How is Ofcom funded?


INSIGHT
Published
Apr 25th '24
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In this article Ofcom want to address some misunderstandings about how they’re funded. Contrary to what some people think, Ofcom is not funded directly by taxpayers or the Government.

 

Most of Ofcom’s funding comes from fees paid to them by the companies they regulate, to cover the cost of the work Ofcom does in their sectors.

 

These could be broadcasters, telecoms providers or firms in the postal sector. Ofcom publish these overall amounts publicly, so people can see how funding is split between industries.

 

Charges are based on companies’ individual revenues and the amount of work Ofcom carry out in their area. Companies must pay these fees. It’s a funding structure that is set by parliament, and it’s the same model used for many UK regulators.

 

The overall spending cap is set as part of the Government Spending Review.

 

Fully independent regulator

While they’re funded by fees paid to them by the companies Ofcom regulate, this does not affect their independence. Ofcom is an independent regulator and make evidence-based decisions without fear or favour. Although Ofcom is accountable to Parliament, they are independent of government and the companies they regulate.

 

At times, decisions Ofcom make can have financial impacts on the companies who pay fees. For example work to protect consumers, or requiring telecoms providers to make sure their networks are fit for the future.

 

As well as this, Ofcom sometimes issue significant fines to companies who fail to comply with the rules – including some of the largest companies they regulate.

 

Examples of recent fines issued include: a £10.5m fine for O2 for over-charging its customers; a £5.6m fine for Royal Mail for missing delivery targets; and a £1.5m fine for Sepura for a breach of competition law.

 

The biggest fine levied was in 2018, when Ofcom issued Royal Mail with a £50m financial penalty for breaking competition law.

 

Any income received through issuing fines is passed directly to HM Treasury and does not contribute to Ofcom’s running costs.

 

Other fees paid to Ofcom

As the UK’s communications regulator Ofcom also manage the radio spectrum. This is a finite national resource that needs to be carefully managed, with certain bands of spectrum being used for different purposes. For example, mobile companies use different parts of the spectrum to TV companies.

 

As part of this management role, Ofcom license specific spectrum bands to the different companies and organisations that use them – and they pay for these licences.

 

Ofcom collect the revenue raised through issuing these licences, and pass most of it to HM Treasury. With the agreement of HM Treasury, they retain a proportion of the revenue to cover costs in authorising and managing the use of radio spectrum and representing the UK internationally, as well as Ofcom’s competition work such as market studies and enforcement work under the Competition Act.

 

In addition to these fees, Ofcom receive funding for managing and allocating numbering resources like the telephone numbers we use every day. For example, if a telecoms provider wants to use a block of numbers for its customers, they are required to pay to do this.

 

Ofcom funding model gives them financial independence and sustainability, allowing them to effectively regulate the communications services people in the UK use and depend on every day.

 

Source:  Office of Communication (Ofcom)

 

About Ofcom

Ofcom is the regulator for the communications services that we use and rely on each day.

 

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