Telecommunications Law and Regulation [5th ed.] 0198807414, 9780198807414

Citation preview

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Telecommunications Law and Regulation

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Telecommunications Law and Regulation Fifth Edition

E d it e d b y

Ian Walden

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1 Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © The Contributors 2018 The moral rights of the authors have been asserted Fourth Edition published in 2012 Fifth Edition published in 2018 Impression: 1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Crown copyright material is reproduced under Class Licence Number C01P0000148 with the permission of OPSI and the Queen’s Printer for Scotland Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2018942280 ISBN 978–​0 –​19–​8 80741–​4 Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work.

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Preface The origins of this book lie in a LLM course in Telecommunications Law, for which I became responsible when I joined the Centre for Commercial Law Studies, at Queen Mary University of London in 1992, and still teach today. One problem faced by our students in those early days was the lack of a suitable textbook, as those targeted at the professional adviser market were priced appropriately. The first edition, published by Blackstone in 2001, was the affordable and accessible single work that we felt was missing in the market. The publication of the second edition, in 2005, was by Oxford University Press. For the third edition, in 2009, my co-editor, John Angel, stepped down from the role due to other commitments. I would like to record my thanks to John for his invaluable input to this project. The fourth edition was published in 2012. This fifth edition substantially updates the fourth edition. In terms of new material, all the chapters have changed significantly, reflecting the ongoing legal and regulatory developments occurring in the sector. While no new chapters were required, we welcome some new authors and remain immensely grateful to all the contributors for their input. The organization of the book remains structured into six parts: Fundamentals; Regulatory Regimes; Key Regulatory Issues; Telecommunications Transactions; Communications Content; and International Regulatory Regimes. The telecommunications sector continues to be of strategic importance to states, both as an activity in its own right as well as an infrastructure over which trade is carried out. Rapid technological and market developments confront the legal frameworks that are designed to regulate the sector, challenging legislators, regulators, and advisers. This book attempts, but inevitably fails, to keep up with such developments and the challenges they generate. While the law should be correct up to January 2018, we have managed to sneak some amendments in up until June 2018. Professor Ian Walden Centre for Commercial Law Studies, Queen Mary, University of London Of Counsel, Baker McKenzie June 2018

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Contents Table of Cases  Table of Statutes  Table of EU Legislation 

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Table of International Instruments 

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List of Contributors 

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PART I: FUNDAMENTALS 1. TELECOMMUNICATIONS LAW AND REGULATION: AN INTRODUCTION  Ian Walden 2. THE ECONOMICS OF TELECOMMUNICATIONS REGULATION  Lisa Correa

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PART II: REGULATORY REGIMES  3. THE TELECOMMUNICATIONS REGIME IN THE UNITED KINGDOM  Ian Walden, Helen Kemmitt, and John Angel

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4. EUROPEAN UNION COMMUNICATIONS LAW  Ian Walden

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5. US TELECOMMUNICATIONS LAW  Karen Lee and Jamison Prime

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PART III: KEY REGULATORY ISSUES  6. AUTHORIZATION AND LICENSING  Anne Flanagan

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7. SPECTRUM MANAGEMENT  Anne Flanagan

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8. ACCESS AND INTERCONNECTION  Ian Walden

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viii Contents 9. CONSUMER PROTECTION AND TELECOMMUNICATIONS  Elizabeth Newman

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10. COMPETITION LAW AND TELECOMMUNICATIONS  Vincent Smith and Lorna Woods

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PART IV: TELECOMMUNICATIONS TRANSACTIONS  11. CAPACITY AGREEMENTS: FROM MICROWAVES TO MVNOs  Graeme Maguire, Joanne Wheeler, and Rhys Williams 12. CORPORATE AND MULTINATIONAL ENTERPRISE TELECOMMUNICATIONS TRANSACTIONS  Bostjan Makarovic

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PART V: COMMUNICATIONS CONTENT  13. COMMUNICATIONS PRIVACY  Ian Walden

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14. CONVERGENCE: THE IMPACT OF BROADCAST REGULATION ON TELECOMMUNICATIONS  Daithí Mac Síthigh

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15. INTERNET SERVICE PROVIDERS: CONTENT LIABILITY, CONTROL, AND NETWORK NEUTRALITY  Christopher T. Marsden

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PART VI: INTERNATIONAL REGULATORY REGIMES 16. INTERNATIONAL REGULATORY LAW  Ian Walden

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17. TELECOMMUNICATIONS REFORM IN EMERGING MARKETS  Ann Buckingham, Camilla Bustani, David Satola, and Cameron Whittfield

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Index 

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Table of Cases A&M Records, Inc v Napster, Inc, 239 F 3d 1004 (2001) (‘Napster’). . . . . . . . . . . . . . . . . . . . . . . . . 737–​8 ABC/​Général des Eaux/​Canal+/WHSmith (Case IV/M.110) [1991] OJ C244 . . . . . . . . . . . . . . . . 568–​9 AEG Telefunken v Commission (Case 107/​82) [1983] ECR 3151. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539 AGC v ISTAT (Case C-​240/​15), 28 July 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 Agincourt Steamship Co Ltd v Eastern Extension, Australasia and China Telegraph Co Ltd [1907] 2 KB 305, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804 Aimster Copyright Litigation, In Re, 334 F 3d 643 (7th Cir 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 737 Airtours/​First Choice (IV/​M. 1524) [2000] OJ L 93/​01, 13.4.2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 Airtours v Commission (T-​342/​99) [2002] 5 CMLR 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 AKZO Chemie BV v Commission of the European Communities (C-​62/​86) [1991] ECR I-​3359, [1993] 5 CMLR 215 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36, 555, 559 Alliance for Community Media v FCC, 529 F 3d 763 (6th Cir 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . 202 ALS Scan v Remarq Communities Inc, 239 F 3d 619 (4th Cir 2001). . . . . . . . . . . . . . . . . . . . . . . . . . . 743 Ameren Corporation v FCC, 865 F 3d 1009 (8th Cir 2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252 American Bird Conservancy, Inc and Forest Conservation Council v FCC, 516 F 3d 1027 (DC Cir 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256 American Civil Liberties Union v Reno 21 US 844 (1997). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 735 AOL and Time Warner (Case No COMP/​M.1845), OJ L 268/​28, 9.10.2001. . . . . . . . . . . . . . . . . . . . . 162 Arcor AG & Co KG and Others v Bundesrepublik Deutschland, (C-​152/​07 and C-​154/​07) [2008] ECR I-​5959; [2008] 3 CMLR 37. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 Arcor AG & Co KG v Bundesrepublik Deutschland (C-​55/​06) 24 April 2008 . . . . . . . . . . . . . . . . . . . 64 Areva/​Siemens (Case COMP/​39736), 18 June 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542 AT&T Corp v Iowa Utilities Board, 525 US 366 (1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 AT&T v City of Portland, 216 F 3d 871 (2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 AT&T Wireless PCS v Virginia Beach, 155 F 3d 423 (4th Cir 1998). . . . . . . . . . . . . . . . . . . . . . . . . . 254–​5 Attorney-​General v Edison Telephone Company of London (1880) 6 QBD 244 . . . . . . . 103, 293, 400 Austria v Commission (C-​411/​02) ECJ, ECRI-​8155, 16 March 2004. . . . . . . . . . . . . . . . . . . . . . . 160, 674 Autronic AG v Switzerland (1990) 12 EHRR 485. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 684 A v France (1994) 17 EHRR 462. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 670 BAI and Commission v Bayer (C-​2 and 3/​01P) [2004] ECRI-​23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539 Bais Yaakov of Spring Valley v FCC, No. 14-​1234 (DC Cir 31 March 2017). . . . . . . . . . . . . . . . . . . . . 278 Bărbulescu v Romania (5 September 2017) (Application No. 61496/​08) . . . . . . . . . . . . . . . . 649, 673–4 Base Co. NV v Ministeraad (Case C-​1/​14), (2015), Judgment of Third Chamber, 11 June 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 Base NV and others v Ministeraad (Case C-​389/​08), 6 October 2010. . . . . . . . . . . . . . . . . . . . . . . . . 181 Base NV v Commission (T-​295-​06), 22 February 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 Bell Atlantic Telephone Companies v FCC, 206 F 3d 1 (2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248 Bellsouth/​SBC/​J V (Case COMP/​M.1946), OJ C 202/​5, 15 July 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . 144

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Bertelsmann/Kirch/​Première (Case COMP/​J V 37), decision of 27 May 1998, OJ L 53, 27.2.1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .567 Biret International v Council (C-​93/​02) [2006] 1 CMLR 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 838 Blast, Re [2016] NICA 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 694 Bonnier Audio AB and Others v Perfect Communication Sweden AB (Case C-​461/​10) OJ C 317, 20/​11/​2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 735 Breyer (Patrick) v Germany (Case 582/​14) [2016] 19 October 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . 748 British Airways (Case C-​95/​04P) C:2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 571 British Telecommunications plc v Ofcom (Judgment Market Definition) [2017] CAT 25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88, 365, 474 British Telecommunications plc v Ofcom (Market Definition Ruling) [2017] CAT 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88, 123, 178 British Telecommunications, Re (41/​83) [1985] 2 CMLR 368 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 Bronner (Oscar) GmbH & Co v Mediaprint Zeitungs and Zeitschriftveriag GmbH & Co KG, and Others (C-​7/​97) [1998] ECR 1-​7791 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561–​2, 573, 835 BSkyB/Kirch Pay TV (Case COMP/​I V 37), 21 March 2000, OJ C 110, 15 April 2000. . . . . . . . . . . . . 567 Bunt v Tilley [2006] 3 All ER 336 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 744 Cable & Wireless et al v FCC, No 97–​1612, DC Cir, 12 January 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . 825 Centrafarm v Sterling Drug, Case 15-​74 [1974] ECR 1147. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397 Centrafarm v Winthrop, Case 16-​74 [1974] ECR 1183 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397 Central Hudson Gas & Elec Corp v Public Service Commission, 447 US 557 (1980) . . . . . . . . . . . 274 Centre Belge d’Etudes de Marché-​Télé-​Marketing v Compagnie Luxembourgeoise de Telediffusion SA and Information Publicite Benelux SA (311/​8 4) [1986] 2 CMLR 558 . . . . . . . 161 Chambers v DPP [2012] EWHC 2157 (Admin). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720 Cincinnati v Discovery Network, Inc, 507 US 410 (1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274–​5 Cityhook Ltd v OFT and Others [2007] CAT 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 806 Comcast v FCC, 600 F 3d 642 (2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212, 764, 770–​1, 775 Commission v Belgium (C-​11/​95) [1996] ECR I-​4115. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 693 Commission v Belgium (C-​221/​1), OJ C 274/​14, 9 November 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 Commission v Council of the European Union (Case C-​687/​15), 25 October 2017. . . . . . . . . . 417–18 Commission v France (C-​146/​0 0) [2001] ECR I-​9767 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 Commission v Germany (C-​424/​07) [2009] ECI I-​11431. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13, 182, 460 Commission v Germany (International Dairy Agreement) [1996] ECR I-​3989. . . . . . . . . . . . . . . . 837 Commission v Greece (C-​396/​99) [2001] ECR I-​7577. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 Commission v Luxembourg (C-​97/​01) [2003] ECR I-​5797, [2003] Info TLR 420. . . . . . . . . . . . . . . . 160 Commission v Poland (C-​277/​07) 13 November 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454 Commission v Portugal (C-​429/​99) [2001] ECR I-​7605 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 Commission v Spain (C-​500/​01) [2004] ECR I-​583, [2004] Info TLR 99. . . . . . . . . . . . . . . . . . . . . . . . 160 Commission v Sweden (C-​246/​07) 20 April 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 417 Commission v UK (C-​222/​94) [1996] ECR I-​4025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 690, 696 Commission v VW (C-​74/​04P) [2006] ECR I-​6585. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539 Computer Inquiry I (Regulatory Pricing Problems Presented by the Interdependence of Computer and Communication Facilities, Final Decision and Order, 28 FCC 2d 267 (1971)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 Computer Inquiry II (Amendment of 64.702 of the Commission’s Rules and Regulations, Second Computer Inquiry, Final Decision, 77 FCC 2d 384 (1980)). . . . . . . . . 210–​11

