Insights Fees under the Online Safety Act 2023: Department for Science, Innovation and Technology publishes guidance to Ofcom

Prior to the dissolution of Parliament, the Department for Science, Innovation and Technology published guidance to Ofcom about charging fees in order to carry out its functions under the Online Safety Act 2023.

The regulatory regime under the Act is intended to be “cost neutral to the exchequer”. Therefore, regulated services at or above a revenue threshold (based on ‘qualifying worldwide revenue’ and set by the Secretary of State) will be required to pay an annual fee, unless they are exempt. Those services below the threshold will not be required to pay a fee, but will be required to comply with their duties under the Act.

The Guidance recognises the financial and administrative burden on businesses as a result of having to pay fees. It therefore states that Ofcom’s approach to charging fees should be “robust and fit for purpose”, and that the “aggregate amount of the fees payable to Ofcom should be sufficient to meet, but not exceed, the annual cost to Ofcom of the exercise of their online safety functions”.

Before the fee regime can come into effect (expected to be in 2026/27, until such time Ofcom will be funded by Government), a number of ‘implementation steps’ will have to take place. First, the Secretary of State will issue guidance to Ofcom about the principles to be included in its Statement of Charging Principles (“SOCP”), after which Ofcom will carry out a public consultation, currently expected to take place this summer. As part of that consultation, regulated services will be asked to provide their views on the revenue threshold which will trigger payment of a fee, as well as possible exemptions. The Secretary of State will then determine the qualifying worldwide revenue threshold figure in light of the consultation responses, after which those service providers that are caught will be required to notify Ofcom of relevant revenue information under the Act.

It is at this stage that Ofcom will also publish the SOCP, setting out the principles that will apply in determining fees. Those SOCP must have regard to guidance issued by the Secretary of State, including three ‘overarching principles’ that have been identified. First is proportionality: the fee regime should be “fair and manageable for the range of different regulated providers in scope of the Act”, taking into account the range of services and levels of qualifying revenue, and recognising the potential burden on providers (particularly SMEs). The second principle is transparency: the SOCP should clearly set out the relationship between the cost of Ofcom exercising its regulatory functions on the one hand, and the amount of fees it is charging providers on the other. The third and final principle is stability: as the Guidance explains, businesses need to be able to incorporate fee-paying into their long-term plans. Therefore, it is expected that the principles in the SOCP should enable Ofcom to set fee rates “on a consistent basis year on year”.

We will report on developments in this area as they occur. In the meantime, the Guidance can be found here.