Select Committee on Communities and Local Government Committee Written Evidence

Memorandum by Ordnance Survey

Q1  In 2002, the Committee's predecessor, the Transport, Local Government and the Regions Committee, concluded in its report on Ordnance Survey: "there is a clear need to define the boundaries of Ordnance Survey public service and national interest work." To what extent has the position changed in the intervening five years?

  1.1  Government policy on Ordnance Survey's public service and national interest work was updated and formalised in July 2004 by the publication of a new Framework Document for the organisation. This set out Ordnance Survey's status as:

    —  Responsible for the official, definitive surveying and topographic mapping of Great Britain.

    —  Responsible for maintaining consistent national coverage of other nationally important geospatial datasets.

    —  Operating as a Government Trading Fund.

  1.2  The Framework Document set out Ordnance Survey's Aim as "Satisfying the national interest and customer need for accurate and readily available geospatial data and maps of the whole of Great Britain in the most efficient and effective way". It went on to set out "The vision for Ordnance Survey and its partners to be the content provider of choice for location-based information in the new information economy". The strategic objectives through which the above Aim was to be pursued are listed at Annex A.

  1.3  The other important recent Government policy change was the announcement on 6 November 2006 that the National Interest Mapping Services Agreement (NIMSA) would cease at the end of 2006. NIMSA was established in 1999, since when it has contributed to the costs of an agreed list of mapping activities required in the national interest which would not otherwise have been provided if the decision was made on a purely commercial basis.

  1.4  Despite the ending of NIMSA, Ordnance Survey has continued to operate the 24 x 7 Mapping for Emergencies service, and some Coastal Mapping of changes to tide lines and coastal erosion. Other implications of the ending of NIMSA, connected with the currency and content of the mapping of rural areas, are discussed below in our answers to Questions 6 to 8.

  1.5  Several developments since 2002 have influenced the "regulatory" environment in which Ordnance Survey trades:

    —  The Information Fair Trader Scheme (IFTS ) was launched in Autumn 2002 by Her Majesty's Stationery Office (now the Office of Public Sector Information (OPSI)).

    —  The Re-Use of Public Sector Information Regulations (PSIR) 2005 (SI 2005/1515) were implemented in July 2005.

    —  A report on the Commercial Use of Public Sector Information (CUPI) was published by the Office of Fair Trading in December 2006.

  1.6  Under the IFTS, OPSI sets and assesses standards for public sector bodies in their trading of information. It requires them to encourage the re-use of information and reach a standard of fairness and transparency. Ordnance Survey received full accreditation under the IFTS in April 2003, and was re-accredited in March 2006. Ordnance Survey works closely with OPSI to ensure that, as its licensing evolves in response to market needs, it continues to conform to IFTS principles.

  1.7  As a public body, Ordnance Survey is subject to the PSIR which establish a framework for re-using public sector information. The framework is based on the principles of transparency and consistency of application, which are analogous to IFTS principles. Much, though not all, of the information Ordnance Survey collects, maintains and disseminates comes under the scope of the Regulations. Provisions within the regulations enable Trading Funds like Ordnance Survey to license and charge for the use of their information.

  1.8  The Office of Fair Trading (OFT) published its report on the Commercial Use of Public Information (CUPI) on 7 December 2006. The study looked at a wide range of information produced by the public sector, particularly central government, including information such as employment statistics, property records, company registration files, mapping, meteorological data, and hydrographic charts.

  1.9  Ordnance Survey was identified in the report as generating the greatest revenue from trading public information, and was the focus of a number of findings. In response, Ordnance Survey has sought constructive dialogue with all relevant parties. Pending publication of the Government's formal response to OFT we will continue to discuss and seek to resolve the various issues raised by OFT.

  1.10  We discuss competition issues below in answer to Q9. However, we note that while the CUPI report concluded that up to £520 million of additional economic value is being lost to the UK economy each year as a result of under-exploiting public sector information assets, the supporting economic evidence indicates that only £22 million of this is related to the geographic information sector (which included UK Hydrographic Office, Ordnance Survey, and a number of other organisations).

(a)  In evidence to the Select Committee's recent inquiry into DCLG's Annual Report, the Department said the ending of NIMSA meant there was "no distinction between public service and commercial activity for Ordnance Survey" (Third report of 2006-07, HC 106; Ev 105). But OS remains the largest public sector information holder in the UK, providing publicly gathered data under licence to organisations both public and private. How clear are the boundaries between its roles as the holder of base geographical information required by its partners and competitors to make their products commercially viable and as a commercial operator within the same marketplace as those partners and competitors?

