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The Office of Communications (Ofcom) is the independent regulator and competition authority for the United Kingdom communications sector, which encompasses broadcasting, telecommunications and wireless communications. Ofcom was formed in 2003 from the merger of five previous regulators. Its operating expenditure in 2009-10 was £122 million, funded through broadcast licence fees and charges, and grant-in-aid from two government departments: the Department for Business, Innovation and Skills (£75.7 million in 2009-10); and the Department for Culture, Media and Sport (£0.6 million).
In most cases the communications market functions well and consumers enjoy the benefits of competition, such as choice and low prices for a range of products and services, and our report is presented in the overall context of that positive picture. However, there is scope for Ofcom to do more to tackle persistent problems such as the volume of silent calls, relatively low levels of switching between telecoms providers, and limited competition in fixed-line telephony.
Ofcom has successfully reduced its cost base, compared to its predecessors, despite having taken on a number of additional duties. A frequent justification for undertaking public sector mergers is to reduce costs through streamlining 'back-office' functions and property requirements. Ofcom has achieved cost reductions but, because it has classified some of the benefits of the merger as efficiency savings, it is questionable whether the scale of these is as much as would have been expected, once the merger-specific savings have been taken into account.
Ofcom manages its expenditure within an overall cap, which is agreed each year with the Treasury. In most organisations the intended work plan will determine the budget, but in Ofcom it is effectively the other way round. This has the potential to incentivise Ofcom to make decisions based on keeping within the cap - rather than maximising value. This means that value for money - optimising the available resources to achieve intended outcomes - is not always the primary focus.
Ofcom needs to do more to demonstrate its focus on value for money and to allow the taxpayers and companies that fund its activities to assess its performance. Ofcom sets out in its annual work plan the activities it plans to undertake, but it does not specify its intended outcomes, explain how its activities will achieve those outcomes, or set out how it will measure success. This makes it impossible to assess whether Ofcom is delivering value for money.
On the basis of a report from the Comptroller and Auditor General[1] we took evidence from Ofcom on the management of its resources and the outcomes it delivers for citizens and consumers.
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