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Computer Inquiry III (Amendment of 64.702 of the Commission’s Rules and Regulations, Third Computer Inquiry, Report and Order, 104 FCC 2d 958 (1986)) . . . . . . . 210–11 Consten and Grundig v Commission (Joined Cases 56 and 58/​6 4) [1966] ECR 299. . . . . . . . . . . . 540 Copland v UK (2007) 45 EHRR 37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649 Corbeau (C-​320/​91) [1993] ECR I-​2533. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 Cordless telephones in Germany, Re [1985] 2 CMLR 397. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166 Core Communications, Inc, Re 2008 US App LEXIS 14501 (2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . 248 Covad Communications Co and DIECA Communications, Inc v FCC, 450 F 3d 528 (DC Cir 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244–​5 Crest Nicholson (Operations) Ltd v Crest Nicholson (Operations) Ltd v Arqiva Services Ltd and others (Cambridge County Court, 28 April 2015), unpublished . . . . . . . . . . . . . . . . . . . 369 CVC/​SLEC (Case COMP/​M.4066), 20 March 2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568 Darcy v Allin (1602) Moore KB 671–​675. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290 Delimitis v Henninger Brau (Case C-​234/​89) [1991] ECRI-​935. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540–​1 Delle v Worcester Telegram & Gazette Corp, 2011 WL 7090709 (Mass Super Ct 14 September 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 736 Deutsche Telekom AG v Bundesrepublik Deutschland (Case C-​543/​09), 5 May 2011. . . . . . . . . . 672 Deutsche Telekom AG v Commission (C-​280/​08) [2010] 5 CMLR 27; ECRI-​9555 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 537, 543, 553, 557, 591 Deutsche Telekom AG v Commission (Case T-​27/​03) [2008] ECR-​II. . . . . . . . . . . . . . . . . . . . . . . . . . 560 Deutsche Telekom AG v Commission (T-​271/​03) [2008] 5 CMLR 9, 10 April 2008 . . . . . . . . . . . . . 160 Digital Rights Ireland Ltd v Minister for Communications, Marine and Natural Resources (Case C-293/​12) [2014] 3 CMLR 44 (DRI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 655 Diomed Direct v Clearcast (High Court, May 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .724 Direct Communications Cedar Valley v FCC, 753 F 3d 1015 (2014). . . . . . . . . . . . . . . . . . . . . . . . . . . 262 Dowling v United States, 473 US 207, 222 (1985). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 738 DPP v Collins [2006] UKHL 40. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720 Dramatic Entertainment Limited v British Sky Broadcasting Limited [2012] EWHC 1152, Ch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 752 Dubray v Horshaw, 884 P 2d 23, 28 (Wyo 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292 EBU/​Eurovision (Case IV/​32.150) [1993] OJ L 179, overturned on appeal. . . . . . . . . . . . . . . . . . . . . 570 Edmondson and Others v R [2013] EWCA Crim 1026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658 EE Ltd v Ofcom [2017] EWCA Civ 1873. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421, 428 Elliniki Radiophonia Tileorassi (C-​260/​89) (1991) ECR I-​2925. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 Emtel Ltd v The Information Technology and Communication Technologies Authority v ors [2017] SCJ 294 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Europa Way v AGCOM (Case C-​560/​15), 26 July 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 FAPL v British Telecommunication v ors [2017] EWHC 480 (Ch). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 671 FCC v Iowa Utilities Board, 525 US 1133 (1999). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244, 246 FIFA v Commission (Case C-​204/​11 P) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 708 FIFA v Commission (Case T-​385/​07) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 708 FIFA v EFTA Surveillance Authority (Case E-​21/​13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 708 Football Association Premier League Ltd v British Telecommunications plc and others [2017] EWHC 480 (Ch). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 745

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Football World Cup (Case IV/​36/​888) OJ L5/​55. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 569 France Telecom [2003] OJ C 57/​5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 France Telecom and Deutsche Telekom (Case No IV/​35.337—Atlas, OJ L 239/​23, 19.9.1996). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 France Telecom SA v Commission (Case T-​340/​03) [2007] 4 CMLR 21, ECRI-​117. . . . . . . . . . 160, 559 France Telecom v Commission (Case C-​202/​07P), [2009] ECRI-​2369 . . . . . . . . . . . . . . . . . . . . . . 558–​9 France Telecom/​Wanadoo (Case COMP/​38/​233) (Wanadoo Interactive) [2005] 5 CMLR 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 559 France v Commission (C-​202/​88) [1992] 5 CMLR 552. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157, 496 Freeserve.com.plc v Director General of Telecommunications [2003] CAT 5. . . . . . . . . . . . . . . . . 123 FTC v AT&T Mobility, 835 F 3d 993 (9th Cir 2016); 883 F 3d 848 (9th Cir 2018) (en banc). . . . . . . 224 Garai v Administración del Estado (Case C-​424/​15), 19 October 2016. . . . . . . . . . . . . . . . . . . . . . . . 182 Germany v Council (C-​280/​93) [1994] ECR I-​4973 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 839 Gershwin Pub Corp v Columbia Artists Management, Inc, 443 F 2d 1159, 1162 (CA 2 1971) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 737 Golder v United Kingdom (1979) 1 EHRR 524 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 670 Google Spain v Agencia de Protección de Datos (Case C-​131/​12) [2014], European Court of Justice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .889 Google v BNetzA, Administrative Court of Cologne, Ref 21 K 450/​15, Ruling of 11 Nov 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152, 634 GTE v FCC, 205 F 3d 416 (DC Cir 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245 Halford v United Kingdom [1997] IRLR 471; 24 EHRR 523. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 650 Hermès International v FHT Marketing [1998] ECR I-​3603. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 837–​8 Hoffmann-​L a Roche & Co AG v Commission of the European Communities (‘Vitamins’) (Case 85/​76) [1979] ECR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461, 557, 561 Hofner and Elser v Macrotron (Case C-​41/​90) [1991] ECRI-​1979. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 Huawei Technologies v Commission (Case C-​170-​13) [2015] 5 CMLR 14. . . . . . . . . . . . . . . . . . . . 564–6 Hunt v Cooper, 110 SW 2d 896, 899–​900 (Tex, 1937) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292 Hutchison 3G Austria (M.6497), 12 December 2012, [2013] OJEU C224 . . . . . . . . . . . . . . . . . . . . . . 579 Hutchison 3G (UK) Ltd & Others v Commissioners of Customs and Excise (C-​369/​04) [2007] 3 CMLR 26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 Hutchison 3G (UK) Ltd v Ofcom [2005] CAT 39. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 Hutchison 3G (UK) Ltd v Ofcom [2009] EWCA Civ 683. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94, 474 Hutchison 3G (UK) Ltd v Ofcom [2017] EWHC 3376 (Admin). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430 Hutchison 3G (UK) Ltd v Ofcom (Mobile Call Termination) [2008] CAT 11. . . . . . . . . . . . . . . . . . . . 93 Hutchison 3G UK/​Telefónica UK (Case M.7612) OJ C 357/​15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144, 578 Hutchison/Telefonica Ireland (M.6992), 28 May 2014, [2014] OJEU C264. . . . . . . . . . . . . . . . . . . . . 579 Huvig v France (1990) 12 EHRR 528. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649 IBM v Commission (Case 60/​81) [1981] ECR 2639. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583 ICO Services Limited v European Parliament and Council (T-​4 41/​08), 21 May 2010 . . . . . . . . . . 813 ICSTIS v Andronikou (liquidators of Allied Communications Ltd) [2007] EWHC 2307 (Admin) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 728 IMS Health v Commission (Case C-​4 81/​01) [2004] ECRI-​5039. . . . . . . . . . . . . . . . . . . . . . . . . 561, 572–3 Inmarsat-​P. (Case No IV/​35.296) C 304/​6, 15 November 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 799

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Intel (Case T-​286/​09) [2009] OJEU C 227/​13, 13 May 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intel Corp v Commission (Case C-413/​14P) [2014] 5 CMLR 9; [2017] 5 CMLR 18. . . . . . . . . . . . . . . International Fruit Company NV and others v Produktschap voor Groenten en Fruit (Case 21/​72) [1972] ECR 1219. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International Private Satellite Partners (Case IV/​34.768), OJ L 354/​75, 31 December 1994. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Iowa Utilities v FCC, 219 F 3d 744 (2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Iridium (Case IV/​35/​.518), OJ L 16/​87, 18 January 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Italy v Sacchi [1974] 2 CMLR 177 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITT Promedia (Case T-​111/​96) [1998] ECR II-​2937 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITV Broadcasting v TV Catchup (Case C-​275/​15). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITV v TVCatchup [2011] EWHC 1874 (Pat) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITV v TVCatchup [2015] EWCA Civ 204. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

xiii 564 564 630 801 251 801 685 558 706 706 706

JML Direct v Freesat UK [2009] EWHC 616 (Ch), affirmed in [2010] EWCA Civ 34. . . . . . . . . . . . . 707 Johnson v Youden [1950] 1 KB 544 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680 Kalem Co v Harper Brothers, 222 US 55, 62–​63 (1911). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 737 Klass v Germany (1978) 2 EHRR 214. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649 Kommunikationsbehorde v ORF (C-​195/​06) ECR I-​8817. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 726 Koninklijke KPN BV v ACM (Case C-​28/​15), 15 September 2016. . . . . . . . . . . . . . . . . . . . 158, 458, 460 Konsumentombudsmannen v De Agostini C-​34/95 [1998] 1 CMLR 32. . . . . . . . . . . . . . . . . . . . . . . 690 K, Re (Case C-​475/​16) [2016] OJ C 428/​8, 21 November 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 656 Lap v Axelrod, 95 A2d 457 (NY App Div 3d Dept 1953), appeal denied, 460 NE 2d 1360. . . . . . . . 302 Liberty Global/Virgin Media (Case COMP/M.6880), 15 April 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . 568 Liberty Global/Ziggo (Case COMP/M.7000), OJ [2015] C 145/7. . . . . . . . . . . . . . . . . . . 534–​5, 569, 576 L’Oréal SA & Others v eBay International AG & Others (C-​324/​09), 12 July 2011. . . . . . . 741, 747, 751 L’Oréal v eBay [2009] EWHC 1094 (Ch) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750–​1 Louisiana Pub Serv Commission v FCC, 476 US 355 (1986). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231 Malone v United Kingdom (1985) 7 EHRR 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mannesmannröhrenwerke v Commission (Case T-​112/​98) [2001] ECR II-​729 . . . . . . . . . . . . . . . . Mathias v Walling Enterprises, 609 So 2d 1323, 1332 (Fla App 1992). . . . . . . . . . . . . . . . . . . . . . . . . Maximilian Schrems v Data Protection Commissioner (Case C-​362/​14), 6 October 2015. . . . . . max.mobil Telekommunikation Service GmbH v Commission [2002] 4 CMLR 32. . . . . . . . . . . . MCI Communications v AT&T, 708 F 2d 1081 (7th Cir 1983), 464 US 891 (1983). . . . . . . . . . . . . . . MCI Inc v Commission and France (T-​310/​0 0) [2004] 5 CMLR 26. . . . . . . . . . . . . . . . . . . . . . . . . . . . MCI Telecommunications Corp, 60 FCC 2d 25 (July 13, 1976). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . MCI Telecommunications Corp v FCC, 561 F 2d 365 (DC Cir 1977). . . . . . . . . . . . . . . . . . . . . . . . . . MCI Telecommunications Corp v FCC, 580 F 2d 590 (DC Cir 1978). . . . . . . . . . . . . . . . . . . . . . . . . . MCI/​Worldcom/​Sprint (Case M.1741) [2003] OJEU L300/​1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mediakabel BV v Commissariaat voor de Media [2005] ECR I-​4 891. . . . . . . . . . . . . . . . . . . . . . . . . . Mercury Communications Ltd v Scott-​Garner & ors [1983] 3 WLR 914. . . . . . . . . . . . . . . . . . . . . . . Mercury Personal Communications Ltd v Secretary of State for Trade & Industry [2000] UKCLR 143 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Metro-​Goldwyn-​Mayer Studios, Inc v Grokster Ltd, 545 US 900 (2005) (‘Grokster’). . . . . . . . . . .

