a Priority 2 First Visit 18 hours 94% n/a Resolution 3 calendar days 97% n/a Priority 3 First Visit 2 working days 92% n/a Resolution 6 working days 94% n/a Priority 4 First Visit 5 working day 88% n/a Resolution 20 working days 97% n/a Priority 5 First Visit 15 working days 93% n/a Resolution 40 working days 98% n/a Priority 6 First Visit n/a n/a n/a Resolution 60 working days 97% n/a

| 117 ANNEX SPECTRUM LICENSING

Spectrum licensing

Category A

Licences that involve no frequency assignment, site clearance or Licences issued Licences issued Total on issue as at international co-ordination April 11 – March 12 April 10 – March 11 31 March 12

Business Radio Light – Simple UK (no base station) 1,445 1,348 7,732 Fixed Wireless Access (5.8 GHz) 51 61 332 Business Radio Simple Site 606 621 6,995 Business Radio Suppliers Light 74 49 580 Police and Fire 1 0 124 Subtotal for Business Radio products 2,177 2,079 15,763 Radar Level Gauge 0 0 124 CB, Amateur & Maritime 24,409 24,487 196,257 Total for Category A 26,586 26,566 212,144 KPI for Category A (100% in 7 days) 97% 99% – KPI for Category A (CB, Amateur & Maritime) (100% in 10 days) 97% 99% –

Category B

Licences that involve frequency assignment, but no site clearance or Licences issued Licences issued Total on issue as at international co-ordination April 11 – March 12 April 10 – March 11 31 March 12

Automatic Identification System 34 18 154 Coastal Station Radio (International) 31 35 509 Coastal Station Radio (UK) 41 40 436 Coastal Station Radio (Marina) 46 43 428 Coastal Station Radio (Training School) 29 43 246 Maritime Radio (Suppliers & Demonstration) 4 5 80 Maritime Navaids and Radar 2 4 111 Differential Global Positioning System 0 1 11 Subtotal for Deregulation & Contracting-Out products 187 189 1,975 Business Radio Technically Assigned 2,689 2,705 27,096 Business Radio Area Assigned 47 85 190 Ground Probing Radar 23 15 148 Scanning Telemetry 10 2 32 Self co-ordinated links 8 4 18 Subtotal for Business Radio products 2,777 2,811 27,484 Total for Category B 2,964 3,000 29,459 KPI for Category B 90% in 21 days 96% 99% – 100% in 42 days 99% 99% –

118 | Ofcom Annual Report & Accounts 2011/12 www.ofcom.org.uk

Category C

Licences that require frequency assignment, and site clearance and/or Licences issued Licences issued Total on issue as at international co-ordination April 11 – March 12 April 10 – March 11 31 March 12

Fixed Links 1,820 1,978 33,797 Satellite (Permanent Earth Station) 28 24 167 Satellite (Transportable Earth Station) 100 87 140 Satellite (Earth Station Network) 6 8 54 Total for Category C 1,954 2,097 34,158 KPI for Category C 90% in 42 days 98% 99% – 100% in 60 days 99% 99% –

Test and development (T&D) licences

Licences issued Licences issued Total on issue as at April 11 – March 12 April 10 – March 11 31 March 12

Non-Operational Development Licence 382 352 364 Non-Operational Temporary Licence 106 129 33 Total for T&D 488 481 397 KPI for T&D (100% in 60 days) 100% 100% –

Mobile and wireless broadband licences*

Licences issued through spectrum auction or award processes Licences issued Licences issued Total on issue as at April 11 – March 12 April 10 – March 11 31 March 12

Public Wireless Networks – 4 3G Cellular Telephones – 5 Spectrum Access 412 – 414 MHz – 1 Spectrum Access 1452 – 1492 MHz – 1 Concurrent Spectrum Access 1781-1785 MHz – 12 Spectrum Access 1785 MHz, Northern Ireland – 1 Spectrum Access 3.5, 3.6, 10, 28, 32 and 40 GHz – 12 Broadband Wireless 28 GHz – 15 Total for Mobile and Wireless Broadband – 51

*Licences varied and/or re-issued, or traded from one company to another, are not included in these figures

| 119 ANNEX SPECTRUM LICENSING

Channel Islands and Isle of Man licences

Licence applications made via local Regulators Licences issued Licences issued Total on issue as at April 11 – March 12 April 10 – March 11 31 March 12

2G Cellular Telephones, Channel Islands and Isle of Man – – 8 3G Cellular Telephones, Channel Islands and Isle of Man – – 9 Spectrum / Wireless Access 3.4, 3.6, 10 and 28 GHz 100% 100% – Channel Islands and Isle of Man (1 licence (1 licence 9 surrendered) surrendered)

Total for Channel Islands and Isle of Man 26

Digital dividend spectrum licences Spectrum freed up for new uses as a result of digital switchover.

