Memorandum by Ordnance Survey
Q1 In 2002, the Committee's predecessor, the
Transport, Local Government and the Regions Committee, concluded
in its report on Ordnance Survey: "there is a clear need
to define the boundaries of Ordnance Survey public service and
national interest work." To what extent has the position
changed in the intervening five years?
1.1 Government policy on Ordnance Survey's
public service and national interest work was updated and formalised
in July 2004 by the publication of a new Framework Document for
the organisation. This set out Ordnance Survey's status as:
— Responsible for the official, definitive
surveying and topographic mapping of Great Britain.
— Responsible for maintaining consistent
national coverage of other nationally important geospatial datasets.
— Operating as a Government Trading
Fund.
1.2 The Framework Document set out Ordnance
Survey's Aim as "Satisfying the national interest and customer
need for accurate and readily available geospatial data and maps
of the whole of Great Britain in the most efficient and effective
way". It went on to set out "The vision for Ordnance
Survey and its partners to be the content provider of choice for
location-based information in the new information economy".
The strategic objectives through which the above Aim was to be
pursued are listed at Annex A.
1.3 The other important recent Government
policy change was the announcement on 6 November 2006 that the
National Interest Mapping Services Agreement (NIMSA) would cease
at the end of 2006. NIMSA was established in 1999, since when
it has contributed to the costs of an agreed list of mapping activities
required in the national interest which would not otherwise have
been provided if the decision was made on a purely commercial
basis.
1.4 Despite the ending of NIMSA, Ordnance
Survey has continued to operate the 24 x 7 Mapping for Emergencies
service, and some Coastal Mapping of changes to tide lines and
coastal erosion. Other implications of the ending of NIMSA, connected
with the currency and content of the mapping of rural areas, are
discussed below in our answers to Questions 6 to 8.
1.5 Several developments since 2002 have
influenced the "regulatory" environment in which Ordnance
Survey trades:
— The Information Fair Trader Scheme
(IFTS ) was launched in Autumn 2002 by Her Majesty's Stationery
Office (now the Office of Public Sector Information (OPSI)).
— The Re-Use of Public Sector Information
Regulations (PSIR) 2005 (SI 2005/1515) were implemented in July
2005.
— A report on the Commercial Use of
Public Sector Information (CUPI) was published by the Office of
Fair Trading in December 2006.
1.6 Under the IFTS, OPSI sets and assesses
standards for public sector bodies in their trading of information.
It requires them to encourage the re-use of information and reach
a standard of fairness and transparency. Ordnance Survey received
full accreditation under the IFTS in April 2003, and was re-accredited
in March 2006. Ordnance Survey works closely with OPSI to ensure
that, as its licensing evolves in response to market needs, it
continues to conform to IFTS principles.
1.7 As a public body, Ordnance Survey is
subject to the PSIR which establish a framework for re-using
public sector information. The framework is based on the principles
of transparency and consistency of application, which are analogous
to IFTS principles. Much, though not all, of the information Ordnance
Survey collects, maintains and disseminates comes under the scope
of the Regulations. Provisions within the regulations enable Trading
Funds like Ordnance Survey to license and charge for the use of
their information.
1.8 The Office of Fair Trading (OFT) published
its report on the Commercial Use of Public Information (CUPI)
on 7 December 2006. The study looked at a wide range of information
produced by the public sector, particularly central government,
including information such as employment statistics, property
records, company registration files, mapping, meteorological data,
and hydrographic charts.
1.9 Ordnance Survey was identified in the
report as generating the greatest revenue from trading public
information, and was the focus of a number of findings. In response,
Ordnance Survey has sought constructive dialogue with all relevant
parties. Pending publication of the Government's formal response
to OFT we will continue to discuss and seek to resolve the various
issues raised by OFT.
1.10 We discuss competition issues below
in answer to Q9. However, we note that while the CUPI report concluded
that up to £520 million of additional economic value is being
lost to the UK economy each year as a result of under-exploiting
public sector information assets, the supporting economic evidence
indicates that only £22 million of this is related to the
geographic information sector (which included UK Hydrographic
Office, Ordnance Survey, and a number of other organisations).
(a) In evidence to the Select Committee's
recent inquiry into DCLG's Annual Report, the Department said
the ending of NIMSA meant there was "no distinction between
public service and commercial activity for Ordnance Survey"
(Third report of 2006-07, HC 106; Ev 105). But OS remains the
largest public sector information holder in the UK, providing
publicly gathered data under licence to organisations both public
and private. How clear are the boundaries between its roles as
the holder of base geographical information required by its partners
and competitors to make their products commercially viable and
as a commercial operator within the same marketplace as those
partners and competitors?