652 584 287 889 160 835 160 198 198 198 577 685 112 475 737

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Metro II (Case C-​75/​8 4) [1986] ECR 3201. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542 Metropole Television v Commission (Case T-​528/​93) [1996] ECR II-​6 49. . . . . . . . . . . . . . . . . . 542, 570 METV and Roj TV v Germany (Case C-​244/​10) [2012] 1 CMLR 32. . . . . . . . . . . . . . . . . . . . . . . . . . . . 690 Michelin BV v Commission (322/​81) [1983] ECR 3461. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174, 554, 557 Microsoft v Commission (Case T-​201/​04) [2007] ECR II-​3601. . . . . . . . . . . . . . . . . . . . . . 562, 571–2, 574 Ministere Public v Decoster [1993] (C-​69/​91) ECR I-​5335 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 Ministere Public v Taillandier-​Neny [1993] (C-​92/​91) ECR I-​5383. . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 Ministerio Fiscal (Case C-​207/​16) [2016] OJ C 251/​7, 11 July 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 656 Minnesota Public Utilities Commission v FCC, 483 F 3d 570 (8th Cir 2007) . . . . . . . . . . . . . . . . . . 232 Mobilcom [2003] OJ C 80/​5, 3.4. 2003 and [2003] OJ C 210/​4, 5.9.2003. . . . . . . . . . . . . . . . . . . . . . . . 162 Montecatini v Commission (Case C-​235/​97P) [1999] ECRI-​935. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 Montgomery County v Federal Communications Commission, 811 F 3d 121 (4th Cir 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 Motion of AT&T to be Re-​classified as a Nondominant Carrier, 11 FCC Rcd 327 (1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 Motorola Mobility, Decision, 29 April 2014 [2014] OJEU C34416. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 566 MSG Media Service (Case IV/​M.469), 94/​922/​EC OJ [1994] L364/​1 . . . . . . . . . . . . . . . . . . . . . . . . . . 568 Munn v Illinois, 94 US 113, 125-​6 (1877). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288–​9 Murphy v Ireland (2003) 38 EHRR 212. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723 Mustafa v Sweden (2008) 52 EHRR 803. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 684 National Association of Telecom, Officers and Advisors v FCC (DC Cir 2017). . . . . . . . . . . . . . . . . National Biscuit Co v City of Philadelphia, 98 A 2d 182, 187–​188 (Pa, 1953). . . . . . . . . . . . . . . . . . . National Cable & Telecommunications Association, Inc v Brand X Internet Services 545 US 967 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . National Cable & Telecommunications Association, Inc v Gulf Power Co, 534 US 327 (2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Media Online v Bundeskommunikationssenat (Case C-​374/​14) [2015], 21 October 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . News Corp/​BSkyB (Case M.5932), 21 December 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Newscorp/​Telepiu (COMP/​M.2876). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nokia/​Navteq (M.4942), 2 July 2008, [2009] OJEU C13/​8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . North Carolina Utilities Commission v FCC, 537 F 2d 787, (4th Cir 1976), cert denied, 429 US 1027 (1976) (NCUC I). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Norwich Pharmacal Co v Customs and Excise Commissioners [1973] UKHL 6, [1974] AC 133 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nungesser and Eisele v Commission (Case 258/​78) [1982] ECR 2015. . . . . . . . . . . . . . . . . . . . . . . . .

202 292 211 251 716 568 568 581 231 750 547

O2 Germany v Commission (Case T-​328/​03) [2006] ECR II-​1231. . . . . . . . . . . . . . . . . . . . . . . . . 546, 580 O2 UK Limited/​T-​Mobile UK Limited (UK network sharing agreement) (2003) OJ L 200/​59, 7 August 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442, 544–6, 580 Orkem v Commission (Case 374/​87) [1989] ECR 3283. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584 Peel Land and Property (Ports No 3) Ltd v TS Sheerness Steel Ltd [2013] EWHC 1658 (Ch). . . . . People of the State of California v FCC, 905 F 2d 1217 (9th Cir 1990). . . . . . . . . . . . . . . . . . . . . . . . . Perfect 10, Inc v Amazon, Inc, 508 F 3d 1146, 1172–​73 (9th Cir 2007). . . . . . . . . . . . . . . . . . . . . . . . . Perfect 10, Inc v Google Inc, 416 F Supp (2nd 828) CD Cal 2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

370 211 737 737

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xv

PhonepayPlus v Ashraf [2014] EWHC 4303 (Ch). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 728 Polkomtel v Prezes Urzędu Komunikacji Elektronicznej (Case 277/​16), 20 December 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460 Portugal v Council (Case C-​149/​96) [1999] ECR I-​8395. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 838–​9 Post Danmark v Konkurrencerådet (Case C-​23/​14) [2015] 5 CMLR 25 (‘Post Danmark II’). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574 Probst (Josef) v mr.nexmet GmbH, 22 November 2012 [2013] CEC 913. . . . . . . . . . . . . . . . . . . . . . . 666 Procureur du Roi v Lagauche & Others, Evrard [1993] (C-​46/​90 and C-​93/​91) ECR I-​5267 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 Productores de Musica de Espana (Promusicae) v Telefonica de Espana SAU (C-​275/​06) [2008] ECR I271. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653, 747–​8 Provincie Antwerpen NV, Mobistar (Joined Cases C-​256/​13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292 Radio Telefis Eireann (2) British Broadcasting Corporation (3) Independent Television Publication Ltd v Commission (241/​91P and C242/​91P, OJ 95/​C137/​05) (1995) ECR I-​743 (‘Magill’) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 572 Rambus (Case COMP/​38.636), 9 December 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 563–​4 R (Animal Defenders International) v Secretary of State for Culture, Media and Sport [2008] UKHL 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723 Rapture TV v Ofcom [2008] CAT 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 707 R (Debt Free Direct) v Advertising Standards Authority [2007] EWHC 1337 (Admin) . . . . . . . . . 721 R (DM) v Ofcom [2014] EWHC 961 (Admin). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713 Rechnungshof v Österreichischer Rundfunk (Case C-​465/​0 0) [2003] 3 CMLR 10 . . . . . . . . . . . . . 647 Régie des Télégraphes et des Téléphones v GB-​I nno-​BM SA (C-​18/​88) [1991] ECR I-​5941. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160, 164, 166, 179 R (Gaunt) v Ofcom [2011] EWCA Civ 692, affirming R (Gaunt v Ofcom [2010] EWHC 1756 (Admin) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 711, 713–14 R (ICO Satellite Limited) v Office of Communications [2010] EWHC 2010 (Admin) . . . . . . . . . . . 813 Riley v California, 134 S Ct 2473 (2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651 R (on the application of British Telecommunications Plc and Another) v Secretary of State for Business, Innovation and Skills [2011] EWCA Civ 1229 . . . . . . . . . . . . . . . . . . . . . . . . 755 R (on the application of British Telecommunications Plc) v Secretary of State for Business, Innovation and Skills [2011] EWHC 1021 (Admin). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 755 R (Ordanduu and Optimus Mobile) v Phonepay Plus [2015] EWHC 50 (Admin). . . . . . . . . . . . . . . 729 Royall v State of Virginia, 6 Sup Ct 510 (US 1886). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292 RTE v Magill (C-​241 and 242/​91) [1995] 4 CMLR 718. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 R (TV Danmark I) v ITC [2001] UKHL 42. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709 R v ASA, ex p The Insurance Service (1990) 2 Admin LR 77. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 721 R v Blake [1997] 1 Cr App R 209 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419 R v Broadcasting Standards Commission, ex p BBC [2001] QB 885. . . . . . . . . . . . . . . . . . . . . . . . . . . 712 R v Director General of Telecommunications (Respondent), ex p Cellcom [1999] ECC 314 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116, 183 R v Fellowes and Arnold (1997) 1 CAR 244. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 759 R v Jayson [2002] EWCA Crim 683. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 760 R v Secretary of State for Culture, Media & Sport, ex p Danish Satellite Television & Rendez-​Vouz Television International [1999] 3 CMLR 919. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689 R v Secretary of State for Culture, Olympics, Media and Sport [2012] EWCA Civ 232. . . . . . . . . . 755

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R v Secretary of State for National Heritage, ex p Continental Television [1993] 2 CMLR 333. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689 R v Secretary of State for Trade and Industry, ex p British Telecommunications plc, (C-​302/​94) [1996] ECR I-​6 417, [1997] 1 CMLR 424. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 SABAM v Netlog (C-​360/​10), 16 February 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 748 Satterfield v Simon & Schuster, 569 F 3d 946 (9th Cir 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276 Sazbó and Vissy v Hungary, 12 January 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653 Scarlet Extended SA v Société v Societe Belge des auteurs, compositeurs et editeurs (SABAM) (C-​70/​10), 24 November 2011, [2012] ECDR 4 . . . . . . . . . . . . . . . . 671, 735, 747–​9, 751, 755 Screenport/​EBU (Case IV/​32.524) [1991] OJ L63. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570 Secretary of State for the Home Department v Tom Watson MP v Ors [2015] EWCA 1185. . . . . . 656 SFR/​Télé 2 France (Case M.4504), 18 July 2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568 Shapiro, Bernstein & Co v HL Green Co, 316 F 2d 304, 307 (CA 2 1963). . . . . . . . . . . . . . . . . . . . . . . 737 Sharp v Wakefield [1891] AC 173 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292, 302 Shetland Times, Ltd v Jonathan Wills and Another, 1997 FSR (Ct Sess OH), 24 October 1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 744 Shively v Bowlby, 152 US 1 (1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293 Sky Italia v AGCOM (Case C-234/12), [2014] 1 CMLR 22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 725 Sky Österreich v ORF (Case C-​283/​11). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709 Société Technique Minière v Maschinenbau Ulm [1966] ECR 235. . . . . . . . . . . . . . . . . . . . . . . . . 540–​1 Sony Corp v Universal City Studios, 464 US 417 (1984). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 737 Spain v Commission (C-​271/​90) [1992] ECR I-​5833, 157. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496 State ex rel Peterson v Martin, 180 Or 459, 464, 166 P 2d 636, 643 (1947). . . . . . . . . . . . . . . . . . . . . . 287 Streetmap EU v Google Inc & Ors [2016] EWHC 253 (Ch) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574 Talk Talk Telecom Group plc v Information Commissioner [2016], EA/​2016/​0110, 30 August 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668 Talk Talk Telecom Group v Ofcom [2013] EWCA Civ 1318. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365 Tele2 Sverige AB v Post-​och Telestyrelsen [2017] 2 CMLR 30, 647. . . . . . . . . . . . . . . . . . . . . . . . . . . . 652 Telecom Corporation of NZ Ltd v Clear Communications Ltd (1992) 4 NZBLC. . . . . . . . . 21, 64, 437 Telefónica de España SA v Administración General del Estado (Case C-​79/​0 0) [2002] 4 CMLR 22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 Telefonica Deutschland (M.7018), 2 July 2014, [2015] OJEU C86 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579 Telefonica v OFCOM [2010] Cat 25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386 Telia and Telenor (Case IV/​M.1439), OJ L 40/​1, 9.2.2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 Telia Sonera Finland Oyj v iMEZ Ab (C-​192/​08) 12 November 2009. . . . . . . . . . . . . . . . . . . . . . . . . . 455 Telia Sonera Sverige (Case C-​52/​09) [2011] ECR I-​527. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553, 560 Tennessee v FCC, 832 F 3d 597 (6th Cir 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 The Number Ltd and Conduit Enterprises Ltd v Office of Communications and British Telecommunications plc (C-​16/​10), 17 February 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 Thierry Tranchant and Telephone Store SARL [1995] (C-​91/​94) ECR I-​3911. . . . . . . . . . . . . . . . . . . 179 Tiffany (NJ), Inc v eBay, Inc, 600 F 3d 93 (2nd Cir 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 737 Time Warner Telecom v FCC, 507 F 3d 205 (3rd Cir 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 T-​Mobile, BT, H3G, C&W, Vodafone & Orange v Ofcom [2008] CAT 12. . . . . . . . . . . . . . . . . . . . 18, 362 T-​Mobile Deutschland GmbH/​V iag Interkom GmbH (Germany network sharing agreement) (2003) OJ L 75/​32, 12.3.2004. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442, 545, 546

