Towards the year-end, the UK passed a significant milestone with more than half of all households now on broadband, encouraged by cheaper prices, higher bandwidths and an increasing range of new services.
It is the players in the industry, not regulation, who create this innovation, these improved services for the consumer and wider choice in broadcast television and radio for the viewer and listener. But a good regulatory framework can help promote the competition that drives these developments. Ofcom’s role in wholesale broadband regulation has been critical to the roll-out of Local Loop Unbundling, which passed the two million lines mark during the year which, alongside the three million cable broadband subscribers, means more and more homes having access to high bandwidth services, broadband TV, and low-cost Voice over IP.
Ofcom has always been clear that the ‘consumer’ of communications services, for whose interests we have statutory responsibility, is not just the residential but also the business consumer. Modern, efficient communications are an essential part of the infrastructure underpinning the competitiveness of Britain’s firms and new technology more widely. International comparisons currently show the UK in a good light. But Ofcom has sought to ensure that at the wholesale level there is competitive supply of the key products used by a range of communications operators to provide the managed networks and services on which an increasing range of businesses and other organisations depend. As the technology enables the transition from analogue switched networks to digital IP-based networks we have facilitated the necessary intra-industry co-operation through NGNUK; and are developing the regulatory tools that will be necessary to secure fair interconnection and allow efficient investment and effective competition in a very different technology environment from the one today’s regulation has been designed for.
Another key role for regulation is in the management of the wireless spectrum. Not just in planning spectrum deployment for digital switchover in broadcast television – important though that is – but in making more and more spectrum available for a market which is finding ever-increasing ways to use it from low-powered, licence-exempt devices to mobile TV to WiMAX wireless broadband. In the past year progress continued towards market-led provision and use of spectrum: in the secondary market, spectrum trading has increased and in the primary market Ofcom has held its first auctions, including the first ever co-ordinated auction in both Northern Ireland and the Republic allowing the winner scope to deploy all-Ireland wireless broadband, of considerable importance and interest to Ireland’s rural communities North and South of the border.
Internationally, Ofcom led the UK delegation to the 2006 ITU Regional Radiocommunication Conference which, despite its arcane title, is fundamental to the shift from analogue to digital broadcasting, not just in the UK, but in large parts of the world. It is a tribute both to the very effective system in place between Ofcom and the Government for co-ordination of the interests of UK spectrum users, and to the capabilities and long experience of the Ofcom-led negotiating team, including key industry representation, that the UK achieved all of its negotiating objectives. This will bring substantial benefits in the years ahead to UK users of wireless spectrum, including much more flexibility in the way spectrum can be used.
Ofcom has twin statutory responsibilities – to the consumer, but also to the citizen interest. The latter was furthered during the year both through research, such as the digital inclusion project which examines how all citizens, including minority groups, can benefit from new services; and through practical action such as the development of the third tier of radio – not-for-profit community radio – run by and for local communities. The second round of licensing, undertaken last year, brings the number to over a hundred such new radio stations up and down the country.
One of the most important tasks for any Chairman is the selection of the right Chief Executive for the organisation. In July last year Stephen Carter, Ofcom’s first and founding Chief Executive, left to pursue new avenues in his career. Stephen’s achievements in successfully establishing Ofcom and in the early, big policy calls were outstanding. Two of Stephen’s achievements had a particular bearing on the open competition to find his successor. Firstly, the strong reputation Ofcom established under his leadership made the Chief Executive role attractive to a range of high calibre external candidates. Secondly, the very capable executive team Stephen had built around him meant there was also a very strong internal field. In the end we were very pleased to be able to appoint the best candidate from both inside and outside Ofcom – Ed Richards, formerly Ofcom’s Chief Operating Officer and Senior Strategy Partner.
Ed took up his new role in October. As one of the founding team, he has brought continuity. But he has also already begun a programme of refreshment and new focus both internally to the organisation and in Ofcom’s external priorities.
A key development of emphasis has been the insight that, while effective competition is a necessary part of a well-functioning market, it also needs informed, empowered and protected consumers to take full advantage of the market. It is the customer for whose benefit the market exists. New technologies and new services can bring great benefits to most consumers; but they can also lead to scams, fraud and nuisance for a minority of consumers.
Over the past year Ofcom has substantially increased the pace of its consumer protection and investigations activity. New fining powers against the nuisance of silent calls have been used to the full. Robust investigations of slamming and mis-selling of telecommunications services have been undertaken. Some of the worst offenders have been driven out of the market place. But the problem persists and we will continue to bear down on it. As this Report went to print a number of high-profile investigations into alleged misconduct in Call Quiz TV and other premium rate phone services over broadcast TV were still under way.
Sometimes the problem is not active anti-consumer behaviour but a lack of incentives across the industry to go the extra mile in back office practices to ensure a good consumer experience. This is particularly true of consumer switching and migration. Over the past year Ofcom has taken the lead to ensure that all in the industry have systems that operate to the level of the most responsible and customer-focused companies, so that consumers can shop around and switch if they wish easily and simply.
In addition to the fresh insights he has brought, Ed Richards has also brought one very welcome element of complete continuity with his predecessor: the determination that Ofcom should be a value for money regulator for our stakeholders. In March the Ofcom Board approved a budget which, for the fourth year in succession, continues the real-terms cut in the cost of regulation.
In any new organisation, the launch team can expect to experience significant turnover after three to four years. Ofcom has been no exception. A number of the senior executive team who first joined Ofcom in 2003 have moved on, including two Executive Members of the Board. Kip Meek, who has done a vital job in projecting Ofcom’s policies and values internationally, left at the end of 2006. The effectiveness of the European Regulators Group, which Kip chaired during 2006, has been significantly improved; and the course of the Audio-Visual Media Services Directive has been changed to be one much more congenial to the UK’s interests and expectations. Ian Hargreaves, who has been a Non-Executive Member of the Ofcom Board since 2002, has become an Executive Member of the Board assuming Kip’s international mantle and over-arching responsibility for Ofcom’s presence in the Nations and Regions.
Sean Williams, who was a key architect of the process which led to the BT Undertakings and functional separation – a concept which is now being emulated in the EU and more widely internationally – also left at the end of the reporting year to take up an important role at our sister regulator the Office of Fair Trading. He is replaced on the Ofcom Board by Philip Rutnam, the Ofcom Partner responsible for Spectrum Policy. This recognises the importance of spectrum developments in Ofcom’s thinking.
Finally, I should thank the statutory and non-statutory boards who have provided invaluable input and advice to us. First and foremost of course is the Ofcom Content Board whose activities are covered in Philip Graf’s separate report starting on page 14 but also the Consumer Panel who help us to put the individual consumer experience front and centre of our thoughts; the Advisory Committee on Older and Disabled People; the Ofcom Spectrum Advisory Board and our National Advisory Committees. In addition to their input to our Annual Plan as it is being formed, the Ofcom Board values the direct interaction we have with each of the Committees when we visit the Nations and main cities outside London. We welcome and continue to wish to engage with those views so we can serve UK consumers and citizens in the years ahead to the best of our abilities.