Ofcom assumed its functions from the old regulators on 29 December 2003, which meant that it had a very limited time between publishing its business plan setting out its funding requirements for the first charging year and the setting of tariffs for the 2004/5 charging year on 31st March 2004.
Therefore, Ofcom undertook a shortened consultation on the Statement of Charging Principles and based its 2004/5 tariff principles largely on those of the old regulators. During its consultation on these, a considerable number of stakeholders raised issues that they did not believe had been effectively addressed in the old regulators’ principles. Ofcom agreed that many of these issues deserved a further airing and consulted stakeholders in July 2004 on its proposals.
Ofcom Funding for the year 1 April 2005 to 31st March 2006
Comparison with 2004/05
1.1 For 2004/05 Ofcom set an Operating Budget of £140 million. In setting that budget Ofcom built in the 5 per cent efficiency savings it had already achieved from merging the functions of the five former regulators and the headcount reduction of 25 per cent.
1.2 Ofcom also publicly made a commitment to seeking a further 5 per cent efficiency gain during the 2004/05 year; a target of a further 5 per cent efficiency gain during 2005/06 and of continuing to seek further efficiencies thereafter to be an RPI-Minus Cost Regulator.
2005/06 Budget and end-year out-turn
1.3 Ofcom’s Operating Budget for 2005/06 is therefore £133 million. This is 5 per cent lower than the 2004/05 budget (8 per cent lower in real terms compared with the 2004/05 Operating Budget plus RPI).
1.4 The outturn for 2004/05, Ofcom’s first full year post-merger, is estimated to be £124.1 million. This lower figure reflects higher than expected efficiency gains from the merger; but also that a number of major projects, scheduled for completion in 2004/05 will now be completed over the forthcoming financial year.
1.5 Recognising the impact of this re-phasing and of projected RPI increases in 2005/06, Ofcom believes that the £133 million operating budget is a prudent figure. Of this budget, it is expected that £6.4 million will be capital expenditure, subject to final consultation. The budget is based on an adjusted cash basis, which includes capital expenditure but excludes depreciation.
Updated to amend minor typographical error 09/02/05
1.1 This statement follows a consultation by the Office of Communications (“Ofcom”) in which Ofcom consulted on the principles that it would apply in order to set annual administrative charges and licence fees pursuant to the Communications Act 2003 (the “Act”).
1.2 This statement comprises four parts:
- Information on the background to Ofcom’s funding and an analysis of the methodology used for allocation of this funding requirement across Ofcom’s stakeholder groups;
- The Statement of Charging Principles that Ofcom will apply in determining the amount to be recovered in administrative fees for networks, services and electronic communication code services, and licence fees for broadcasting licences required under sections 38 and 347 of the Act respectively;
- Definitions of terms used in this document; and
- Annexes covering the approach to cost allocation and providing guidance on the principles for calculation of Relevant Turnover in Television and Radio.