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T-​Mobile Deutschland [2004] OJEU L7532. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 580 T-Mobile v Ziggo BV, Ziggo Services BV, Vodafone Libertel BV (ROT 17/​468, ROT 17/​1160 and ROT 17/​1932), 20 April 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786 Torras/​Sarrio Case IV/​M166 OJ (1992) C58/​20 [1992] 4 CMLR 341 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Traveller Movement v Ofcom [2015] EWHC 406 (Admin) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713 TV10 SA v Commissariaat Voor de Media [1995] 3 CMLR 284 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 690 TV Vest v Norway (2009) 48 EHRR 51. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723 Twentieth Century Fox Film Corporation v British Telecommunications Plc (No 1)  [2011] EWHC 1981 (Ch) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 749 Twentieth Century Fox Film Corporation v Newzbin Ltd [2010] EWHC 608 (Ch) (BT/​Newzbin No 1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 749, 751–2 Twentieth Century Fox Film Corporation and Others v British Telecommunications Plc (No 2) [2011] EWHC 2714 (Ch) (BT/​Newzbin No 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 749, 752 Twenty-​First Century Fox/​Sky plc; European Commission clearance decision M8354, 7 April 2017, [2017] OJEU C238. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 576 UEFA Champions League (Case COMP/​37/​398), Decision 2003/​778/​EC [2003] OJ L291/​25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568, 570 UMG Recordings v Veoh Networks, Inc, 665 F Supp 2d 1099, 1116–​18 (CD Cal 2009). . . . . . . . . . 738 United Brands v Commission (27/​76) [1978] ECR 207, [1978] 1 CMLR 429 (Chiquita). . . . . . . 36, 555 United States Telecom Association v FCC, 290 F 3d 415 (DC Cir 2001) (USTA 1). . . . . . . . . . . . . . . 244 United States Telecom Association v FCC, 359 F 3d 554 (DC Cir 2004) (USTA II). . . . . . . . . . . . . . 244 United States Telecom Association v FCC, June 14 2016 (DC Cir No.15-​1063). . . . . . . . . . . . . . . 771–​2 United States v E I du Pont de Nemours & Co 351 US 377 (1956), 76 S Ct 994, L Ed 1264. . . . . . . . . 35 United States v Southwestern Cable Co, 392 US 157 (1968). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 Universal Studio Networks/De Facto 829 (NTL) Studio Channel Ltd (Case COMP/​M.2211), decision of 20 December 2000, OJ C 363, 19 December 2001, at 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 567 Unwired Planet v Huawei [2017] EWHC 711 (Pat), 5 April 2017; [2017] EWHC 1304 (Pat), 7 June 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 565 UPC DTH Sàrl v Nemzeti Média-és Hírközlési Hatóság Elnökhelyettese (Case C-​475/​12), Judgment of the Court (Second Chamber), 30 April 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 631 UPC Nederland v Gemeente Hilversum (Case C-​518/​11), 7 Nov 2013 . . . . . . . . . . . . . . . . . . . . . . . . 152 US v AT&T Corp, 552 F Supp 131 (DC Cir 1982) affirmed sub nom Maryland v US, 460 US 1001 (1983). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 Use of the Carterfone Device in Message Toll Service v AT&T, 13 FCC 2d 420 (1968). . . . . . . . . . 231 USTA v FCC, 825 F 3d 674 (DC Cir 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 USTA v FCC and USA, No 15-​1063 (DC Cir 1 May 2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 Van Landewyck v Commission (Case 209/​78) [1980] ECR 3125. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 Verizon Communications Inc v Law Offices of Curtis v Trinko LLP, (02-​682) 540 US 398 (2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 270 Verizon v Federal Communications Commission, 535 US 467 (2002), 122 S Ct 1646 . . . . . . . 64, 246 Verizon v Federal Communications Commission, 740 F 3d 623 (DC Cir 2014). . . . . . . . . . . . . 213–14, 217, 772, 774 VgT v Switzerland (2001) 34 EHRR 159 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723 Viacom et al v YouTube, Inc et al 718 F Supp 2d 514 (SDNY 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . 737

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Viho v Commission (Case C73/​95P) [1996] ECR I-​5457 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vodafone Airtouch and Mannesmann (Case No Comp/​M.1795), OJ C 141/​19, 19.5.2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vodafone/​BT [2004] CAT 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vodafone Espana SA v Commission (T-​109/​06) [2008] 4 CMLR 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . Vodafone Limited v Office of Communications [2008] CAT 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Volker and Markus Schecke GbR and Hartmut Eifert v Land Hessen (Cases C-​92/​09 and C-​93/​09) [2012] All ER (EC) 127 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vonage Holdings Corp v FCC (489 F 3d 1232 (DC Cir 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Von Hannover v Germany (2005) 40 EHRR I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Von Hannover v Germany (2012) 55 EHRR 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VZW Belgian Anti-​Piracy Federation v NV Telenet, Case 2010/​A R/​2541, 26 September 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

540 162 448 177 134 647 265 677 677 752

Western Union Telegraph Co v Call Publishing Co, 181 US 92, 98 (1901) . . . . . . . . . . . . . . . . . . . . . 766 Wilson v Newspaper and Mail Deliverer’s Union of NY, 197 A 720, 722 (NI Ch 1938). . . . . . . . . . 288 WorldCom and MCI (Case No. IV/​M.1069), OJ L 116/​1, 4.5.1999). . . . . . . . . . . . . . . . . . . . . . . . . 162, 440 WorldCom v FCC, 288 F 3d 429 (2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249 Wouters (Case C-​309/​99) [2002] ECR I-​1577. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 Yildirim v Turkey [2012] ECHR 2074. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 684 Zakharov v Russia [2016] 63 EHRR 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653, 656, 661

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Table of Statutes United Kingdom Statutes British Telecommunications Act 1981 . . . . . . . . . . . . . . . 107–​8, 111–​13,  294 s 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 s 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 s 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 Broadcasting (Radio Multiplex Services) Act 2017 ��������������������������������������������������������705 Broadcasting Act 1990������������ 119, 701, 712, 731 Part 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 694 s 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 696 s 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 693 s 54(6A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 705 s 78A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 705 s 105. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703 s 111. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713 s 111B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713 ss 177–​178. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689 s 201. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703 Sch 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 696 Broadcasting Act 1996������������119, 693, 699, 731 Part 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709 Part 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 s 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 694 s 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 694 s 58ZA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 705 s 98. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709 s 107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 711–​12 s 111. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 712 s 137. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709 Broadcasting Act 2009 s 49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709 Civil Contingencies Act 2004 s 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678 Communications Act 2003�����������������������51, 107, 120–​3, 287, 301, 335–6, 401–​2, 418–​19, 595, 724, 731

Part 2, Chapter 1 . . . . . . . . . . . . . . . . . . . . . . . 335 Part 4A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720 Part 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370 s 2B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 s 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 712 ss 3–​6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420 s 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370 s 4(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421 s 4(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421 s 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368, 432 s 5(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 s 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 340, 727 s 6(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 159 s 6(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 s 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368 s 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368 s 17(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368 s 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369 s 21(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369 s 22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807 s 24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369 s 31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370 s 32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370 s 32(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315, 618 s 32(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 618 s 32(4)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467 s 32(4)(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467 s 33(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 s 33(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 s 33(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 s 35. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 s 36. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 s 36(1)(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372 s 37. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 s 38. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376 ss 38–​43 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367 s 40. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378 s 41. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378 s 41(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378

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s 41(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378 s 42. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378, 379 s 42(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379 s 42(9)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378 s 44. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 s 45. . . . . . . . . . . . . . 335, 337, 360, 363, 365, 367 s 45(2)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 s 45(2)(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 s 46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335 s 46(2)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 s 46(2)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 s 46(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362 ss 46–​49C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339 s 48(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120, 476 ss 48A–​49C. . . . . . . . . . . . . . . . . . . . . . . . . . . . 339 s 49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 518 s 51. . . . . . . . . . . . . . . . . . . . . . . 505, 510, 522, 528 s 51(1)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338 s 51(1)(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 s 51(1)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 s 51(1)(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 s 51(1)(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 s 51(1)(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 s 51(1)(g). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 s 51(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338, 506 s 51(2)(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 s 51(2)(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338 s 51(2)(e). . . . . . . . . . . . . . . . . . . . . . . . . . 338, 516 s 51(2)(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338 s 51(2)(g). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338 s 51(2)(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338 ss 51–​6 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 s 52. . . . . . . . . . . . . . . . . . . . . . . . . . . 338, 505, 524 s 52(2A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338 s 52(2)(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526 s 52(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526 s 52(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526 s 53(5)(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 527 s 54. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526 s 56A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338 s 57. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338 s 58. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338 s 64. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337, 705 s 65. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136, 362 s 65(2B). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 s 66(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360 s 67. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360

s 71. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 s 72A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 s 72B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 s 73. . . . . . . . . . . . . . . . . . . . . . . . 73, 474, 476, 706 s 73(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362 s 73(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466 s 73(3A). . . . . . . . . . . . . . . . . . . . . . . . . . . 363, 466 s 73(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 476 s 74. . . . . . . . . . . . . . . . . . . . . . . . . . . 362, 474, 476 s 74(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362 s 74(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363 s 75(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 476 s 76. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 476 s 76A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466 s 77. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 s 77(2)–​(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365 s 78. . . . . . . . . . . . . . . . . . . . . . . . . . . 363, 469, 618 s 78(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363 s 79(1)–​(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469 s 79(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 ss 79(4)–​81. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469 s 80(4)(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 s 80A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 s 80B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 s 84A(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 s 86(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 s 86(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 ss 87–​91. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469 ss 87–​93. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 s 88. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371 s 89. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364, 371 s 89(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 s 89(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588 s 89A . . . . . . . . . . . . . . . . . . . . . . . . . 299, 364, 588 s 89B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364, 588 s 89C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 s 90. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 s 91. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 s 92. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 s 94. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366, 376 s 94(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366 s 94(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366 ss 94–​104 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477 s 95. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366, 376 s 96. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366, 376 ss 96A–​104. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365 s 96C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366