1a.1 Ordnance Survey shares the Government
view, expressed in its response to the Select Committee in 2002,
that there is no clear line between Ordnance Survey as the holder
of "base" geographic information and its commercial
operations. All of Ordnance Survey's operations contribute to
commercial revenue generation in some way, which in turn enables
it to create and maintain its "base" geographic information.
1a.2 We comment below (paragraphs 9.4-9.6)
on licensing arrangements in respect of Ordnance Survey's partners
and competitors. Put simply, Ordnance Survey strongly encourages
others to use its data to produce products or services it does
not itself produce, and Ordnance Survey avoids competing with
those products and services.
1a.3 Ordnance Survey is currently working
closely with CLG and Shareholder Executive[1]
officials on further clarification and definition of Ordnance
Survey's Public Task. The outcome of this work will be shared
with the Select Committee once agreed with Ministers.
Q2 In 2002, the Select Committee also identified
"a clear need for some form of independent arbitration so
that conflicts could be resolved" between OS and its partners
and customers. To what extent has that position changed in the
intervening five years?
2.1 In the period since 2002 the number
of complaints against Ordnance Survey has remained low. Since
then, IFTS and PSIR (see paragraphs 1.5-1.7 above) have been introduced
and each give Ordnance Survey's current and potential customers
a right to complain to OPSI where they consider that Ordnance
Survey has breached the required standards. Given these, and a
number of other possible avenues of redress (OFT and the courts)
we believe that there is no need for additional formal processes.
2.2 Since IFTS was introduced there have
been two complaints that Ordnance Survey breached the principles
of the scheme and/or the PSI regulations. In the first case OPSI
found in Ordnance Survey's favour. In the second they found against
on part of the complaint. Ordnance Survey worked closely with
OPSI to address the concerns raised in their report on the second
complaint, and has now met all of OPSI's requirements. However,
since then a review of the OPSI findings was completed by the
Advisory Panel for Public Information (APPSI). This review supported
Ordnance Survey's view that the substance of the original complaint
was not covered by the PSI regulations in the first place.
GEOGRAPHIC PANEL
Q3 What is your assessment of the UK Geographic
Panel's operation since its introduction in 2005?
3.1 The Panel as a group of senior individuals
from both public and private sectors has coalesced as a useful
forum for deliberation and discussion.
3.2 The GI Panel has made good progress
on its main task, the development of a Location Strategy for the
United Kingdom. Work on that Strategy has resulted in members
of the GI Panel currently working across Whitehall to explain
"Why Place matters"; a short report entitled A Location
Strategy for the United Kingdom—Why Place matters will be
delivered to the GI Panel Minister shortly with a recommendation
from HMT officials that it is referred for discussion at PSX(E).
3.3 During that work, the mix of public
and private sector colleagues has sometimes made the work environment
challenging. This is due to the confidential nature of some of
the discussions that certain Government colleagues wished to undertake
to ensure that the Strategy met the needs of their Department
and the nation's interests.
Q4 The Select Committee's predecessor, in
recommending in 2002 that an advisory panel on geographic information
should be created, suggested that it should have at least three
members, including the Association for Geographical Information,
OS and a private sector representative. Is the current panel's
membership sufficiently balanced with three private sector representatives
among its 12 members?
4.1 We consider that the Panel's membership
is sufficiently balanced. The current composition represents the
views of a variety of providers of geographic information from
local and central government and a very wide range of user communities
from the organisations chosen. We estimate that these organisations
in turn represent perhaps 4,000 or more of the companies and individuals
operating in the geospatial industry in the United Kingdom.
4.2 Four of the 13 members have a specific
remit to represent the private sector, namely the Association
for Geographic Information, Association of British Insurers, Royal
Institution of Chartered Surveyors and the Demographic User Group,
between them representing more than 700 private sector companies;
it would however be inappropriate to have individual companies
represented.
Q5 In the memorandum to the Committee during
its recent inquiry into DCLG's Annual Report 2006, the Government
said that the ending of NIMSA means "there is no distinction
for OS between public service and commercial activity". If
that is the case, should the head of a commercially active organisation
continue, ex officio, to be official adviser to Ministers on "all
aspects of survey, mapping and geographic information"?
5.1 Ordnance Survey believes that this is
entirely appropriate and does not present any material conflict
of interest. The Director General and Chief Executive of Ordnance
Survey, as is the case with the Chief Executive of many Agencies
and Trading Funds, has long been the official advisor to government
on specialist issues. There has never been any direct connection
between this role and the availability of NIMSA. Moreover, Ordnance
Survey has been "commercially active" for most of its
existence, having charged for its information since the 1800s.
5.2 Ordnance Survey advice is focused on
survey, mapping and geographic information (GI), primarily related
to short term issues. Where specific requests for advice are confidential
or strategic in nature they frequently require a rapid response,
and can best be delivered by a government organisation with extensive
skills and experience in the area of the advice.
