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


Supplementary Note by Ordnance Survey (OS 22(c))

  I have studied all the oral and written evidence provided to the Committee over the past four months. As I understand that you are now beginning to work on the final report, I thought it might be helpful to you if I provided a little more information and clarification about some of the topics that have engaged members' interest.

  These notes are intentionally brief, but I shall be happy to provide more detail if required.

ORDNANCE SURVEY'S CORE ACTIVITIES

  During 1999, in "Joined-up geography for the new millennium"[2], we redefined the core functions of Ordnance Survey for the information age, describing them in terms of four roles:

  1.  To provide a unique national referencing system for geospatial information relating to Great Britain.

  2.  To capture and maintain an authoritative definition of the topographic features of the landscape, both natural and man-made.

  3.  To associate selected non-topographic attributes and other non-topographic geospatial information with this topographic information.

  4.  To make this information available in an affordable and useable manner to as wide a range of users as possible, but leave to them exactly how they use it.

  I note that the association role has caused some concern among those giving evidence, particularly in relation to the extension of layers within OS MasterMap.

  Ordnance Survey has plans for a number of new layers of OS MasterMap in its forward development programme. The creation and maintenance of many of the new layers—such as imagery, land height, building height, pre-build, land and property and integrated transport—could be managed in a number of ways, and we are likely to use a range of options. We could develop all the layers ourselves, but we do not believe that is beneficial to the industry where we recognise there are skills that we do not have ourselves. In particular, through open competition, we have already involved supplier partners in the creation of the imagery layer and the points of interest layer. We are working with private and public sector partners to develop the land and property layer. We are also likely to involve supplier partners in the height, boundary and land use layers. In many instances we expect our partners to maintain an IP interest in the data they supply and consequently they will share in the revenue derived from onward licensing of that data by us through OS MasterMap. Partners can of course continue to license their own data directly to end-users.

  There will, however, be some instances, where economies of scale are likely to lead to sound business decisions that we use our own existing resources to collect some data—instances here include improvement of the address component of the land and property layer and initial work on the integrated transport network.

  Finally, there will be third party datasets that have a geographical component that we would not envisage incorporating within OS MasterMap. We would, however, encourage the data owners to geo-reference their data within the DNF standards so that direct customers of these third parties can be confident that the datasets will integrate immediately with OS MasterMap and any other datasets similarly associated with OS MasterMap.


APPLICATION DEVELOPMENT

  In defining the boundaries of our business at the beginning of 2001 we stated that "As a general rule, we will not be involved in developing applications", and subsequently we have acted to rationalise activities. Good examples being the ceasing of co-publication and consultancy activity in our core activities where we felt our business had developed beyond what was necessary, to fulfil the fourth role mentioned above. Our published vision for Ordnance Survey reinforces the role of partnerships in meeting customers' needs: Ordnance Survey and its partners will be the content provider of choice for location-based information in the new information economy.

THE ROLE OF THE NATIONAL INTEREST MAPPING SERVICE AGREEMENT

  It has been suggested that NIMSA might be modified to subsidise the price of Landranger and OS Explorer series maps. NIMSA exists to support the national interest by ensuring national coverage, national consistency and maintenance of the national geospatial infrastructure. It does not contribute to the creation of specific products, nor do we believe that it could or should. Any subsidy of Landranger or OS Explorer maps, which compete with the products of the private sector, would be open to charges of breaching UK and European competition law.

PAN GOVERNMENT SLA

  I am pleased to say that we have reached agreement on a pilot Pan Government SLA for 2002-03 improving the access of Ordnance Survey data from use by 40 departments who currently hold data licenses to approximately 560 government departments and agencies. We are using inclusion in the Civil Service Year Book as the basis for determining who is eligible to benefit from the agreement.

  It is existing Ordnance Survey users who are funding the pilot together with some gap funding from DTLR and an input from the Neighbourhood Statistics project. Existing users get immediate access to a wider range of data. New users will also benefit from initial Ordnance Survey support to help them identify the most effective use of geographic information in their activities. The agreement will also generate growth in the wider geographic information market as new users seek software and longer term advice.

  I regret to say though that there is no agreement on funding the agreement beyond one year. Understandably, the existing users do not feel able to fund new users for more than one year. Existing users wish to benefit themselves from a reduction in unit price that a long term agreement will generate. Together with DTLR we are engaging officials in Cabinet office and Number 10 Downing Street policy unit who recognise the benefit of geographic information, but we have not yet identified a source of long term funding. The outlook for agreed funding for a permanent Pan Government remains difficult. If we cannot get agreement, we will have to return to our previous arrangements with individual or small groups of government departments.

ORDNANCE SURVEY'S MARKET POSITION

  A short answer to the apparently simple question of whether or not Ordnance Survey occupies a monopoly position is not particularly helpful, for two reasons. First, as witnesses have pointed out, monopoly of itself is not necessarily a problem if properly managed; indeed a benign monopoly may be desirable in the geographical information market. Secondly, under current competition law the relevant test is not whether an organisation holds a dominant position but whether it abuses that position to the detriment of consumers. In recent months, we have taken a good deal of legal advice from Slaughter & May, the leading experts on competition law. We are acutely aware of our legal responsibility to behave fairly and we keep under constant review the controls we have in place to ensure that we do.