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Table of Statutes s 97(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366 s 100. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365 s 100A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365 s 103. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367 s 104(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477 ss 105A–​105D . . . . . . . . . . . . . . . . . . . . . 367, 667 s 106. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114, 373 s 106(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371 s 106(3)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368 ss 106–​119 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367 s 107(4)(a)–​(d). . . . . . . . . . . . . . . . . . . . . . . . . . 372 s 108. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371 s 109(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371 s 110(2)(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 s 110A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 s 111A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 s 112. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 s 113(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 s 120. . . . . . . . . . . . . . . . . . . . . 356, 375–​6, 728–​9 s 120(3)(za). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375 s 120(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375 ss 120–​124 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367 s 121. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375, 728 s 122. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376 s 123. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376, 728 s 124. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376, 728 s 124O. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 763 s 124S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 523 s 127. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720 s 127(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720 s 127(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720 s 134A . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121, 466 s 134A(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466 s 134B . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121, 466 s 134D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507 s 135. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367 s 135(3)(ig). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466 ss 135–​144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367 s 136. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507 s 137A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507 s 137B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507 s 143. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367 s 146A . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338, 510 s 147. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335 s 151(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494 s 151(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465 s 151(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465

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s 151(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465 s 156. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419, 432 s 157. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419 s 167. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427 s 168. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430 s 185. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122, 477 s 185A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477 s 188(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 s 192. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 s 192(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 s 193. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 s 194A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 s 196(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 s 196(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 s 198A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701 s 207. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 699 s 213. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 694 s 224. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701 s 232. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 696 s 232(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 s 233(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 s 233(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 s 233(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 s 233(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 s 233(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 s 233(7)–​(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 ss 233–​234. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 s 234. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 s 235. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 696 s 244. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702 s 264. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 699 s 264A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701 s 265. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700 ss 266–​268. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 710 s 272. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 706 s 273. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 706 ss 290–​294. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702 s 303. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 711 s 309. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 710 s 310. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 706 s 316. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590 s 319. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 711, 723 s 319(a)–​(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 712 s 321. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723 s 322. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 725 s 324. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 711 s 325. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 711

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s 325(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 724 s 326. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 711 ss 329–​332 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689 s 360. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703 s 362(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703 s 368A(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . 715–16 s 368B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 722 s 368B(9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 715 s 368C(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 711 s 368D(3)(zb). . . . . . . . . . . . . . . . . . . . . . . . . . . 715 s 368E(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 718 s 368E(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 718 s 368E(d)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 719 s 370. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183, 592 s 371. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 s 386BA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 716 s 386D(ZA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 716 s 386N. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 715 s 405(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703 Sch 3A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367–​71 Sch 11A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 727 Sch 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367, 371 Competition Act 1998��������������������� 183, 298, 537, 591–​2,  596 s 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 535, 538 s 2(1)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539 s 46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595 s 47A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 538 s 49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595 s 54(1)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 543 s 54(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 592 Sch 8 para 3(2)��������������������������������������������������������595 para 3(2)(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 595 para 3(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595 Sch 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 543 Computer Misuse Act 1990, s 1 ����������������������658 Consumer Protection Act 1987 ����������������������516 Consumer Rights Act 2015 s 80. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 728 Sch 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 538 Continental Shelf Act 1964, s 8(1)������������������804 Copyright, Designs and Patents Act 1988 s 30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709 s 73. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 705 s 97A . . . . . . . . . . . . . . . . . . . . . . . 671, 749, 754–​5 s 97A(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 751

s 97A(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 751 Coroners and Justice Act 2009, ss 62–​69������760 Corporation Tax Act 2009, Part 8 ������������������606 Counter-​Terrorism Act 2008, s 19(1)��������������657 Criminal Justice Act 1988 s 160. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 760 s 160(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 760 Criminal Justice and Immigration Act 2008, s 63������������������������������������������������������759 Data Protection Act 1998 s 1(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 s 29(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 s 55. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658 Data Retention and Investigatory Powers Act 2014 (DRIPA)����������������������������������������661 s 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658 Defamation Act 1996, s 1����������������������������������744 Digital Economy Act 2010���������������701, 731, 763 s 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121, 466 ss 9–​18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 754–​5 s 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 754, 755 s 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 754, 755 ss 19–​21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 763 s 32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 705 s 34. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 704, 706 Digital Economy Act 2017������������� 122, 136, 144, 338, 359, 361–​2, 371, 522, 523, 528, 595, 731 Part 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 Part 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367–​8 Part 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 719, 763 s 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 s 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522 s 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 528 s 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367 ss 14–​21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 763 s 34. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 706 s 82. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 s 83. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507 s 86. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507 s 91. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713 s 102. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 523 Sch 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368 Sch 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367 Electronic Communications Act 2000 s 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 s 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

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Enterprise Act 2002��������������������������������������������537 Part 4. . . . . . . . . . . . . . . . . . . . . . . . . 183, 298, 721 s 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 586 s 22(1)(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 575 s 42. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 582 s 44A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 575 s 47. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 582 s 54. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 582 s 129. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494 s 131. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585, 592 s 131(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 125, 590 s 131(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588 s 131(2A). . . . . . . . . . . . . . . . . . . . . . . . . . . 589–​90 s 131(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588–​9 s 131(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589 s 132. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 586 s 134. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588–​9 s 134(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588 s 154. . . . . . . . . . . . . . . . . . . . . . . . . . . . 125, 298–​9 s 155(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52, 298 s 183. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494 s 213(5A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 516 Enterprise and Regulatory Reform Act 2013�����������������������������������������������������������585–6 s 51. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 593 s 52. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 593 s 317. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 593 Sch 14, paras 17–​18 . . . . . . . . . . . . . . . . . . . . . 593 European Communities Act 1972, s 2(2) ��������117 Fair Trading Act 1973����������������������������������������585 Finance Act 2000, Sch 23�����������������������������605–​6 Finance Act 2002, Sch 29����������������������������������606 Human Rights Act 1998, s 6 ����������������������������714 Income Tax (Trading and Other Income) Act 2005 Pt 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 606 Pt 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 606 s 146. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 606 Investigatory Powers Act 2016 (IPA)�������� 648, 657 Part 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 661 Part 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 s 3(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658 s 4(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658 s 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658 s 43(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 659 s 43(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660 s 43(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 659

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s 43(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660 s 44. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 670, 673 s 45. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 670 s 46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673 s 59. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 s 66(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660 s 66(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660 s 82. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 s 85. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 659 s 85(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 659 s 87(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 661 s 87(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 662 s 92. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 662 s 95(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 s 97. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 659 s 97(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 659 s 99(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 s 128(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660 s 128(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660 s 135. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 s 231(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 s 235(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 s 249. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660 s 250(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660 s 253. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660 s 255(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 s 257. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660 s 261(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658 s 261(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658 s 261(12). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658 s 263(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 656 Landlord and Tenant Act 1954������������������������369 Licensing Act 2003 ��������������������������������������������703 Marine etc Broadcasting (Offences) Act 1967����������������������������������������������������������������418 Office of Communications Act 2002 s 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 s 3(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 s 3(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 s 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119, 121 Online Infringement of Copyright (Initial Obligations) (Sharing of Costs) Order 2011 (Draft) ������������������������755 Outer Space Act 1986 s 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 797 s 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 797 s 5(2)(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 797

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s 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 797 Post Office Act 1961��������������������������������������������106 Post Office Act 1969������������������������������� 106–​7,  113 s 3(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401 s 24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 Post Office (Amendment) Act 1935����������������720 Postal Services Act 2011, s 28(1)����������������������107 Protection of Children Act 1978 ��������������������760 Public Order Act 1986, s 22������������������������������703 Railway Regulation Act 1844 s XII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 s XIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 Regulation of Investigatory Powers Act 2000 (RIPA) Part I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 648 Part II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 657 Part III. . . . . . . . . . . . . . . . . . . . . . . . . . . . 657, 660 s 3(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673 s 4(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673 s 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660 Serious Crime Act 2007, s 57(5–​8)������������������744 Sexual Offences Act 2003 s 45. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 760 s 46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 760 Sound Broadcasting Act 1972��������������������������703 Space Industry Act 2018������������������������������������798 Statute of Monopolies 1623������������������������������290 Telecommunications Act 1984 ���������������������105, 113–​17, 131, 335 Part 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418 s 3(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 s 3(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 115, 183 s 4(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 s 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115, 451 s 7(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116, 444 s 7(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116, 444 s 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 s 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 s 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91–​2,  129 ss 16–​18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 s 18(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 s 18(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 s 45(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 670 s 49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Sch 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367 para 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 Telegraph Act 1863 �����������������������������������102, 400

Telegraph Act 1868 ��������������������������������������������102 s 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658 Telegraph Act 1869, s 4��������������������������������������102 Telegraph Act 1870 ��������������������������������������������400 Telegraph Act 1899 ��������������������������������������������104 Telephone Act 1951��������������������������������������������104 Terrorism Act 2000 s 3(5A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 761 s 3(5B). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 761 s 3(5)(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 761 s 3(5C). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 761 Terrorism Act 2006, s 21������������������������������������761 Trade Descriptions Act 1968���������������������������516 Video Recordings Act 1984������������������������������716 s 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 719 Wireless Telegraphy Act 1904�������������������������401 Wireless Telegraphy Act 1949��������� 107, 131, 418 s 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401 Wireless Telegraphy Act 1967��������������������������418 Wireless Telegraphy Act 1998������������� 131–​2,  418 s 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131, 427 Wireless Telegraphy Act 2006�������������������������107, 401–​2, 418–​19, 621,  820 ss 1–​5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419 s 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420 s 2(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420 s 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421 s 3(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420 s 3(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420 s 3(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420–​1 s 4(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421 s 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422 s 5(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421 s 5(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420 s 5(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421 s 5(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421 s 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422–​3,  694 s 8(1)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419 s 8(1)(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419 s 8(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419–​22 s 8(3A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422 s 8(3B). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423 s 8(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421–​2 s 8(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422 s 8A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423–​4 s 8B(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423 s 8C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423

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Table of Statutes s 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422 s 9(1A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422 s 9A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 691 s 9ZA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423 s 9ZA(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423 s 9ZA(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423 s 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421 s 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420, 421 s 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421, 427 s 18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 424 s 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425 s 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421, 426 s 22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420–​1 s 23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421, 426 s 27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425 s 28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425 s 29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 424 s 30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430 s 35(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419 s 48. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658 s 159(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425

Statutory Instruments Advanced Television Services Regulations 1996 (SI 1996/​3151)������������451 Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015 (SI 2015/​542)��������������528 Audiovisual Media Services Regulations 2010 (SI 2010/​419) ��������������������������������������715 Audiovisual Media Services Regulations 2014 (SI 2014/​2916) ������������������������������������719 Broadcasting Act 1996 (Renewal of Local Radio Multiplex Licences) Regulations 2015 (SI 2015/​904)��������������705 Code of Practice for Electronic Programme Guides (Addition of Programme Services) Order 2012 (SI/​2011/​3003) ��������������������������������������������702 Communications (Access to Infrastructure) Regulations 2016 (SI 2016/​700) (Infrastructure Access Regulations)������������������������������������������������363 Pt 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465 reg 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466 reg 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466

