Memorandum submitted by Ofcom
Following the oral hearing with David Currie
and me on 17 April 2007, I undertook to write to you and your
Committee Members with additional details on a few topics that
were raised with us. One such issue was in relation to the charges
raised by BT and in particular the method of payment. On this
matter I intend to write separately to you and your Committee
Members shortly.
OFCOM'S
APPROACH TO
LEARNING ABOUT
CONSUMER AND
CITIZEN DEMANDS
Mr Hoyle asked how we consult. We conduct extensive
market research—both qualitative and quantitative—to
establish the consumer perspective on our consultations. Last
year we spent over £5 million consulting consumers across
a broad range of Ofcom projects and published over 70 separate
research reports. We believe that statistically robust research
is the most effective way of identifying consumer views since
it enables us to consult with a representative sample of the population—not
just those who are interested in responding to our consultations.
For example, with the Digital Dividend Review
we surveyed 1500 people interested in digital technology, as well
as interviewing over 100 in small, in-depth groups. This enabled
us to get a much more balanced perspective of the issues from
consumers' point of view and complemented the formal consultation
responses.
FOOD ADVERTISING
Mr Davies and Mr Farrelly asked about the measures
we will employ to evaluate the success of restricting the advertising
of food and drink to children. When we devised and presented restrictions
on the advertising to children of HFSS, we were conscious that
it was imperative to have a timely review to assess the success
of this measure. This we plan to do at the end of 2008 when we
shall look at the following:
— whether the scheduling restrictions
are achieving the objective of reducing significantly the number
of HFSS product advertising impacts (an impact being each occasion
when a viewer sees an advert) among children aged 4-15 years;
— whether the impact on broadcasters
has been broadly consistent with the effects that both Ofcom and
the broadcasters expected;
— whether the scheduling restrictions
and revised content rules are being implemented as intended, or
whether unexpected difficulties have emerged, in interpretation,
implementation or enforcement;
— whether advertisers are evading
the spirit of the restrictions, by airing advertising and sponsorship
in the name of brands commonly associated with HFSS products in
children's airtime; and
— whether advertisers have (contrary
to our expectations) significantly increased the amount of HFSS
advertising and sponsorship in periods outside children's airtime,
at times when significant numbers of children may be watching.
In light of this review, and of the FSA's planned
review of its nutrient profiling scheme, we shall consider whether
any modifications to the restrictions would be appropriate.
We have always stated that our aim is to contribute
to changing the balance of food promotion to children as a means
of influencing food preferences towards healthier choices. Changing
the way children choose and consumer food is itself part of the
much wider Department of Health initiative to reduce childhood
obesity, a project which touches all aspects of children's lives
including education, parenting, physical activity etc.
We therefore wish to be clear that our review
will not assess the impact on obesity levels per se, but rather
focus on the operation of one important measure which has a role
to play in influencing change in the long term alongside many
other measures.
MOBILE TERMINATION
RATES (MTRS)
Mr Binley asked about our policy to reduce prices
for mobile phone users. Ofcom has, for some time been considering
what action to take to deal with the level of prices charged by
mobile operators for connecting calls to mobile numbers, to the
detriment of consumers who have been required to pay these charges
as part of the price of calling a mobile number. Our recent review
of MTRs found that the five mobile network operators continue
to exercise significant market power, therefore requiring regulatory
intervention to protect consumers.
The new charge controls will result in significant
savings for consumers over the four year period that the charge
controls will apply; reducing the amount mobile operators can
charge other carriers for connecting calls to their networks,
as announced on 27 March (http://www.ofcom.org.uk/media/news/2007/03/nr—20070327).
Because of this new measure we expect an average annual reduction
in wholesale charges of £400-500 million over four years;
savings which we expect to be passed through to retail customers.
As noted by the Committee, an issue was raised
by the European Commission about the inclusion within the cost
analysis of an element of the operators' 3G licence fees. After
constructive engagement with the Commission to explain our thinking
as to why such costs have to be included and the considerable
reductions in charges being achieved even taking account of those
costs, we believe the Commission has been persuaded as to the
merits of this decision which allows for greater consumer benefits.
