Select Committee on Transport, Local Government and the Regions Appendices to the Minutes of Evidence

Memorandum by Getmapping (OS 14)


  Getmapping (GM) welcomes the inquiry of the Urban Affairs Sub-Committee of the Select Committee on Transport, Local Government and the Regions into the OS. It is an opportunity to review the services provided by OS, with references to its performance against its remit as the National Mapping Agency, its use of public funds, and the efficiency and probity of its business practices.

  GM supports Government policy towards OS, as set out in recent written answers. Sally Keeble MP (PUSS, DTLR) stated "working with partners is a central element of the Ordnance Survey corporate strategy" (WA 21 November 2001) and that the Quinquennial Review of OS, announced in February 2001, "has provided extensive opportunities for consultation with internal and external stakeholders" (WA 28 November 2001). However, GM asserts that OS has misused its dominant position to compete unfairly in GM's market.

  GM was founded in 1998 specifically to create and maintain a complete aerial survey of the UK (the Millennium Map) and to sell it to all users at affordable prices. No such survey had ever existed and the OS had no plans to create one. GM has invested over £10 million in the project and employs 65 staff. The Millennium Map is now complete for England and Wales and can be used on-line by anybody who sets up an account. Sales are growing strongly, and GM expects to be profitable by the end of 2002. OS by contrast has no experience in the market, never having commissioned any colour photography before June 2001.

  GM is an OS Licensed Partner (using OS data to make the Millennium Map map-accurate). OS confirmed to GM throughout 1999-2000 that selling colour aerial photography was not in its remit, and that GM's business did not conflict with OS's business. Trusting the honour of these assurances, GM agreed that OS could become a reseller of the Millennium Map in September 2000, and as a result GM has spent considerable effort briefing OS staff on all aspects of the business, thus providing OS with vital marketing intelligence. At no time until 2001 did OS declare a conflict of interest.

  In December 2000, GM presented the Millennium Map and explained how well it would fit into MasterMap: the OS was enthusiastic, and agreed in principle to the use of the Millennium Map as a layer for MasterMap. In January 2001, GM made a formal proposal to the OS to adopt the Millennium Map as a layer within MasterMap. It was only after this that OS decided to acquire its own Imagery Layer. We can provide detailed evidence for this.

  In May 2001 OS started the procurement of an Imagery Layer for Britain very similar to the Millennium Map. GM protested that this was unnecessary and offered to license the Millennium Map to OS free of charge under a long-term partnership to satisfy OS requirements. However, OS rejected GM's offer on the grounds that the Millennium Map did not meet the OS specification. Instead, OS wants to license small parts of the Millennium Map to get it started with an Imagery Layer. OS now intends, over the next few years, to use its own cartographic photography as the basis for the Imagery Layer thus excluding GM from any serious future involvement. To facilitate this all OS cartographic flying was switched to colour in June 2001.

  OS chose a specification for the Imagery Layer which OS knew would make the Millennium Map non-compliant. Furthermore, the specification was set without a proper understanding of the market, without consulting the private sector imagery providers, and, as far as we know, without properly consulting the customer base. GM strongly suspects that the specification was chosen to further OS's commercial interests, and not for valid market reasons.

  OS has a remit to maintain Britain's National Mapping, to maintain the geographic referencing system and to support third party data providers by facilitating the interchange of geographic information. This third point is an explicit aim of the new MasterMap. ". . .It is not the purpose of [MasterMap] to supplant any existing systems, but to underpin and support them". By attempting to procure an Imagery Layer of its own, OS is acting outside its remit without any overriding justification of public good.

  In short, the facts point to a large, well-established and partly publicly funded body using its strength, market power and privileged access to a smaller partner's trade secrets to undermine that smaller company which had pioneered investment in a new market in which OS had previously been uninterested. GM has offered what it considers to be excellent terms to OS for continued partnership. However, OS appears to have moved from a relationship based on partnership to a head on competition which threatens GM's survival.

  In the course of its "partnership" with OS, GM has acquired experiences and views which it hopes will inform the Select Committee's inquiry.

1.   We suspect a misuse of public funds

  Under a National Interest Mapping Service Agreement (NIMSA), the Government contributed £42 million in 1999 to support certain OS mapping services which could not attract sufficient commercial funds to cover their costs. Included in this package was "the most intensive programme of aerial survey work ever undertaken by OS" to "accelerate the updating of detailed maps of rural areas from the north of Scotland to the south of England". These photographs were to be taken in black and white. There was no mention of any need or intention to create an Imagery Layer. If, as OS has recently claimed to GM, they had been planning a colour Imagery Layer for a long time, there was no sense in embarking on the NIMSA programme using black and white photography. All OS flying was moved to colour in June 2001. GM suspects that NIMSA funding is now being used to support (more expensive) colour photography which is going to be used in the OS Imagery Layer in competition with the private sector. If so, this is a clear misuse of NIMSA funding.

2.   OS is not operating on a break-even basis

  The OS Framework Document (April 1999) defines how OS is to operate: "The Trading Fund model is one of breaking even taking one year with another after allowing for operating costs, investment needs, loan repayments and agreed levels of dividend". GI News, September 2001, states that OS made a retained profit of £28.6 million on £99.6 million turnover (including a £19 million award from AA). This amounts to 29 per cent profit which is well in excess of a breakeven model. Far from operating on a breakeven basis, OS appears to be building up a sizeable war chest, which gives it the capability to compete with the private sector in markets outside its remit.