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Communications Act 2003 (Maximum Penalty for Contravention of Information Requirements) Regulations 2003 (SI 2011/​1773)������������420 Community Radio (Amendment) Order 2015 (SI 2015/​1000)������������������������������������704 Competition Appeal Tribunal Rules (SI 2015/​1648) r 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595 r 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595 Consumer Contract (Information, Cancellation and Additional Charges) Regulations 2013 (SI 2013/​3134)����������������������������������������������519 Consumer Protection (Cancellation of Contracts Concluded Away from Business Premises) Regulations 1987 (SI 1987/​2117)������������������������������������516 Consumer Protection (Distance Selling) Regulations 2000 (SI 2000/​2334) ������������������������� 516, 519 Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/​1277)���������������������������������������������721 reg 19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 722 Contracting Out (Functions Relating to Broadcast Advertising) and Specification of Relevant Functions Order 2004 (SI 2004/​1975)����������������������������������������������723 Control of Misleading Advertisements Regulations 1988 (SI 1988/​915)��������������516 Copyright and Related Rights Regulations 2003 (SI 2003/​2498), reg 27(1)��������������������������������������������������������749 Data Retention (EC Directive) Regulations 2009 (SI 2009/​859)��������������661 reg 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 662 Digital Economy Act 2017 (Commencement No. 1) Regulations (SI 2017/​765)������������������������������������������������763 Digital Economy Act 2017 (Commencement No. 3) Regulations (SI 2017/​1286)����������������������������������������������368 Electronic Commerce (EC Directive) Regulations 2002 (SI 2002/​2013), reg 4(2)����������������������������������������������������������744

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Electronic Communications and Wireless Telegraphy Regulations 2011 (SI 2011/​1210)��������� 338, 419, 466, 505 Sch 1 para 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315 para 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506 para 27(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 510 para 88. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510 Electronic Communications Code (Conditions and Restrictions) Regulations 2003 (SI 2003/​2553) ����������373 reg 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373 regs 5–​8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373 reg 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 reg 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 reg 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 Electronic Communications Code (Conditions and Restrictions) (Amendment) Regulations 2013 (SI 2013/​1403)����������������������������������������������373 Electronic Communications Code (Conditions and Restrictions) (Amendment) Regulations 2017 (SI 2017/​753)������������������������������������������������373 Electronic Communications Code (Jurisdiction) Regulations 2017 (SI 2017/​1284)����������������������������������������������369 Electronic Communications (Market Analysis) Regulations 2003 (SI 2003/​330)������������������������������������������������469 Electronic Communications (Universal Service) Order 2003 (SI 2003/​1904) ������136 art 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494 Electronic Communications (Universal Service) (Amendment) Order 2011 (SI 2011/​1209)����������������������������������������������419 art 5(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 Electronic Communications (Universal Service) Regulations 2003 (SI 2003/​33)����������������������������������������360 Foreign Satellite Service Prescription Order 1993 (SI 1993/​1024)������������������������689 Foreign Satellite Service Prescription Order 1995 (SI 1995/​2917)������������������������689 Foreign Satellite Service Prescription Order 1996 (SI 1996/​2557)������������������������689 Foreign Satellite Service Prescription Order 1997 (SI 1997/​1150)������������������������689

Foreign Satellite Service Prescription Order 1998 (SI 1998/​1865)������������������������689 Foreign Satellite Service Prescription (No 2) Order 1998 (SI 1998/​3083) ����������689 Foreign Satellite Service Prescription Order 2005 (SI 2005/​220)��������������������������689 Investigation Powers (Interception by Businesses etc for Monitoring and Record-​keeping Purposes) Regulations 2018 (SI 2018/​356)��������������673 Investigatory Powers (Technical Capability) Regulations 2018 (SI 2018/​353)������������������������������������������������660 Legislative Reform (Further Renewal of Radio Licences Order) 2015 (SI 2015/​2052)����������������������������������������������705 Local Digital Television Programme Services Order 2012 (SI 2012/​292)������������������������������������������������702 Open Internet Access (EU Regulation) Regulations 2016 (SI 2016/​607)��������������������������������������� 513, 785 reg 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525 Privacy and Electronic Communications (EC Directive) Regulations 2003 (SI 2003/​2426) (PECR)����������������������������� 648 reg 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494 reg 2(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679 reg 8(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666 reg 9(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 674 reg 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678 reg 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678 reg 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678 reg 14(5)(a)(ii). . . . . . . . . . . . . . . . . . . . . . . . . . 666 reg 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678 reg 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678 reg 16A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678 reg 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675 regs 18–​26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680 reg 19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679 reg 19(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680 reg 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 reg 20(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680 reg 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679 reg 21(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680 reg 22(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680 regs 25–​26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680 reg 33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

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Privacy and Electronic Communications (EC Directive) (Amendment) Regulations 2011 (SI 2011/​1208)���648, 679 Privacy and Electronic Communications (EC Directive) (Amendment) Regulations 2016 (SI 2016/​524)��������������679 Privacy and Electronic Communications (EC Directive) (Amendment) (No. 2) Regulations 2016 (SI 2016/​1177)������������680 Regulation of Investigatory Powers (Maintenance of Interception Capability) Order 2002 (SI 2002/​1931)����������������������������������������������660 Satellite Television Service Regulations 1997 (SI 1997/​1682)������������������������������������696 Telecommunications (Data Protection and Privacy) Regulations 1999 (SI 1999/​2093)��������������������������������������������� 648 Telecommunications (Interconnection) Regulations 1997 (SI 1997/​2931)������������446 reg 6(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448 reg 6(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448 Telecommunications (Lawful Business Practice) (Interception of Communications) Regulations 2000 (SI 2000/​2699) reg 3(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673 reg 3(1)(a)(cc) . . . . . . . . . . . . . . . . . . . . . . . . . . 673 reg 3(2)(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673 Telecommunications (Licence Modification) (Mobile Public Telecommunications Operators) Regulations 1999 (SI 1999/​2453)������������449 Telecommunications (Licence Modifications) (Standard Schedules) Regulations 1999 (SI 1999/​2450)������������449 Telecommunications (Licensing) Regulations 1997 (SI 1997/​2930)������������ 117 Television Multiplex Services (Reservation of Digital Capacity) Order 2008 (SI 2008/​1420) ����������������������699 Town and Country Planning, England and Wales (General Permitted Development) Order 1995 (SI 1995/​418), Pt 24 ������������������������������������373 Town and Country Planning (General Permitted Development) (England) Order 2015 (SI 2015/​596), Sch 1, Pt 16������144

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Town and Country Planning (General Permitted Development) (Scotland) Amendment (No 2)  Order 2001 (SSI 2001/​266)������������������������373 Town and Country Planning (General Development) (Amendment) Order (Northern Ireland) 2003 (SR 98)������������373 Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/​246)������������������������������������������������655 Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/​2083)����������������������������������������������516 Video Recordings Act 1984 (Exempted Video Recordings) Regulations 2014 (SI 2014/​2097)����������������������������������������������719 Wireless Telegraphy Act 2006 (Directions to Ofcom) Order 2010 (SI 2010/​3024)���������������������������� 122, 385, 421 Wireless Telegraphy Act 2006 (Directions to Ofcom) Order 2012 (SI 2012/​293)������������������������������������������������702 Wireless Telegraphy (Exemption) Regulations 2003 (SI 2003/​74)��������������������������������������������������419 Wireless Telegraphy (Licence Award) Regulations 2012 (SI 2012/​2817)������������424 Wireless Telegraphy (Exemption) (Amendment) Regulations 2011 (SI 2011/​2950)����������������������������������������������422 Wireless Telegraphy (Exemption and Amendment) (Amendment) Regulations 2010 (SI 2010/​2512)������������419 Wireless Telegraphy (Exemption and Amendment) (Amendment) Regulations 2013 (SI 2013/​1253)������������419 Wireless Telegraphy (Exemption and Amendment) (Amendment) Regulations 2014 (SI 2014/​1484)������������419 Wireless Telegraphy (Exemption and Amendment) (Amendment) Regulations 2017 (SI 2017/​46) ����������������419 Wireless Telegraphy (Limitation of Number of Licences) (Amendment) Order 2006 (SI 2006/​2786) ����������������������424 Wireless Telegraphy (Mobile Spectrum Trading) Regulations 2011 (SI 2011/​1507)������������������������������������� 431, 432

xxivi

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Table of Statutes

Wireless Telegraphy (Recognised Spectrum Access Charges) Regulations 2007 (SI 2007/​392)��������������426 Wireless Telegraphy (Recognised Spectrum Access Charges) Regulations 2011 (SI 2011/​2762)������������426 Wireless Telegraphy (Recognised Spectrum Access Charges) Regulations 2015 (SI 2015/​1399)������������426 Wireless Telegraphy (Recognised Spectrum Access and Licence) (Trading Regulations) 2009 (RSA Trading Regulations) (SI 2009/​17)��������������������������������������������� 426–​7 Wireless Telegraphy (Register) Regulations 2004 (SI 2004/​3155)����������������������������������������������301 Wireless Telegraphy (Spectrum Trading) Regulations 2012 (SI 2012/​2187)������������132 Wireless Telegraphy (Spectrum Trading) Regulations 2004 (SI 2004/​3154)�����������430

Indonesia Regulation of Ministry of Maritime and Fishery No 33/​M EN/​2002, art 5(f)������������������������805

Lebanon Law 431/​2002 of July 2002��������������������������������854

Malaysia Multimedia Act 1998 ����������������������������������������888

Myanmar Electronic Transactions Law (No 5 of 2004), Arts 34 et seq������������������������������������891

Netherlands Telecommunications Law 2012 Art 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 787 Art 7:1a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 787 Art 7:4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786–​7 Art 7:4a. . . . . . . . . . . . . . . . . . . . . . . . . . . 765, 787

Other Jurisdictions

New Zealand

Australia

Submarine Cables and Pipeline Protection Act 1996 ����������������������������������805 Telecommunications Act 2001 ����������������������437 ss 102–​105. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305 s 106. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305 s 110. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305

Telecommunications Act 1997, s 4������������������ 11 Telecommunications and Other Legislation Amendment (Protection of Submarine Cables and Other Measures) Act 2005, No 104, Sch 1, Pt I, ss 36–​37 ��������������������805

Nigeria

Law No. 12965 Decree No. 8771/​2016 ����������766

Communications Act 2003, Chapter VI, Part I ��������������������������������������859

Finland

Russia

Brazil

Information Society Code (917/​2014)������������766

Federal Law No. 374-​FZ������������������������������������661

Germany

Slovenia

Federal Telecommunications Law (TKG), § 6 ����������������������������������� 627, 633 Teleservices Act 1997 (TDG)����������������������������739

Law on Electronic Communications 2012 ����������������������������766

Solomon Islands India Regulations (No. 2 of 2016)������������������������������766

Telecommunications Act 2009 (No 20 of 2009)��������������������������������������������859

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Table of Statutes

South Africa Electronic Communications Act 2005����������888

Timor-​Leste Decree Law No. 15/​2012 of 28 March 2012, § 57.4 ��������������������������������������������������853

Trinidad and Tobago Telecommunications Act 2001 s 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304, 306 s 36. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306

