The Office of Communications Annual Report and Accounts For the period 1 April 2014 to 31 March 2015 The Office of Communications Annual Report and Accounts For the period 1 April 2014 to 31 March 2015 Report and Accounts presented to Parliament pursuant to Paragraphs 11 and 12 of Schedule 1 of the Office of Communications Act 2002. HC 169 Ordered by the House of Commons to be printed 2 July 2015 © Ofcom Copyright 2015 The text of this document (this excludes, where present, the Royal Arms and all departmental or agency logos) may be reproduced free of charge in any format or medium provided that it is reproduced accurately and not in a misleading context. The material must be acknowledged as Ofcom copyright and the document title specified. Where third party material has been identified, permission from the respective copyright holder must be sought. Any enquiries related to this publication should be sent to us at [email protected]. This publication is available at www.gov.uk/government/publications Print ISBN 9781474117999 Web ISBN 9781474118002 ID P002724853 07/15 Printed on paper containing 75% recycled fibre content minimum. Printed in the UK on behalf of the Controller of Her Majesty’s Stationery Office. Contents A D Overview Governance Statement 64 Chairman’s and Chief Executive’s statement 4 Who we are and what we do 65 The governance structure 6 Chairman’s message 70 The risk and control framework 73 Statement of responsibilities B Strategic Report E 8 Highlights of 2014/15 Remuneration report 10 Look ahead to 2015/16 74 Remuneration report 12 Chief Executive’s report 16 Improving outcomes for consumers F Financial Statements 17 Progress on delivering against our Annual Plan priorities 79 Certificate and report of the 34 Our ongoing responsibilities and Comptroller and Auditor General the resources we manage to the Houses of Parliament 44 Principal risks and uncertainties 80 Statement of income and expenditure 46 Financial Review 81 Statement of financial position 51 How we work and whom we work with 82 Statement of changes in equity 56 Our employees 83 Statement of cash flows 57 Corporate responsibility 84 Notes to the accounts 58 Sustainability report G Annex C Directors’ Report 113 Ofcom’s Boards and Committees 116 Regulatory statements 60 The Ofcom Board 122 Investigations programme 62 Register of disclosable interests 123 Broadcasting standards 62 Pension Liabilities 125 Spectrum engineering and enforcement 62 Non-audit work 126 Spectrum licensing 62 Personal data-related incidents 129 Sustainability 62 Sickness absence data 131 Glossary A Who we are and what we do Overview Who we are and what we do The Office of Communications (Ofcom) is the UK’s independent communications regulator. We regulate fixed-line We seek to ensure that businesses telecoms, mobiles, the and individuals in the UK get the best from their communications TV and radio sectors, services and are protected from postal services, and the scams and sharp practices, while airwaves over which ensuring that, where appropriate, competition can thrive. wireless devices operate. 4 Ofcom Annual Report & Accounts 2014/15 www.ofcom.org.uk A Established under the Office of What we do Communications Act 2002, Ofcom Our main legal duties operates under a number of Acts of are to ensure that: Parliament and regulations. These include the Communications Act • the UK has a wide range of electronic 2003, the Wireless Telegraphy Act communications services, including 2006, the Broadcasting Acts 1990 and high-speed services such as fixed and 1996, the Digital Economy Act 2010 mobile broadband; and the Postal Services Act 2011. • the radio spectrum (the airwaves The Communications Act 2003 used by everyone from taxi firms What we do not do states that Ofcom’s principal duty and boat owners, to mobile-phone Ofcom has powers to enforce is to further the interests of citizens companies and broadcasters) is used consumer law on behalf of in relation to communications in the most effective way; consumers generally. Ofcom does matters and to further the interests • a wide range of high-quality not have the power to resolve of consumers in relevant markets, television and radio programmes individual consumer complaints where appropriate by promoting are provided by a range of different about telecommunications or postal competition. This underpins much organisations, appealing to a range services, unlike TV and radio, but we of what we do. In relation to postal of tastes and interests; provide advice to complainants and services our duty is to carry out refer them to the two alternative our functions in a way that we • people who watch television and dispute resolution (ADR) schemes consider will secure the provision of listen to the radio are protected that we have approved. a universal postal service in the UK. from harmful or offensive material. We handle complaints about We are involved in advising on and television and radio broadcasting and setting some of the more technical assess each complaint against the aspects of regulation, as well as Broadcasting Code or other relevant in implementing and enforcing codes or licence conditions; communications law, competition and consumer protection laws. • people are protected from being treated unfairly in television and Ofcom is funded by fees from radio programmes, and from having industry for regulating broadcasting, their privacy invaded; and communications networks and postal services, and grant-in- • the universal service obligation on aid from the UK government for postal services is secured in the UK. undertaking concurrent competition regulation and managing radio spectrum. We work independently, free from political influence. 