  1a.1  Ordnance Survey shares the Government view, expressed in its response to the Select Committee in 2002, that there is no clear line between Ordnance Survey as the holder of "base" geographic information and its commercial operations. All of Ordnance Survey's operations contribute to commercial revenue generation in some way, which in turn enables it to create and maintain its "base" geographic information.

  1a.2  We comment below (paragraphs 9.4-9.6) on licensing arrangements in respect of Ordnance Survey's partners and competitors. Put simply, Ordnance Survey strongly encourages others to use its data to produce products or services it does not itself produce, and Ordnance Survey avoids competing with those products and services.

  1a.3  Ordnance Survey is currently working closely with CLG and Shareholder Executive[1] officials on further clarification and definition of Ordnance Survey's Public Task. The outcome of this work will be shared with the Select Committee once agreed with Ministers.

Q2  In 2002, the Select Committee also identified "a clear need for some form of independent arbitration so that conflicts could be resolved" between OS and its partners and customers. To what extent has that position changed in the intervening five years?

  2.1  In the period since 2002 the number of complaints against Ordnance Survey has remained low. Since then, IFTS and PSIR (see paragraphs 1.5-1.7 above) have been introduced and each give Ordnance Survey's current and potential customers a right to complain to OPSI where they consider that Ordnance Survey has breached the required standards. Given these, and a number of other possible avenues of redress (OFT and the courts) we believe that there is no need for additional formal processes.

  2.2  Since IFTS was introduced there have been two complaints that Ordnance Survey breached the principles of the scheme and/or the PSI regulations. In the first case OPSI found in Ordnance Survey's favour. In the second they found against on part of the complaint. Ordnance Survey worked closely with OPSI to address the concerns raised in their report on the second complaint, and has now met all of OPSI's requirements. However, since then a review of the OPSI findings was completed by the Advisory Panel for Public Information (APPSI). This review supported Ordnance Survey's view that the substance of the original complaint was not covered by the PSI regulations in the first place.


Q3  What is your assessment of the UK Geographic Panel's operation since its introduction in 2005?

  3.1  The Panel as a group of senior individuals from both public and private sectors has coalesced as a useful forum for deliberation and discussion.

  3.2  The GI Panel has made good progress on its main task, the development of a Location Strategy for the United Kingdom. Work on that Strategy has resulted in members of the GI Panel currently working across Whitehall to explain "Why Place matters"; a short report entitled A Location Strategy for the United Kingdom—Why Place matters will be delivered to the GI Panel Minister shortly with a recommendation from HMT officials that it is referred for discussion at PSX(E).

  3.3  During that work, the mix of public and private sector colleagues has sometimes made the work environment challenging. This is due to the confidential nature of some of the discussions that certain Government colleagues wished to undertake to ensure that the Strategy met the needs of their Department and the nation's interests.

Q4  The Select Committee's predecessor, in recommending in 2002 that an advisory panel on geographic information should be created, suggested that it should have at least three members, including the Association for Geographical Information, OS and a private sector representative. Is the current panel's membership sufficiently balanced with three private sector representatives among its 12 members?

  4.1  We consider that the Panel's membership is sufficiently balanced. The current composition represents the views of a variety of providers of geographic information from local and central government and a very wide range of user communities from the organisations chosen. We estimate that these organisations in turn represent perhaps 4,000 or more of the companies and individuals operating in the geospatial industry in the United Kingdom.

  4.2  Four of the 13 members have a specific remit to represent the private sector, namely the Association for Geographic Information, Association of British Insurers, Royal Institution of Chartered Surveyors and the Demographic User Group, between them representing more than 700 private sector companies; it would however be inappropriate to have individual companies represented.

Q5  In the memorandum to the Committee during its recent inquiry into DCLG's Annual Report 2006, the Government said that the ending of NIMSA means "there is no distinction for OS between public service and commercial activity". If that is the case, should the head of a commercially active organisation continue, ex officio, to be official adviser to Ministers on "all aspects of survey, mapping and geographic information"?

  5.1  Ordnance Survey believes that this is entirely appropriate and does not present any material conflict of interest. The Director General and Chief Executive of Ordnance Survey, as is the case with the Chief Executive of many Agencies and Trading Funds, has long been the official advisor to government on specialist issues. There has never been any direct connection between this role and the availability of NIMSA. Moreover, Ordnance Survey has been "commercially active" for most of its existence, having charged for its information since the 1800s.

  5.2  Ordnance Survey advice is focused on survey, mapping and geographic information (GI), primarily related to short term issues. Where specific requests for advice are confidential or strategic in nature they frequently require a rapid response, and can best be delivered by a government organisation with extensive skills and experience in the area of the advice.