United States Administrative Procedure Act 1946�����220, 230 American Recovery and Reinvestment Act 2009�������������������������������������������������259–​60 Cable Communications Policy Act 1984������201 § 621(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 Cable Television Consumer Protection and Competition Act 1992������������������201–​2 California Civil Code § 1798.29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667 § 1798.80. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667 Clayton Act 1914������������������������������������ 223–​4,  267 § 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268–​9 § 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268–​9 § 4(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269 § 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270, 274 § 7A(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271 § 7A(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271 s 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274 Commercial Spectrum Enhancement Act 2004, Title II ����������������������������������������238 Communications (Deregulatory) Act 1996 § 153(10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 768 § 153(20). . . . . . . . . . . . . . . . . . . . . . . . . . 210, 768 § 153(43). . . . . . . . . . . . . . . . . . . . . . . . . . 209, 768 § 153(46). . . . . . . . . . . . . . . . . . . . . . . . . . 209, 768 Communications Act 1934������������195, 196, 197, 220–​3, 225–​6, 230, 253, 273–​4, 279–80, 294, 768 § 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 § 2(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231 § 201 . . . . . . . . . . . . . . . . . . . . . . . . . 247, 249, 257 § 202 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257 § 214. . . . . . . . . . . . . . . . . . . . 234–​5, 239–​40,  289 § 222 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280

xxix

§ 222(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279 § 222(c)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280 § 222(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280 § 222(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280 § 222(h)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279 § 230(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 § 251 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 § 254 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227, 259 § 254(b)(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260 § 254(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261 § 303(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 § 309(j). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236 § 310. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240 § 310(b)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240 § 310(b)(4) . . . . . . . . . . . . . . . . . . . . . . . . . 239–​41 § 310(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 § 332(c)(1)(B). . . . . . . . . . . . . . . . . . . . . . . . . . . 212 § 332(c)(7) . . . . . . . . . . . . . . . . . . . . . . . . . . 254–5 § 332(c)(7)(B). . . . . . . . . . . . . . . . . . . . . . . . . . . 255 § 332(d)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 § 332(d)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 Part VI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233 Title I. . . . . . . . . . . . . . . . . . . . . . . . . 209, 218, 734 Title II. . . . . . . . . . . . . . . . . 199, 209–​10, 212–​14, 216, 233, 734 Title III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 Title VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 Communications Assistance for Law Enforcement Act 1994 (CALEA)������������654 Communications Decency Act 1996 § 230 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 736 § 230(c)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 736 § 230(e)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 736 Communications Satellite Act 1962��������������208 Controlling the Assault of Non-​Solicited Pornography and Marketing Act 2003��������������������������������������������������� 278–​9 Digital Millennium Copyright Act 1998���������������������������������������������������736–​8 § 512 . . . . . . . . . . . . . . . . . . . . . . . . . . . 734–​5,  736 § 512(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 736 § 512(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 736 § 512(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 736 § 512(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 736 § 512(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743 § 512(g). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743 § 512(g)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743

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§ 512(g)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743 § 512(g)(2)(c). . . . . . . . . . . . . . . . . . . . . . . . . . . 743 § 512(i)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . 743 § 512(k)(1)(A–​B) . . . . . . . . . . . . . . . . . . . . . . . . 735 Do Not Call Improvement Act 2007��������������277 Endangered Species Act 1973 ������������������������255 Federal Trade Commission Act 1914������������223 § 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224, 280 Hart-​Scott-​Rodino Antitrust Improvements Act 1976 ��������������������������267 Interstate Commission Act 1877��������������������197 Junk Fax Prevention Act 2005 ������������������������278 Mann-​E lkins Act 1910 ��������������������������������������197 National Environmental Policy Act 1969��������������������������������������������������������255 National Historic Preservation Act 1966��������������������������������������������������������255 Omnibus Budget Reconciliation Act 1993, § 6002(b)��������������������������������������������205 Online Copyright Infringement Liability Limitation Act��������������������������������������������734 Open-​Market Reorganization for the Betterment of International Telecommunications Act 2000 (ORBIT) § 647 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208 § 761(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 801 Rural Health Care Connectivity Act 2016��������������������������������������������������������264 Sherman Anti-​t rust Act 1892��������������������������224 § 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267–​9 § 1–​7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 § 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268–​70

STELA Reauthorization Act 2015, § 111 ��������������������������������������������202 Telecommunications Act 1996����������196, 199–​201, 219, 225–​7, 233, 253–​5, 265, 770 § 161(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 § 224(f)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251 § 251 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 § 251(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 § 251(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 § 251(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 § 251(b)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248 § 251(c)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 § 251(c)(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245 § 251(d)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244 § 251(d)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244 § 251(d)(3)(A)–​(C). . . . . . . . . . . . . . . . . . . . . . 232 § 251(g). . . . . . . . . . . . . . . . . . . . . . . . . . . 248, 249 § 252 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 § 252(c)(2)(A). . . . . . . . . . . . . . . . . . . . . . . . . . . 246 § 252(c)(2)(B). . . . . . . . . . . . . . . . . . . . . . . . . . . 246 § 252(c)(2)(D) . . . . . . . . . . . . . . . . . . . . . . . . . . 246 § 252(d)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251 § 254(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190 § 271 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 § 272(f)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 § 706 . . . . . . . . . . . . . . . . . . . . . . . . . . 213–14, 232 Telemarketing Consumer Fraud and Abuse Prevention Act 1993 ��������������������275 Telephone Consumer Protection Act 1991���������������������������������������������������275–​7,  680 Wireless Communications and Public Safety Act 1999��������������������������������������������279

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Table of EU Legislation Regulations Reg 17/​62/​EEC [1962] OJ 13 Art 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583 Reg 3286/​94/​EC [1994] OJ L 349/​71����������������841 Reg 2887/​2000/​EC [2000] OJ L 336/​4 (Local Loop Regulation)����������72, 138, 157, 450, 557 Reg 733/​2002/​EC [2002] OJ L 113/​1 (EU Top Level Domain)���������������������������� 171 Reg 1/​2003 [2003] OJ OL 1/​1 (Rules on Competition)�������������������584, 592 Art 3(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 539, 593 Art 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 537 Art 11(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 593 Art 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583 Arts 18–​21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583 Art 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583 Art 31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 594 Reg 139/​2004/​EC [2004] OJ L 24 (Merger Regulation) Art 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144, 537 Art 1.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 576 Art 2(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 575 Art 2(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 580 Art 2.3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579 Art 3(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579 Art 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579 Art 4(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577 Art 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577 Art 9(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577 Art 21(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 581 Art 21.2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 576 Art 21.3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 576 Art 21.4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 576 Reg 2006/​2004/​EC [2006] OJ L 354/​1 (Consumer Protection Cooperation) ����������������� 155, 495

Reg 717/​2007/​EC [2007] OJ L 171/​32 (Roaming Regulation)����������������������157, 313 Recital 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463 Recitals 6–​8. . . . . . . . . . . . . . . . . . . . . . . . . . . . 463 Recital 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463 Recital 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463 Reg 765/​2008/​EC [2008] OJ L 218 (Accreditation and Market Surveillance) (RAMS), Chapter IV����������������������������������������������������167 Reg 544/​2009 [2009] OJ L 166/​12��������������������463 Reg 1211/​2009 [2009] OJ L 337/​1 (Body of European Regulators for Electronic Communications) (BEREC Regulation)������������������ 157, 313–​14, 316, 318, 334, 409, 413, 417 Reg 330/​2010/​EC [2010] OJ L102/​1 (VABE Regulation) Art 1(1)(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 548 Art 1(1)(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 548 Art 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 548 Reg 531/​2012 [2012] OJ L 172/​10 (Roaming Regulation)������������144, 157, 321, 463, 495, 546, 627, 734, 779 Recital 81. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463 Art 6(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158 Art 6(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463 Art 15(2a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 Art 15(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 Art 16(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463 Reg 611/​2013/​EU [2013] OJ L173/​2 Art 3(2)��������������������������������������������������������������668 Reg 316/​2014 [2014] OJEU L93/​17 Art 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 548 Art 4(1)(c)(ii). . . . . . . . . . . . . . . . . . . . . . . . . . . 549 Reg 654/​2014 [2014] OJ L �������������������������189, 841

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Reg 2015/​2120 [2015] OJ L 310/​1 (Open Internet Access and Roaming Regulation)��������������321, 324, 463, 495, 513, 669, 734, 762, 778–​9, 785–​7 Art 2(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 Art 3. . . . . . . . . . . . . . . . . . . 512, 525, 782, 784–​7 Art 3(1) . . . . . . . . . . . . . . . . . . . . . 512, 780, 783–​4 Art 3(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 780 Art 3(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 780 Art 3(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 781 Art 3(5) . . . . . . . . . . . . . . . . . . . . . 512, 627, 782–​3 Arts 3–​6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 780 Art 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 782–6 Art 4(1) . . . . . . . . . . . . . . . . . . . . . . . 497, 512, 525 Art 4(1)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669 Art 4(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525 Art 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 785– ​6 Art 5(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 784 Art 5(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . 185, 784 Art 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 784 Art 15(2a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 Reg 2016/​679 [2016] OJ L 119 (General Data Protection Regulation, GDPR)���������� 646, 649–​50, 676, 681, 889 Recital 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 647 Recital 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669 Recital 42. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 672 Art 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667 Art 4(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669 Art 4(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 Art 4(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 Art 4(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666 Art 5(1)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669 Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 647 Art 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 647, 672 Art 9(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665 Art 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669 Art 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669 Art 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669 Art 28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 Art 28(3)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 Art 33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668 Art 33(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668 Art 34. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668 Art 36(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 671 Art 36(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 671 Art 40. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 682

Art 44. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 639 Art 45. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 656 Art 58(1)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668 Art 95. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 648 Reg 2016/​2286 [2016] OJ L 344/​46 Recital 27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463 Art 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 630 Art 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 630 Reg 2017/​1354 [2017] OJ L�������������������������190, 404 Reg 2017/​2311 [2017] OJ L 331/​39��������������������463 ePrivacy proposal (COM 2017), 10 1 2017���������������646, 652, 664, 666–​7, 669, 671, 676–​7, 679–​81 Recital 19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651 Recital 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651 Recital 25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677 Art 4(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 647 Art 6(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 671 Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 647 Art 8(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677 Art 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681 Art 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680

Directives Dir 86/​361/​EEC [1986] OJ L 217/​21 (Approval for Telecommunications Terminal Equipment) ���������������� 165–​6,  402 Dir 87/​371/​EEC [1987] OJ L 196 ����������������������402 Dir 87/​372/​EEC [1987] OJ L 196/​85 (Frequency Bands)������������������ 171, 386, 404 Dir 88/​301/​EEC [1988] OJ L131/​73 (Equipment Directive)������������157, 163, 169 Art 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166 Art 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166, 800 Art 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495 Dir 89/​336/​EEC [1989] OJ L 139 (Electromagnetic Compatibility)����������322 Dir 89/​552/​EEC [1989] OJ L 298 (Television without Frontiers’ Directive) �������������������������������������������685, 688 Art 1(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 686 Dir 90/​387/​EEC [1990] OJ L 192/​1 (Open Network Provision)������������������172–​3 Art 2(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 Art 5a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 Art 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