3.   OS may intend to break its own cross subsidy rules to disadvantage the private sector

  The OS Framework Document states that "There is no cross subsidy between the various elements of the OS operations". But OS has stated that aerial photography flown for cartography (and probably part-funded by NIMSA) will be used to create the Imagery Layer. This would give OS a huge and unfair advantage over the private companies who pioneered the Imagery Layer market (unless the photography is charged to the Imagery Layer business at full commercial rates). We have asked OS to confirm that the cartographic photography will be charged to the Imagery Layer at full commercial rates, but OS's answer is not entirely clear.

4.   Why has OS not sold any imagery as a reseller of the Millennium Map?

  OS has been remarkably unsuccessful as a reseller of the Millennium Map—in fact it has not sold a single image. In contrast, in 2001, the Geoinformation Group sales of the Millennium Map topped £100,000, Integrated Statistical Solutions sold over £50,000, and others sold a total of over £85,000. This is remarkable: OS has the largest sales force of all GM's resellers and the best access to key public sector and private sector clients. Does OS really not have skills or knowledge in this market (which, by extension would indicate that they are in no position to decide on the best specification for an Imagery layer without consulting GM and other private sector providers)? Or has OS deliberately not tried to sell GM's data (in which case they are in breach of their reseller agreement and are working deliberately to disadvantage a supposed partner)?

5.   OS has biased its competition for its Imagery Layer

  We suspect that OS chose to specify orthorectified data not to comply with market demand, but to allow it to declare the Millennium Map non-compliant. The experience of GM and TGG (the most successful suppliers in the market up until 1999) is that the main market demand is for geocorected rather than orthorectified data. This view is strongly supported by a recent Business Research Centre market survey which demonstrates that only a small minority of users need orthorectified data. OS has never sold any colour imagery (see point 4), and therefore OS should have based its specification on the experience of the companies currently working in the market. OS claims to have conducted a thorough and statistically significant market survey to justify the choice of orthorectified imagery. We have asked OS for a copy of their market survey but it has been refused on the grounds that it is commercially sensitive.

  It is important to note that in practice there is very little difference between the Millennium Map and an orthorectified Imagery Layer. Please see Annex A for an illustration.

6.   Collateral damage to GM from OS's Imagery Layer Procurement

  By undertaking to acquire its own Imagery Layer in direct competition to the Millennium Map, OS is inflicting severe and demonstrable damage on GM's business. Several of our major customers are now waiting to see how the OS imagery Layer evolves; others are reluctant to purchase the Millennium Map because OS promotional material appears not to endorse it: "Our data customers have made it clear to us that they need and expect a comprehensive OS Imagery Layer to be orthorectified, as such imagery has geometric fidelity . . . Orthorectification is increasingly seen as the all-purpose standard for the future" (Philip Round, Chief Press Officer, OS). OS is the dominant force in the UK mapping business; it has a monopoly to provide mapping to the public sector. It is understandable that major public sector and private sector customers are unwilling to commit to GM's product when OS is embarking on its own competitive product. Orthorectified data will become the natural specification for an Imagery Layer in a few years time once the errors in OS LandLine have been corrected, and the second layer of the Millennium Map will be orthorectified to reflect this. But today the Millennium Map is the only product available and it fits LandLine better than an orthorectified product. OS should therefore be promoting the merits of the Millennium Map rather than seeking to undermine the market prospects of its own legal partner.

7.   The OS procurement of web serving tools raises ethical questions

  Web serving tools for graphics are outside OS's remit: "In order to allow Licensed Partners scope to develop their offerings and their markets, we will not ourselves introduce an on-line graphics service immediately. We will neither launch any other pay-as-you-use services on our web site, nor will we compete head on with our Licensed Partners with such services for the foreseeable future" (OS Information Paper 3/2000).

  Although OS's analysis of its Imagery Layer Business and Technical requirements was completed by April 2001, there was no mention of any web serving tools in its Imagery Layer specifications of May and August. However, GM's response to the Imagery Layer ITT offered to provide OS with its web serving tool, Imagexpress, and gave OS a detailed description of the capabilities of the system. In October OS started a new procurement for web serving tools for the Imagery Layer. Again, OS appears to be using information gained through its relationship with GM to start a procurement for tools outside its own stated remit. This runs wholly against the partnership ethos.


  GM considers that OS's attempt to procure an Imagery Layer is unnecessary given that this new market is now well-served by the private sector. Furthermore, OS's procurement activities appear to have been badly handled, (in particular the specification of orthorectified data without industry consultation or proper market analysis). By its activities OS has badly damaged GM's business. It is therefore recommended that OS should immediately withdraw from the procurement of an Imagery Layer for a period of at least five years. This will give the private sector initiatives time to mature. In the moratorium period OS can serve both the Millennium Map and other private sector datasets as third party layers within MasterMap, exactly in accordance with the MasterMap philosophy of underpinning and supporting third party datasets.

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