  5.3  More broadly-based advice and recommendations on medium and longer term key geographic information issues are also available to Ministers from the United Kingdom Geographic Information Panel, established in 2005. Government may at any time request and receive representations on particular issues from other interested parties.


Q6  What impact will the ending of NIMSA have on OS' own structures, financing, turnover and dividend?

  6.1  NIMSA, established as a seven-year agreement in 1999 when Ordnance Survey became a Trading Fund, has contributed to the costs of an agreed list of mapping activities required in the national interest, which would not otherwise have been provided if the decision were made on a purely commercial basis.

  6.2  It is important to appreciate that a significant proportion of NIMSA funded a single major programme—Positional Accuracy Improvement (PAI)—that resulted in an improved standard of absolute accuracy of mapping data for rural areas. This programme was successfully completed in 2006, coincident with the end of NIMSA, and now yields increasing benefits in maintenance costs. The remainder of NIMSA supported a cyclical programme of data maintenance and capture for rural areas, and some relatively lower-cost activities (eg the gigateway discovery metadata service, now separately funded by DCLG).

  6.3  The annual value of NIMSA reduced over the period of the agreement, most significantly during 2006-07, when it was originally budgeted to be in the region of £6 million but eventually only £0.96 million was agreed with the Department, representing less than 1% of Ordnance Survey's annual turnover.

  6.4  The impact of the ending of NIMSA has naturally been factored into the annual Ordnance Survey business planning process. A three year corporate Business Plan is submitted annually for Ministerial approval. This Plan includes both operational and financial projections, but is not published publicly, for reasons of commercial confidentiality (this is explicitly specified in the Ordnance Survey Framework Document).

  6.5  With the ending of NIMSA, Ordnance Survey has reviewed its planned activity, particularly on cyclical data revision. Ordnance Survey now believes that it will be able to continue to provide a comparable level of support to mapping rural geography as achieved under NIMSA, at naturally some financial impact to itself, by adopting a new approach as outlined below (Q7). Ordnance Survey's current estimate is that the additional annual cost to itself of maintaining this support will be up to £1 million higher than currently incurred in the post-NIMSA era.

Q7  What impact will the ending of NIMSA have on rural mapping?

  7.1  Ordnance Survey is close to finalising a policy and operational approach that will maintain the quality of rural mapping at sustainable cost to itself despite the ending of NIMSA.

  7.2  When the end of NIMSA was announced, Ordnance Survey publicly indicated that it would have an impact on the currency and content of the rural geography within its products, and might also result in the lengthening of rural revision sweep cycles, if Ordnance Survey continued with the current programme.

  7.3  However, Ordnance Survey has subsequently reviewed its rural revision policy in the light of the altered funding arrangements, evolving customer needs, and opportunities presented by new processes and technology which have improved Ordnance Survey's capability and efficiency in maintaining its databases. A new approach is close to being finalised which we believe will appropriately underpin the currency and content of the rural geography within Ordnance Survey's products, at some additional cost but not one that is disproportionate.

  7.4  Under the new policy all primary features, such as residential, industrial or transport infrastructure developments, will continue to be surveyed within 6 months of completion. A varying two- to 10- year national programme of cyclic rural revision will maintain all secondary features. All areas of Great Britain will be revised in a more integrated programme. The most populated or most rapidly changing areas will be revised more frequently than previously, with the most remote areas still being revised at least once every 10 years. Revision intervals may vary according to patterns of known change and customer need.

Q8  Will the procurement of necessary services be more expensive for local authorities now that OS is not providing them under NIMSA?

  8.1  For the avoidance of doubt, the cost of Ordnance Survey products for local authorities was not directly affected by the existence of NIMSA. NIMSA funding enabled investment in maintaining the consistency of currency, content and specification of the mapping to agreed levels, which would not otherwise have been provided if the decision was made on a purely commercial basis. All users have benefitted from these investments in the products supplied by Ordnance Survey.

  8.2  The current local government contract (the Mapping Services Agreement or MSA) was let in 2005 following a competitive tender process and Ordnance Survey expects that the same approach would be adopted for any future procurement of mapping information and services by local authorities. It is reasonable to assume that Ordnance Survey would be a bidder in such a tender process in the normal course of events. However the current MSA does not expire until 31 March 2009, and until an Invitation to Tender is issued, with specifications for data and services, it would be highly premature to predict likely costs.