MOBILE NUMBER
PORTABILITY
Mr Luff raised the length of time it takes to
port mobile telephone numbers in the UK. Mobile number porting
times in the UK are already significantly shorter than a number
of other EU Member States including France, where porting time
has been reduced earlier this year from 30 to 10 days, and Germany
where it takes 31 days. However, some other Member States do enjoy
shorter lead times. We agree with members of the Committee that
the length of time it takes to port numbers in the UK, currently
five working days, is too great. Our research indicates that consumers
want to see this time reduced; Ofcom has been conducting a review
of number portability over the last few months and will publish
a statement shortly which sets out the steps we intend to take
in this area. I will keep the committees fully informed of progress.
OFCOM'S
REDUCTION OF
REGULATION
Mr Davies wanted to know whether our stated
approach to reducing regulation had been met, particularly in
the context of extending regulation on the restrictions of food
and drink TV advertising to children.
One of our priorities for 2006-07 is to continue
to reduce regulation across the full range of Ofcom's responsibilities
and, following the approach taken by Government departments, we
published a Simplification Plan as an annex to the Annual Plan
2006-07. This set out details of the projects which were expected
to lead to deregulation or reduced regulatory burdens.
Reducing regulation will continue to be a priority
that cuts across all our work. Our Annual Plan 2007-08 sets out
a strategic policy framework which shows what our key areas of
focus will be over the next three years. In some areas, such as
spectrum liberalisation, we are proposing to make further significant
reductions in regulation and administrative burdens . Increased
competition and convergence are likely to create further opportunities
to remove formal regulation and extend co- and self regulation.
An important element of Ofcom's approach to
regulation has been to conduct major strategic reviews of telecoms,
spectrum and public service broadcasting. In these reviews, we
have considered how these sectors are likely to evolve and the
key issues requiring regulatory action. In this way, we can target
regulation more effectively and remove regulation which is no
longer necessary, with any such reduction generally leading to
a reduction in the administrative burdens on stakeholders.
We also seek to use the least intrusive means
of achieving our objectives. For example, we have established
adjudicators to speed up decision-making and facilitate industry-led
solutions. The telecoms adjudicator has reduced the number of
disputes about local loop unbundling and has helped deliver improved
processes. The adjudicator for the television advertising market
has also proved successful in resolving disputes between ITV and
its advertising customers. Another example is our co-regulatory
approach to handling complaints about TV and radio advertising.
Responsibility for dealing with such complaints has been transferred
to the Advertising Standards Authority. This had the effect of
streamlining regulation, with all complaints about advertising
now being handled by one body.
In other areas, new rules may be needed, but
in line with our regulatory principles, we will seek the least
intrusive mechanisms available.
The attached annex (Updated Simplification Plan
2006-07) shows the areas where Ofcom has reduced or removed regulation
or is continuing to do so. Areas include: billing and metering,
spectrum trading, extending exemption from licensing, and relaxation
of a number of regulations around product placement and channel
sponsorship.
RETAIL PRICE
CONTROLS
Mr Hoyle asked for details about which newspapers
Ofcom advertise in to communicate with the public (such as when
retail price controls where lifted). In July last year, 22 years
after retail price controls were first imposed to limit increases
in the price of line rental and calls for BT customers, Ofcom
announced their removal. Ofcom embarked upon a comprehensive advertising
campaign to inform the general public of this move prior to the
removal of these controls on 31 July.
A public information campaign, managed by Ofcom
and funded by BT with a contribution from Ofcom, was launched
in July with national and regional newspaper and national poster
advertisements. The public information campaign continued through
the summer and into the autumn, with further newspaper, magazine
and outdoor advertising as well as an online campaign. Additionally,
BT included a letter from Ofcom in all customer bills posted over
the summer.
The information campaign sought to make consumers
aware of this change and encourage them to understand the choices
available in the competitive market.
In terms of press coverage, advertisements were
placed in the following national publications:
— The Independent on Sunday;
— The Scotland on Sunday;
Adverts were also placed in the following regional
publications:
— West Midlands Express &
Star;
— Newcastle Evening Chronicle;
— Nottingham Evening Post;
— Yorkshire Evening Post;
In addition to 24 million letters and leaflets
explaining the end of retail price controls were sent to existing
BT customers in bills and additional communications. The cost
of these activities exceeded £3 million, paid in the main
by BT.
Thank you once again for you and your Committees'
interest in Ofcom's work.
10 May 2007
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