DDR GI Licences issued through spectrum award processes Licences issued Licences issued Total on issue as at April 11 – March 12 April 10 – March 11 31 March 12

Spectrum Access 541-55MHz (Cardiff) – – 1 Spectrum Access 758-766MHz (Manchester) – – 1 Total for Digital Dividend licences – – 2

Non-discretionary spectrum licences The Civil Aviation Authority (CAA) issues aircraft licences and the Joint Frequency Management Group (JFMG) issues licences and authorisations for outside broadcasts and programme-making and special events.

Partners’ Activity Licences issued Licences issued Total on issue as at April 11 – March 12 April 10 – March 11 31 March 12

JFMG issues Licences for – – 8 Programme-Making & Special Events 4,019 3,317 4,225 KPI for JFMG (100% in 7 days) 100% 100% CAA issues Licences for Aeronautical 15,074 13,608 14,226 KPI for CAA (100% in 7 days) 75% 76% Total 19,093 16,925 18,451

TOTAL NUMBER OF LICENCES – ALL CATEGORIES 51,085 49,069 294,688

120 | Ofcom Annual Report & Accounts 2011/12 SUSTAINABILITY REPORT www.ofcom.org.uk

Sustainability Report This section presents sustainability data and financial costs in more detail.

GreenhouseGreenhouse gas gas emissions emissions 2008/9 2009/10 2010/11 2011/12 Non-financial Scope 1 Gas 218 192 239 143 indicators Oil 41 14 24 26 (tonnes CO2e) Fleet fuel 258,836 258,836 224,632 224,338 Scope 2 Electricity 1,844 1,791 1,768 1,542 Scope 3 Business travel 452,981 371,478 374,811 408,279 Air 262,082 148,411 165,901 188,108 Domestic 18,189 20,152 11,470 11,393 Short haul 147,748 81,415 103,391 147,357 Long haul 96,146 46,844 51,040 29,358 Rail/bus/tube 110,735 108,692 93,083 119,998 Car/motorbike/cycle 63,612 104,204 111,956 96,600 Taxis 16,551 10,171 3,871 3,573 Related Scope 1 Gas (kWh) 925,793 941,947 1,185,315 710,046 consumption data Gas per FTE (kWh) 1,083 1,083 1,650 912 Oil (litres) 13,508 4,500 7,953 8,500 Fleet fuel (litres) 96,964 n/a 87,320 87,206 Scope 2 Electricity (kWh) 3,389,442 3,291,355 3,370,121 2,938,500 Electricity per FTE (kWh) 3,965 3,784 4,692 3,774 Financial indicators Scope 1 Gas £32,753 £36,460 £38,612 £19,992 Oil £6,268 £2,104 £4,785 £6,239 Fleet Fuel £112,491 £112,491 £109,219 £123,748 Scope 2 Electricity £369,056 £410,760 £365,542 £270,130 Scope 3 Business travel £987,034 £820,896 £627,606 £713,021 Air £454,839 £330,286 £194,477 £239,722 Rail/bus/tube £282,483 £258,160 £233,081 £297,685 Car/motorbike/cycle £77,176 £126,424 £150,046 £129,466 Taxis £172,536 £106,026 £50,002 £46,148

Scope 1 – This covers direct Ofcom pays for diesel fuel for its Electricity data across all years consumption of gas and oil, and fuel fleet cars using fuel cards, and covers Ofcom’s offices in London, consumption from Ofcom’s fleet cars. consumption is recorded and Baldock, Belfast, Birmingham, monitored on a monthly basis. Fuel Cardiff, Haydock and Glasgow. For Gas consumption data across all consumption from our fleet cars is 2008/9 it also includes consumption years covers Ofcom’s offices in largely dependent on demand for from offices in Bristol, Caterham, London, Birmingham, Haydock and our enforcement services. Fuel data Peterborough, Leeds and Livingstone. Belfast. For 2008/9 this also includes was not available for the 2009/10 For 2009/10 and 2010/11 it also consumption from offices in Caterham, financial year, so we have assumed includes consumption from an Peterborough and Livingston. For that fuel consumption was the same office in Caterham. For 2010/11 and 2009/10 and 2010/11 it also includes as for the 2008/9 financial year. 2011/12 it also includes consumption consumption from an office in from our Project Park office. Caterham. Oil consumption data relate Scope 2 – This covers electricity only to Ofcom’s office in Baldock. supplies to Ofcom’s offices. Both electricity and gas consumption are dependent on weather conditions.