5.3 More broadly-based advice and recommendations
on medium and longer term key geographic information issues are
also available to Ministers from the United Kingdom Geographic
Information Panel, established in 2005. Government may at any
time request and receive representations on particular issues
from other interested parties.
NATIONAL INTEREST
MAPPING SERVICES
AGREEMENT
Q6 What impact will the ending of NIMSA have
on OS' own structures, financing, turnover and dividend?
6.1 NIMSA, established as a seven-year agreement
in 1999 when Ordnance Survey became a Trading Fund, has contributed
to the costs of an agreed list of mapping activities required
in the national interest, which would not otherwise have been
provided if the decision were made on a purely commercial basis.
6.2 It is important to appreciate that a
significant proportion of NIMSA funded a single major programme—Positional
Accuracy Improvement (PAI)—that resulted in an improved
standard of absolute accuracy of mapping data for rural areas.
This programme was successfully completed in 2006, coincident
with the end of NIMSA, and now yields increasing benefits in maintenance
costs. The remainder of NIMSA supported a cyclical programme of
data maintenance and capture for rural areas, and some relatively
lower-cost activities (eg the gigateway discovery metadata service,
now separately funded by DCLG).
6.3 The annual value of NIMSA reduced over
the period of the agreement, most significantly during 2006-07,
when it was originally budgeted to be in the region of £6
million but eventually only £0.96 million was agreed with
the Department, representing less than 1% of Ordnance Survey's
annual turnover.
6.4 The impact of the ending of NIMSA has
naturally been factored into the annual Ordnance Survey business
planning process. A three year corporate Business Plan is submitted
annually for Ministerial approval. This Plan includes both operational
and financial projections, but is not published publicly, for
reasons of commercial confidentiality (this is explicitly specified
in the Ordnance Survey Framework Document).
6.5 With the ending of NIMSA, Ordnance Survey
has reviewed its planned activity, particularly on cyclical data
revision. Ordnance Survey now believes that it will be able to
continue to provide a comparable level of support to mapping rural
geography as achieved under NIMSA, at naturally some financial
impact to itself, by adopting a new approach as outlined below
(Q7). Ordnance Survey's current estimate is that the additional
annual cost to itself of maintaining this support will be up to
£1 million higher than currently incurred in the post-NIMSA
era.
Q7 What impact will the ending of NIMSA have
on rural mapping?
7.1 Ordnance Survey is close to finalising
a policy and operational approach that will maintain the quality
of rural mapping at sustainable cost to itself despite the ending
of NIMSA.
7.2 When the end of NIMSA was announced,
Ordnance Survey publicly indicated that it would have an impact
on the currency and content of the rural geography within its
products, and might also result in the lengthening of rural revision
sweep cycles, if Ordnance Survey continued with the current programme.
7.3 However, Ordnance Survey has subsequently
reviewed its rural revision policy in the light of the altered
funding arrangements, evolving customer needs, and opportunities
presented by new processes and technology which have improved
Ordnance Survey's capability and efficiency in maintaining its
databases. A new approach is close to being finalised which we
believe will appropriately underpin the currency and content of
the rural geography within Ordnance Survey's products, at some
additional cost but not one that is disproportionate.
7.4 Under the new policy all primary features,
such as residential, industrial or transport infrastructure developments,
will continue to be surveyed within 6 months of completion. A
varying two- to 10- year national programme of cyclic rural revision
will maintain all secondary features. All areas of Great Britain
will be revised in a more integrated programme. The most populated
or most rapidly changing areas will be revised more frequently
than previously, with the most remote areas still being revised
at least once every 10 years. Revision intervals may vary according
to patterns of known change and customer need.
Q8 Will the procurement of necessary services
be more expensive for local authorities now that OS is not providing
them under NIMSA?
8.1 For the avoidance of doubt, the cost
of Ordnance Survey products for local authorities was not directly
affected by the existence of NIMSA. NIMSA funding enabled investment
in maintaining the consistency of currency, content and specification
of the mapping to agreed levels, which would not otherwise have
been provided if the decision was made on a purely commercial
basis. All users have benefitted from these investments in the
products supplied by Ordnance Survey.
8.2 The current local government contract
(the Mapping Services Agreement or MSA) was let in 2005 following
a competitive tender process and Ordnance Survey expects that
the same approach would be adopted for any future procurement
of mapping information and services by local authorities. It is
reasonable to assume that Ordnance Survey would be a bidder in
such a tender process in the normal course of events. However
the current MSA does not expire until 31 March 2009, and until
an Invitation to Tender is issued, with specifications for data
and services, it would be highly premature to predict likely costs.
COMPETITION
Q9 Some OS competitors allege it is able to
use its position as public sector information holder to compete
unfairly, either by imposing over-stringent and costly licence
conditions or by developing products of its own in direct competition
with theirs but without the associated information licensing costs.
