Simplification Plan 2008

Published 11 December 2008

Executive summary

This Simplification Plan demonstrates Ofcom’s commitment to minimising the burdens on our stakeholders. It reports on the work that we have done over the last year to remove unnecessary burdens and on the work that is ongoing or planned for the year ahead. We distinguish between the regulatory burdens that arise from our policy decisions, such as the need to comply with price control regulation, and the administrative burdens that arise from the need to show compliance with regulation, such as the requirement to apply for a licence for certain activities.

Our principal duty is to advance the interests of citizens and consumers. We believe that simplification is consistent with the promotion of the citizens’ and consumers’ interests. For example, through appropriate deregulation we believe we can support competition between firms and enable customers to benefit from new services and products. As well as imposing a direct cost on stakeholders, unnecessary burdens may act as a barrier to innovation and the deployment and take-up of products and services, resulting in a loss to consumers and citizens. We aim to minimise this by not imposing unnecessary burdens on our stakeholders and removing any burdens that have become unnecessary.

In our policy work we impose regulation only when we absolutely need to – we have a bias against intervention. This mindset is supported by the principles of Better Regulation – that regulation should be transparent, accountable, proportionate, consistent and targeted only at cases where action is needed. Our policy development processes are designed to ensure that this happens in practice. We have a duty to carry out impact assessments to support our decisions. Under the 2003 Communications Act we have to report on how we have both avoided imposing unnecessary burdens and removed burdens that have become unnecessary. We believe that we meet this obligation by publishing our annual Simplification Plan.

Our internal processes and systems are a key enabler of simplification. In 2008, we have continued the roll-out of a of new innovative IT system under Project Unify, which we believe will deliver substantial benefits to users of spectrum. Unify is already simplifying licence administration processes and promoting efficient use of spectrum by enabling the trading of certain licence classes. By replacing some legacy systems, Project Unify is also helping to reduce the overall organisational cost base of Ofcom.

As mentioned above, in thinking about simplification, we distinguish between regulatory burdens and administrative burdens. The quantification of benefits from the removal of, or avoidance of unnecessary regulatory burdens is difficult and subject to many factors beyond Ofcom’s control. However, we believe these benefits to be substantial, and where possible, have attempted to quantify them.

We outline below completed and ongoing work that we believe may significantly reduce regulatory burdens on stakeholders:

• In broadcasting policy, as part of our review of public service broadcasting, we are reviewing the obligations associated with Channel 3 licences. As a result, we are consulting on potential changes to licences to allow ITV Plc to make an estimated regulatory cost saving of £54m per year, to reflect the decreasing value of Channel 3 licences. We have attempted to identify and preserve what audiences see as socially valuable, while reducing the regulatory burden on ITV Plc.
• In May 2008 we completed our review of the wholesale broadband access market. This review (required under the European Framework) found that increased competition in certain areas, driven by Local Loop Unbundling, merited the removal of regulation in approximately 70 per cent of the wholesale broadband access market. These measures will allow for more flexible pricing in wholesale markets and the potential for greater innovation and competition in retail markets, benefiting consumers in the form of new services and pricing approaches.
• In our Future of Radio statement we issued new standardised guidelines for local programming and simplified format requirements to increase flexibility for commercial radio. This decision has come into effect over the last year and we estimate that this may reduce regulatory burdens on radio stations by up to £11.7m per year
• In spectrum, we have carried out further work to liberalise the use of spectrum and, in some cases, make it licence-exempt. Making the use of certain equipment licence exempt, reduces the regulatory burdens on users of this spectrum to near zero, allowing for innovation in technology and encouraging lower usage costs for consumers. For example, licence exemption has encouraged the development of short-range anti-collision wireless devices for vehicles, with a benefit to society through improved road safety. In our consultation on spectrum usage rights, we estimated that the work to enable spectrum to be used for innovative applications more widely than would otherwise have been possible, has a potential value of £0.9bn a year.

We are also consulting on a number of other simplification initiatives. For example:

• We are consulting on whether to introduce ‘Innovation Licences’, a new class of licence to encourage the development of innovative commercial uses of spectrum.
• We launched a simplified code in relation to the scheduling of advertising breaks, and in October we published a consultation on the scope for further simplification in this area.

In relation to administrative burdens, we have made decisions that will reduce administrative burdens on stakeholders by £1.5m a year. These savings result from:

• Spectrum information – improved IT systems, supported by Unify, have enabled Ofcom to provide UK spectrum information to the European Frequency Information System. This will reduce the cost to stakeholders, such as equipment manufacturers, in obtaining information required for them to fulfil regulatory obligations. We estimate this will save stakeholders £1.4m a year.
• Regulatory reporting – the Financial reporting Data Extraction Tool will enable Ofcom to directly interrogate BT regulatory accounting data, which we believe will lead to better targeted ad hoc Section 135 information requests to BT. We estimate this may save BT £0.1m a year

These reductions in administrative burdens follow reductions in 2006 and 2007 that totalled £1m a year. Taken together, over the past three years, we have reduced administrative burdens on our stakeholders by a total of £2.5m a year. It is important to note that stakeholders will benefit from these savings on an ongoing basis. We also expect that the benefits to stakeholders will be greater than £2.5m a year, as in some cases, where administrative burdens are reduced, it is not proportionate to quantify the amount of the reductions.

For some of the projects detailed in this plan the preferred approach may be simplification, but after further review and consultation we may decide that specific proposals involving simplification would not be of benefit to citizens and consumers. In line with good practice, all the ongoing projects described are subject to consultation with stakeholders.

We will report on the progress of the initiatives we have described in our next Simplification Plan. Our Draft Annual Plan 2009/10 sets out how we are going to build upon the work carried out this year and details proposed policy priorities for the coming financial year: http://www.ofcom.org.uk/consult/condocs/draftap0910/