  Ordnance Survey operates in a competitive marketplace in all aspects of its business. In particular, the barriers to entry into the large scale arena are falling all the time. Large scale competition will be increasingly global in nature with competitive products being developed by companies with significant financial muscle. We believe that this competitive marketplace and the importance we place on fulfilling our competition law obligations taken together with the roles of the Office of Fair Trading (OFT) and HMSO means that the need for more formal regulation is unnecessary.

PROTECTING THE PUBLIC INTEREST

  The view has been expressed that an aggrieved party's only recourse is to law, in the event that Ordnance Survey breaches its obligations under the Competition Act. This is not a fair reflection of the true position. Having first exhausted our own complaints procedure, a complainant can contact the Ombudsman in addition to OFT or HMSO.

  We do not publish our prices and discount structures for individual products. We continue to simplify these pricing and licensing structures. Current proposals from the Controller of HMSO, as regulator of Crown Copyright, indicate that she wishes to assure herself by audit that all Trading Funds are applying in practice the pricing algorithms they publish. We welcome this proposals and will incorporate the proposed Fair Trader Certificate for all Trading Funds into our published plans and reports. We need to reserve only one area for individual negotiation—that of value-added applications built by our partners. We will apply similar terms and conditions to similar applications, but both HMSO and ourselves recognise that there has to be different pricing terms and conditions for wholly different applications in different markets. We have developed Pay As You Use and royalty based pricing models for use by Partners. Partnership agreements therefore are unique and a ``one size fits all'' approach is infeasible.

  The majority of concerns should, we think, be alleviated by the system of checks and balances that already exists or, in the case of HMSO regulation, is currently proposed.

ORDNANCE SURVEY'S ADVISORY ROLE

  Witnesses argued that the Director General of Ordnance Survey should no longer be the official adviser to government on geographical information, on grounds of lack of impartiality and/or partial knowledge of the market. We understand some of the reasons underlying these views. Our goal is for Great Britain to have an effective geographic information policy that allows the national mapping agency to operate in a way that ensures its continued viability, ensures that customer and government needs are met economically and enables fair and effective competition. Given the centrality of our role, we would of course expect to continue to be consulted on major issues whether or not the formal role of adviser continues in its present form.

  If it is not possible for the Director General's formal role as adviser to government on geographic information to continue in its present form, one way forward may be establishment of a small team of experts to advise Ministers on geographic information policy across central and local government. We could envisage a team of three with a clear understanding of the potential of geographic information. Membership should comprise the chair of the Association of Geographic Information, the Director General and Chief Executive of Ordnance Survey together with a representative from the private sector.

REGULATION

  As mentioned above, we do not see any benefits at all in formal regulation. Whatever the theoretical benefits of regulation, they must be set against the costs of administration as well as, possibly, the drag they may apply to the market by hindering the response of businesses to emerging opportunities. This is likely to present a significant obstacle in the case of geographical information, since the regulatory overhead would be very high in relation to market value.

  It is also not clear to us just how much work would fall to a regulator in normal conditions. We firmly believe that there are enough checks and balances on Ordnance Survey activities today to ensure that the nation and customers have a national mapping agency that fulfils all its obligations properly.


CONVERSION TO GOVERNMENT-OWNED PLC

  There is no doubt that the rapidly changing business environment requires greater agility from Ordnance Survey. The key question is only how this is to be achieved.

  Stage 2 of the Quinquennial review is comparing the costs and benefits of conversion to GOPLC with those of an enhanced Trading Fund. There seems little argument that the GOPLC option will offer greater flexibility than Trading Fund in the areas of business agility, investment capital, acquisitions and joint ventures, and little doubt that a GOPLC framework can be designed so as to provide the most appropriate financial controls and governance arrangements. We do not believe that the Trading Fund financial regime, with its narrow focus on Return on Capital Employed, is conducive to effective medium and long term development.

  GOPLC status would also be helpful in moving the culture of the organisation to one that is more responsive and adaptable to changing needs. Part of this would come from the ability to employ a wider range of options for terms and conditions of employment, but we also understand now that these specific needs could largely be met under a more flexible Trading Fund regime.

  We understand the importance of the national interest activities that we undertake today and we have led the arguments to sustain these activities within our remit. We have been very consistent in our view that full privatisation or anything other than a 100 per cent government owned PLC are not acceptable options.

  We share Sally Keeble's view that she evaluate the costs and benefits of 100 per cent government owned PLC versus an enhanced Trading Fund status before making a final decision.

  Ordnance Survey will, of course, be content to operate under any regime that allows us to fulfil our potential, sustain the business in the face of new global competitors and deliver a national mapping service that meets the need of all its customers across the spectrum of national interest, government customers and private sector customers.

  I hope these notes will be helpful in preparing your report, which I look forward to reading in due course.

Vanessa Lawrence

Director General & Chief Executive

15 April 2002


2   Ordnance Survey (1999), Joined-up geography for the new millennium, Ordnance Survey Information paper 13/1999. Back


 
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