There are further complaints that OS is an effective monopoly,
preventing fair and transparent competition in the geographical
information market. What is your view of these suggestions?
9.1 Ordnance Survey believes that these
concerns are based on misconceptions as to the nature of its role
and business model, and the terms on which Ordnance Survey competes
in the market.
9.2 Revenue from the sale and licensing
of Ordnance Survey's products, which represents almost all of
its income, is its only possible means of meeting its financial
targets as a Trading Fund. It is therefore in Ordnance Survey's
interests to ensure that its data is widely available and widely
used. Its Vision (see paragraph 1.2 above) makes clear that Partners
have a key role to play in the success of Ordnance Survey's business
model. The partner network was started in its current form in
2002 and has now grown to over 500 partners generating for Ordnance
Survey over £26 million per annum, and we estimate to the
economy somewhere in the region of £300-£400 million
per annum.
9.3 Ordnance Survey does not consider that
it has any kind of privileged status in the market, or that it
"competes unfairly". It is subject to the same competition
law rules as any other business trading within the UK, and is
subject to the enforcement powers of the Office of Fair Trading,
and to the possibility of private litigation in the courts, like
any other business. Ordnance Survey is additionally subject to
the PSIR and participates in the IFTS operated by OPSI, both of
which provide for third parties who feel that Ordnance Survey
has not met the required standards an avenue to complain to OPSI.
9.4 In deciding how best to meet its financial
and legal obligations, Ordnance Survey has taken the view, in
line with general competition law, that where it produces and
markets products and services itself (either directly or through
its appointed distribution network), there is no business or policy
case for it to licence others to use its data to produce the same
or similar products.[2]
Ordnance Survey considers that this approach is also consistent
with the policy underlying the PSI Regulations and the IFTS, which
seek to maximise re-use of data outside of the original
purpose to which it is put by the public sector information holder.
It should be noted, therefore, that Ordnance Survey's approach
is to create universal base framework data for both public and
private sector usage. Building on this, Ordnance Survey's 500
business Partners create value-added applications.
9.5 Ordnance Survey strongly encourages
the use of Ordnance Survey data by third parties ("Licensed
Partners") to produce products or services that Ordnance
Survey does not produce itself. Ordnance Survey's policy is not
to compete with the products and services that are supplied by
Licensed Partners using its data, although different Licensed
Partners can (and do) compete with each other in various downstream
markets.
9.6 Ordnance Survey has developed a licensing
model that is designed to minimise the risk of conflict between
Ordnance Survey and its licensees, and between different licensees,
and which takes account of the wide range of possible uses to
which Ordnance Survey data can be put. It has created a series
of "Specific Use Contracts" (SUCs) for different types
of end use. This approach:
— Enables licences to reflect the nature
of the use to which data can be put—for example, internet
applications may pay royalties on a "per hit" basis
whereas navigation products incorporating an update service will
attract an annual royalty payment.
— Ensures that Licensed Partners who
compete with each other are all licensed on the same terms and
conditions.
— Ensures that changes to terms and
conditions are made in a coherent manner. Changes to the standard
framework are only made after a full consideration of the implications
of the proposal, including the interests of all Licensees.
— Retains some flexibility to take
account of the changing nature of the use to which Ordnance Survey
data is put over time, by extending the scope of Licenses or adding
new categories of SUCs when innovative products and services are
devised.
9.7 Ordnance Survey has therefore tried
to build flexibility into its licensing approach. Nonetheless,
we accept that because, in the interests of avoiding discrimination,
we do not negotiate "bespoke" arrangements with individual
licensees, there is a degree of formality and standardisation
to our licensing arrangements that may sometimes be inconvenient
to potential licensees—and also to Ordnance Survey. This
is in the overall interests of licensees as a whole, as well as
being the approach best calculated to ensure that Ordnance Survey
can comply with its own obligations.
9.8 Ordnance Survey also accepts that the
terms on which its products are supplied are more complex than
in a normal sale of goods transaction. This is necessary because
they concern the licensing of intellectual property rights. The
complexity reflects the nature of the "product", as
well as the wide range of uses to which it can be put, and the
range of its customer base. Nonetheless, we share the concern
of licensees that terms should be as straightforward as possible,
and are currently considering how to reduce their complexity.
1 The Shareholder Executive is based in DTI, with
a cross-Governmental remit to advise and support Departments in
their role as shareholders Back
2
It has developed this approach taking into account in particular
the approach of the ECJ in case C-418/01 IMS Health GmbH &
Co. OHG v NDC Health GmbH & Co. KG which indicates that a
holder of intellectual property rights is not required to license
third parties to use those rights to produce products in circumstances
where the right holder is already meeting the market demand itself. Back
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