5 A Overview Chairman’s message Chairman’s message Patricia Hodgson Our aim, as always, is to deliver the best outcomes for UK citizens and consumers. Competition is the prime tool, but where it fails, intervention may be necessary. Tough new installation and repair targets on Openreach, pressure on operators to handle complaints better and action on silent and abandoned calls are just three examples where we have acted in the past year. Good value and high quality communications services for businesses are also a central objective for Ofcom. We have kicked off a project to assess whether the communications market is fully meeting the needs of small and medium-sized enterprises. And we have launched a market review of the provision of leased lines, including the most effective use of dark fibre. Superfast broadband and 4G are now available to three-quarters of all homes and businesses. Britain has embraced these technologies faster Where historic competitive than any other European country, bottlenecks have prevented this, and Ofcom is committed to do all it we have tackled them. But as can to sustain further momentum. telecoms and broadcast platforms and services converge still further, 2014/15 saw significant change in new bottlenecks may emerge. Ofcom’s leadership. We welcomed Graham Mather and Stephen We are therefore embarking on a Ofcom has done much Hill to the Board as new non- major strategic review of the UK’s executive members, and Baroness to stimulate innovation, digital communications markets. Noakes as Deputy Chairman. This By looking at broadband, mobile investment and new experience and expertise was and landline markets as a whole, services in the UK’s further strengthened by Jonathan we aim to ensure that incentives Oxley, who joined the Board as communications sectors, for investment remain strong and Group Director, Competition. And something we do by that we reduce regulation where in March, after successfully guiding we can. This review, the first since encouraging competition the organisation as Acting Chief 2005, seeks to ensure that Ofcom’s and market entry. Executive for three months, Steve regulatory framework continues to be Unger joined the Board permanently. responsive to a rapidly evolving sector. 6 Ofcom Annual Report & Accounts 2014/15 www.ofcom.org.uk A Departing both Ofcom and its Board was Jill Ainscough, whom I thank for guiding Ofcom’s operations activity so well since 2006. Finally, having been an integral part of Ofcom from its inception, we bade farewell to Ed Richards. Ed’s mark on Ofcom and the sectors we regulate is indelible, the combination of drive, passion and creativity he brought to the role unmistakable. In Ed’s place, I was delighted to welcome Sharon White, who brings with her an outstanding combination of intellect, acumen and experience leading complex public organisations. She will build on Ofcom’s considerable Dame Patricia Hodgson, DBE track record and reputation. Chairman 7 B Highlights of 2014/15 Strategic Report Highlights of 2014/15 Ensuring effective competition Ensuring spectrum use is optimised Ensuring consumers’ rights and investment in broadband During the year we decided to to effective redress We introduced a new rule to release the 700MHz band for We opened investigations into two promote competition in superfast mobile broadband by 2022, and large mobile network operators’ broadband by requiring BT to laid the foundations for industry to complaints handling processes. maintain a sufficient margin use white spaces for new wireless One of these is ongoing, the between its wholesale and retail applications (pages 27 and 29). other resulted in Ofcom imposing superfast broadband charges. The a financial penalty (page 35). rule should help both safeguard investment and deliver benefits Helping consumers to to consumers (page 22). change communications Tackling the problem of providers more easily nuisance calls and mis-selling Effective switching processes help We continued our extensive Simplifying non- consumers change provider with programme of work to protect geographic numbers greater ease, confidence and consumers from silent and We continued our work to simplify convenience. This remains a priority abandoned calls, as well as the non-geographic numbers for area for Ofcom, and we continue mis-selling of landline telephone business and domestic consumers.