Q9  Some OS competitors allege it is able to use its position as public sector information holder to compete unfairly, either by imposing over-stringent and costly licence conditions or by developing products of its own in direct competition with theirs but without the associated information licensing costs. There are further complaints that OS is an effective monopoly, preventing fair and transparent competition in the geographical information market. What is your view of these suggestions?

  9.1  Ordnance Survey believes that these concerns are based on misconceptions as to the nature of its role and business model, and the terms on which Ordnance Survey competes in the market.

  9.2  Revenue from the sale and licensing of Ordnance Survey's products, which represents almost all of its income, is its only possible means of meeting its financial targets as a Trading Fund. It is therefore in Ordnance Survey's interests to ensure that its data is widely available and widely used. Its Vision (see paragraph 1.2 above) makes clear that Partners have a key role to play in the success of Ordnance Survey's business model. The partner network was started in its current form in 2002 and has now grown to over 500 partners generating for Ordnance Survey over £26 million per annum, and we estimate to the economy somewhere in the region of £300-£400 million per annum.

  9.3  Ordnance Survey does not consider that it has any kind of privileged status in the market, or that it "competes unfairly". It is subject to the same competition law rules as any other business trading within the UK, and is subject to the enforcement powers of the Office of Fair Trading, and to the possibility of private litigation in the courts, like any other business. Ordnance Survey is additionally subject to the PSIR and participates in the IFTS operated by OPSI, both of which provide for third parties who feel that Ordnance Survey has not met the required standards an avenue to complain to OPSI.

  9.4  In deciding how best to meet its financial and legal obligations, Ordnance Survey has taken the view, in line with general competition law, that where it produces and markets products and services itself (either directly or through its appointed distribution network), there is no business or policy case for it to licence others to use its data to produce the same or similar products.[2] Ordnance Survey considers that this approach is also consistent with the policy underlying the PSI Regulations and the IFTS, which seek to maximise re-use of data outside of the original purpose to which it is put by the public sector information holder. It should be noted, therefore, that Ordnance Survey's approach is to create universal base framework data for both public and private sector usage. Building on this, Ordnance Survey's 500 business Partners create value-added applications.

  9.5  Ordnance Survey strongly encourages the use of Ordnance Survey data by third parties ("Licensed Partners") to produce products or services that Ordnance Survey does not produce itself. Ordnance Survey's policy is not to compete with the products and services that are supplied by Licensed Partners using its data, although different Licensed Partners can (and do) compete with each other in various downstream markets.

  9.6  Ordnance Survey has developed a licensing model that is designed to minimise the risk of conflict between Ordnance Survey and its licensees, and between different licensees, and which takes account of the wide range of possible uses to which Ordnance Survey data can be put. It has created a series of "Specific Use Contracts" (SUCs) for different types of end use. This approach:

    —  Enables licences to reflect the nature of the use to which data can be put—for example, internet applications may pay royalties on a "per hit" basis whereas navigation products incorporating an update service will attract an annual royalty payment.

    —  Ensures that Licensed Partners who compete with each other are all licensed on the same terms and conditions.

    —  Ensures that changes to terms and conditions are made in a coherent manner. Changes to the standard framework are only made after a full consideration of the implications of the proposal, including the interests of all Licensees.

    —  Retains some flexibility to take account of the changing nature of the use to which Ordnance Survey data is put over time, by extending the scope of Licenses or adding new categories of SUCs when innovative products and services are devised.

  9.7  Ordnance Survey has therefore tried to build flexibility into its licensing approach. Nonetheless, we accept that because, in the interests of avoiding discrimination, we do not negotiate "bespoke" arrangements with individual licensees, there is a degree of formality and standardisation to our licensing arrangements that may sometimes be inconvenient to potential licensees—and also to Ordnance Survey. This is in the overall interests of licensees as a whole, as well as being the approach best calculated to ensure that Ordnance Survey can comply with its own obligations.

  9.8  Ordnance Survey also accepts that the terms on which its products are supplied are more complex than in a normal sale of goods transaction. This is necessary because they concern the licensing of intellectual property rights. The complexity reflects the nature of the "product", as well as the wide range of uses to which it can be put, and the range of its customer base. Nonetheless, we share the concern of licensees that terms should be as straightforward as possible, and are currently considering how to reduce their complexity.

1   The Shareholder Executive is based in DTI, with a cross-Governmental remit to advise and support Departments in their role as shareholders Back

2   It has developed this approach taking into account in particular the approach of the ECJ in case C-418/01 IMS Health GmbH & Co. OHG v NDC Health GmbH & Co. KG which indicates that a holder of intellectual property rights is not required to license third parties to use those rights to produce products in circumstances where the right holder is already meeting the market demand itself. Back

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