| 121 ANNEX SUSTAINABILITY REPORT

Scope 3 – Business travel financial and categorised into domestic, short Detailed waste data are not available data have been obtained from our haul and long haul flights as per for other Ofcom offices, and this SAP reporting system and includes Defra flight distance guidance. consumption is insubstantial. Ofcom travel by all our colleagues regardless recycles or incinerates (with energy of where they are located. We have Waste minimisation recovery) all its waste and operates on converted taxi and rail travel financial a zero waste to landfill basis. Ofcom data into distances using guidance and management pays an overall waste management from the Carbon Trust Standard, and fee which cannot be attributed into car travel financial data into distances Waste data for all years relate to the individual waste categories. using Ofcom’s expenses policy. Air Ofcom’s office in London, and for travel data have been obtained directly 2010/11 and 2011/12 also includes from our business travel provider, data from our Project Park office.

Waste minimisation and management 2008/9 2009/10 2010/11 2011/12

Non-financial indicators Total waste 100 156 150 151 (tonnes) Waste sent to landfill 0 0 0 0 Waste recycled/re-used (incl. ICT equipment) 80 92 83 89 Waste composted 4 10 10 9 Waste incinerated with energy recovery 16 54 57 53 Waste incinerated without energy recovery 0 0 0 0 Total waste per FTE 0.117 0.180 0.209 0.194

Financial indicators Total waste £35,557 £31,591 £25,649 £28,094

Finite resource consumption 2008/9 2009/10 2010/11 2011/12 Non-financial indicators Water consumption (m3) 9,263 9,915 10,495 7,737 (m3) Water consumption per FTE 10.83 11.40 14.61 9.94 Financial indicators Water £26,772 £22,461 £23,994 £19,672

Finite resource 2008/9 it also includes consumption are included in the service charge and from offices in Bristol, Caterham, therefore cannot be analysed. Water consumption Peterborough and Leeds. For consumption is limited to operational Water data across all years covers 2010/11 and 2011/12 it also includes use, including a catering facility in Ofcom’s offices in London, Baldock, consumption from our Project Park Ofcom’s London headquarters. Birmingham and Haydock. For office. Water charges for other offices

Notes 1. The above table has been prepared in accordance with guidelines laid down by the Treasury in ‘Public Sector Sustainability Reporting’ published at www.financial-reporting.gov.uk. 2. All information conforms to the normal public sector financial year of 1 April to 31 March. 3. Defra conversion factors have been used to calculate carbon emissions figures. 4. Emissions are not weather corrected. 5. We only report energy and water consumption in buildings where we are directly billed and responsible for the payment 6. We only report our waste in buildings where we receive data from a waste management company. 7. Where utility bills had not yet been received, consumption was estimated based on previous months’ data. 8. Gas and electricity consumption from Ofcom’s Bristol, Caterham, Peterborough, Leeds and Livingstone offices has been included where applicable, as these offices closed at various points between 2008-10.

122 | Ofcom Annual Report & Accounts 2011/12 GLOSSARY OF TERMS www.ofcom.org.uk

Glossary

2G Second generation of mobile Community radio Refers to radio Fibre-to-the-cabinet Access telephony systems. Uses digital stations that typically cover a network consisting of optical fibre transmission to support voice, small geographical area with a extending from the access node low-speed data communications, coverage radius of up to 5km and to the street cabinet. The street and short messaging services. run on a not-for-profit basis. cabinet is usually located only a few hundred metres from the subscriber 3G Third generation of mobile DAB Digital audio broadcasting. premises. The remaining segment systems. Provides high-speed A set of internationally-accepted of the access network from the data transmission and supports standards for the technology by which cabinet to the customer is usually a multimedia applications such as full- terrestrial digital radio multiplex copper pair but could use another motion video, video-conferencing services are broadcast in the UK. technology, such as wireless. and internet access, alongside conventional voice services. DCMS Department for Fibre-to-the-home A form of fibre Culture, Media and Sport optic communication delivery in BARB Broadcasters Audience Research Digital switchover The process of which the optical signal reaches the Board. The pan-industry body that end user’s living or office space. measures television viewing. switching over the analogue television or radio broadcasting system to digital. Fibre-to-the-building A form of BEREC The Body of European DSL Digital subscriber line. A family fibre-optic communication delivery in Regulators in Electronic which an optical fibre is run directly Communications. of technologies generally referred to as DSL, or xDSL, capable of onto the customer’s premises. Bit-rates The rate at which digital transforming ordinary phone lines HDTV High-definition television. A information is carried within (also known as ‘twisted copper pairs’) technology that provides viewers with a specified communication into high-speed digital lines, capable better quality, high-resolution pictures. channel. Broadband speeds are of supporting advanced services such commonly measured in Mbit/s. as fast internet access and video on Headline connection speed The demand. ADSL, HDSL (high data rate theoretical maximum data speed Broadband A service or connection digital subscriber line) and VDSL that can be achieved by a given generally defined as being ‘always (very high data rate digital subscriber broadband. A number of factors, on’ and providing a bandwidth line) are all variants of xDSL). such as the quality and length of greater than narrowband. the physical line from the exchange DTT Digital terrestrial television. Bundling A marketing term describing to the customer, mean that a given The television technology that customer may not experience the packaging together of different carries the Freeview service. communications services by this headline speed in practice. organisations that traditionally offered EPG An electronic programme Internet A global network of only one or two of those services. guide (or EPG) is a programme networks, using a common schedule, typically broadcast set of standards (e.g. internet Communications Act alongside digital television or radio Communications Act 2003, which protocol), accessed by users with a services, to provide information computer via a service provider. came into force in July 2003. on the content and scheduling of current and future programmes. ISP Internet service provider. A company that provides access to the internet.

| 123 ANNEX GLOSSARY

Leased line A transmission facility Next generation core networks Slamming Where a consumer which is leased by an end user (NGN) Internet protocol-based is switched to a different from a public carrier, and which is core networks which can support supplier of a communications dedicated to that user’s traffic. a variety of existing and new service without consent. services, typically replacing multiple, LLU (local loop unbundling) LLU is single service legacy networks Smartphone A mobile phone that the process whereby the incumbent offers more advanced computing operators (in the UK it is BT and Next generation access networks ability and connectivity than a Kingston Communications) make (NGA) New or upgraded access contemporary basic ‘feature phone’. their local network (the lines that networks that will allow substantial run from customers premises improvements in broadband speeds Telecommunications, or ‘telecoms’ to the telephone exchange) and quality of service compared to Conveyance over distance of speech, available to other communications today’s services. This can be based on music and other sounds, visual images providers. The process requires a number of technologies including or signals by electric, magnetic the competitor to deploy its own cable, fixed wireless and mobile. or electro-magnetic means. equipment in the incumbent’s Most often used to refer to networks Unbundled A local exchange local exchange and to establish a using fibre optic technology. that has been subject to local backhaul connection between this loop unbundling (LLU). equipment and its core network. Peer-to-peer (P2P) distribution The process of directly transferring VoD (Video-on-demand) A service Local loop The access network information, services or products or technology that enables TV connection between the between users or devices that operate viewers to watch programmes or customer’s premises and the local on the same hierarchical level. films whenever they choose to, not PSTN exchange, usually a loop restricted by a linear schedule. comprised of two copper wires. Product placement Where commercial broadcasters include paid- LTE (Long-term evolution) part of the for references to products and services development of 4G mobile systems in some TV and radio programmes. that started with 2G and 3G networks. RAJAR Radio Joint Audience Mobile broadband Various types Research – the pan-industry body of wireless high-speed internet which measures radio listening. access through a portable modem, telephone or other device. Service provider A provider of electronic communications services Net neutrality The principle that to third parties, whether over its all traffic on the internet should own network or otherwise. be treated equally, regardless of content, site or platform.

124 | Ofcom Annual Report & Accounts 2011/12 /12 Annual Report 2011 2011 For the period 2012 1 AprilFor 31 March 2011 to Annual Report and Accounts Annual Report The Office of Communications of The Office

The Office of Communications Annual Report and Accounts For the period 1 April 2011 to 31 March 2012

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