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Dir 90/​388/​EEC [1988] OJ L 192/​10 (Services Directive) �������� 157, 163, 168, 402 Art 1(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 Art 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Art 4c. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190 Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 Dir 91/​263/​EEC [1991] OJ L 128/​1 (Telecommunications Terminal Equipment)��������������������������������������������������166 Dir 92/​4 4/​EEC [1992] OJ L 165/​27 (Open Network Provision to Leased Lines)���������������������������������173, 584 Recital 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 Dir 93/​38/​EEC [1993] OJ L 199/​8 4 (Procurement Procedures of Entities Operating in the Water, Energy, Transport and Telecommunication Sectors) ��������������������������������������������������������163 Dir 94/​46/​EU [1994] OJ L 268/​15 (Satellite Communications)�����������169, 800 Art 2(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 Dir 95/​46/​EC [1995] OJ L 281/​31 (Data Protection Directive, DPD)�������322, 646–​9, 651, 655, 669, 676, 746, 776 Recital 47. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 Art 2(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666 Art 8(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665 Art 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 Art 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667 Art 17(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 Art 25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 639 Dir 95/​47/​EC [1997] OJ L 281/​51 (Standards for the Transmission of Television Signals)��������������������������� 451, 707 Dir 95/​51/​EC [1995] OJ L 256/​49 (Use of Cable TV Networks)��������������������169 Dir 95/​62/​EC [1995] OJ L 321/​6 (ONP Voice Telephony Directive) ����������� 172, 187 Recital 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 Art 2(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 Art 7(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502 Dir 96/​2/​EC [1996] OJ L 20/​59 (Mobile and Personal Communications)�������������169, 402 Dir 96/​19/​EC [1996] OJ L 74/​13 (Full Competition in Telecommunications Services)�������������������������������������������� 164, 190–​1 Art 1(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

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Art 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190–​1 Dir 97/​13/​EC [1997] OJ L 117 (Licensing Directive) ���������������304, 310–​13, 404–​5, 447 Recital 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404 Recital 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404 Recital 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312 Recital 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404 Art 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 Art 5(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 Art 5(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312 Art 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310 Art 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 Art 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 Art 9(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312 Art 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 Art 10(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 Art 10(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 Art 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312, 404 Art 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312 Art 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156, 312 Art 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 Annex 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 Annexes 3.1–​3.6. . . . . . . . . . . . . . . . . . . . . . . . 311 Annex 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 Dir 97/​33/​EC [1997] OJ L 199/​32 (Interconnection Directive)�������������������172, 444–51, 447, 456, 460, 489, 503 Art 3(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445 Art 4(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 446 Art 4(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445 Art 4(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445 Arts 6–​8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 446 Art 7(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 Annex I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445 Annex II. . . . . . . . . . . . . . . 446–7, 449, 454, 468 Dir 97/​36/​EC [1997] OJ L 202/​60 (Pursuit of Television Broadcasting Activities)��������������������������685 Recital 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 686 Dir 97/​51/​EC [1997] OJ L 295/​23 (Competitive Environment in Telecommunications��������������������������������584 Recital 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 Art 1(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 Art 2(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173 Art 11(1a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

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Dir 97/​66/​EC [1998] OJ L 24/​1 (Telecommunications Privacy Directive) ������������������������������647–​8, 653, 655 Dir 98/​10/​EC [1998] OJ L 101/​24 (ONP and Voice Telephony) ������������������������������173 Dir 98/​13/​EC [1998] OJ L 74 (Mutual Conformity Recognition)������������������������166 Dir 98/​34/​EC [1998] OJ L 204/​37 (Technical Standards and Regulations)������������������������������������������715–​16 Art 1. . . . . . . . . . . . . . . . . . . . . . . . . . 150, 314, 780 Art 1(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 734 Dir 98/​4 8/​EC [1998] OJ L 217/​18 (Technical Standards and Regulations)������������������������������������������715–​16 Recital 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315 Art 1(2)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 734 Annex V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 734 Dir 98/​61/​EC [1998] OJ L 268/​37 (Numbering Directive)�������������������133, 503 Dir 98/​8 4/​EC [1998] OJ L 320/​54 �����������336, 707 Dir 99/​5/​EC [1999] OJ L 91/​10 (Radio and Telecommunications Terminal Equipment Directive) (R&TTE Directive) �����������������������������������321, 397, 403 Recital 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Art 2e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Art 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 Dir 2000/​31/​EC [2000] OJ L 178/​1 (Electronic Commerce Directive, ECD)������������������ 151, 314, 322, 633, 685, 688 Recital 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 751 Recital 32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 739 Recital 46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 741 Recital 49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 739 Art 1(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 739 Art 1(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 739 Art 1(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 740 Art 2(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 734 Art 2(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 740 Art 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 740 Art 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 740 Art 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 740 Art 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 740–​1 Art 14(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 741 Art 15. . . . . . . . . . . . . . . . . . . . . 729, 740, 748, 755 Art 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 739

Art 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 744 Art 21(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 741–​2 Dir 2001/​29/​EC [2001] OJ L 167 (Copyright Directive)��������������������������������706 Recital 59. . . . . . . . . . . . . . . . . . . . . . . . . 746, 751 Art 5(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 741 Art 8(3) . . . . . . . . . . . . . . . . . . . . . 746, 749, 751–2 Dir 2001/​83/​EC [2001] OJ L 311/​67 ����������������726 Dir 2002/​19/​EC [2002] OJ L 108/​7 (Access Directive)�����������149, 155, 190, 315, 321, 322, 329, 341, 451–​62, 465, 469, 482, 489, 543, 557, 618, 774 Art 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 705, 777 Art 2(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 435, 453 Art 2(b). . . . . . . . . . . . . . . . . . . . . . . . . . . 436, 453 Art 2(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442 Art 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454–​5 Art 4(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 454, 467 Art 4(2)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318 Art 4(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455 Art 5. . . . . . . . . . 455–​6, 463–4, 474–​6, 545, 706 Art 5(1) . . . . . . . . . . . . . . . . . . . . . . . . . 455–6, 777 Art 5(1)(a). . . . . . . . . . . . . . . . . . . . . 326, 455, 805 Art 5(1)(ab). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455 Art 5(1)(b). . . . . . . . . . . . . . . . . . . . . . . . . 326, 456 Art 5(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 Art 6. . . . . . . . . . . . . . . 321, 326, 461, 476–​7, 707 Art 6(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Art 6(3). . . . . . . . . . . . . . . . . . . . . . . . . . . 328, 461 Art 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Art 8(3). . . . . . . . . . . . . . . . . . 128, 324, 456, 458 Art 8(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458 Arts 8–​13a . . . . . . . . . . . . . . . . . . . . . . . . . 456–​61 Art 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324, 459 Arts 9–​13. . . . . . . . . . . . . . . . . . . . . . . . . .364, 460 Arts 9–​13a . . . . . . . . . . . . . . . . . . . . . . 454, 457–​8 Arts 9–​13b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Art 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324, 459 Art 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324, 459 Art 12. . . . . . . . . . . . . . 315, 324, 458–​9, 705, 805 Art 12(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458 Art 12(1)(a). . . . . . . . . . . . . . . . . . . . . . . . 443, 557 Art 12(1)(a)–​( j) . . . . . . . . . . . . . . . . . . . . . . . . . 458 Art 12(2)(a)–​(f) . . . . . . . . . . . . . . . . . . . . . . . . . 459 Art 13. . . . . . . . . . . . . . . . . . . . . 324, 459–​60, 461 Art 13(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460 Art 13(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460

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Art 13a . . . . . . . . . . . . . . . . . . . . . . . 325, 460, 588 Art 13a(1)–​(3) . . . . . . . . . . . . . . . . . . . . . . . . . . 325 Art 13a(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325 Art 13b . . . . . . . . . . . . . . . . . . . . . . . . . . . 325, 460 Art 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 456 Art 14(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Art 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Annex I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 706–​7 Part I. . . . . . . . . . . . . . . . . . . . . . . . . . . 461, 476 Annex II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459 Dir 2002/​20/​EC [2002] OJ L 108 (Authorisation Directive)����� 149, 155, 286, 302, 310, 313–​41, 334, 379, 407–​10, 431, 774 Recital 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312 Recital 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 Recital 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 Recital 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 Recital 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 Recital 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318 Recital 11. . . . . . . . . . . . . . . . . . . . . . . . . 318, 407 Recital 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319 Recital 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319 Recital 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321 Recital 32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411 Art 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 631 Art 3(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 Art 3(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 316, 631 Art 3(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . 316, 321 Art 4(1)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 Art 4(1)(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 Art 4(2)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318 Art 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318, 407 Art 5(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405 Art 5(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 319, 408 Art 5(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . 319, 407 Art 5(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319 Art 5(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 424 Art 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 631 Art 6(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410 Art 6(2) . . . . . . . . . . . . . . . . . . . . . . . . . 329, 331–​2 Art 6(3) . . . . . . . . . . . . . . . . . . . 298, 322, 328, 410 Art 7(1)(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 424 Art 7(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 408 Art 7(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407 Art 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318 Art 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320

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Art 10(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 Art 10(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331 Art 10(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 Art 10(3)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 Art 10(3)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 Art 10(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331 Art 10(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331 Art 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321 Art 11(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 Art 11(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 Art 11(c)–​(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 Art 11(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 Art 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321, 377 Art 12(1). . . . . . . . . . . . . . . . . . . . . . . . . . 181, 332 Art 12(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 Art 12(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 Art 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332, 411 Annex A . . . . . . . . . . . . . . . . . . . . . . . . 320–​1,  339 Annex B . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422–​3 Dir 2002/​21/​EC [2002] OJ L 108/​33 (Framework Directive) ����������119, 149, 155, 314–​15, 322, 379, 411, 452–3, 465, 774, 783, 839 Recital 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 Recital 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 Art 1(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 168, 336 Art 1(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 Art 2. . . . . . . . . . . . . . . . . . . . . . . . . . . 631, 779–80 Art 2(a). . . . . . . . . . . . . . . . . . . . . . . 150, 315, 685 Art 2(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314 Art 2(c) . . . . . . . . . . . . . . . . . . . . . . . 150, 336, 633 Art 2(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Art 2(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Art 2(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 672 Art 2(k). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 672 Art 2(n). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 626 Art 2(o). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Art 3(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 Art 3(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 Art 3(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 Art 3(3a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 Art 3(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 Art 4. . . . . . . . . . . . . . . . . . . . . . 183, 302, 320, 331 Art 4(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 183, 331 Art 4(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 Art 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Art 6. . . . . . . . . . . . . . . 319, 321, 325, 328, 456–​7

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Art 6a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328, 333 Art 7. . . . . . . . . . . . . . . . . 177–​8, 185, 405, 456–​7 Art 7(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . 473, 641 Art 7(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 Art 7(5)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 Art 7(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 Art 7(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 Art 7a. . . . . . . . . . . . . . . . . . . . . . . . . 177, 185, 456 Art 7a(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 Art 7a(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 Art 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . 417, 420–​2 Art 8(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 Art 8(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 Art 8(3)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 Art 8(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 Art 8(4)(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 Art 8(4)(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 775 Art 8a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 414 Art 9. . . . . . . . . . . . . . . . . . . . . . . . . . 176, 414, 416 Art 9(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Art 9(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 414–​15 Art 9(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 414 Art 9(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415 Art 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176, 417 Art 11. . . . . . . . . . . . . . . . . . . . . . . . . 176, 317, 452 Art 11(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 Art 12. . . . . . . . . . . . . . . . . . . . . 176, 452, 464, 545 Art 12(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 326, 453 Art 12(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453 Art 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163, 176 Art 13a . . . . . . . . . . . . . . . . . . . . . . . . . . . 176, 667 Art 13b . . . . . . . . . . . . . . . . . . . . . . . 176, 333, 667 Art 14(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 175, 329 Art 14(2) . . . . . . . . . . . . . . . . . . 175, 363, 553, 557 Art 14(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325 Art 15(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555 Art 15(3) . . . . . . . . . . . . . . . . . . . . . . . . . . 175, 457 Art 15(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453 Art 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175, 324 Art 16(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469 Art 16(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Art 16(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 Art 16(4) . . . . . . . . . . . . . . . . . . . . . . . . . . 176, 457 Art 16(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473 Art 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322 Art 17(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 552 Art 19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323

Art 19(1). . . . . . . . . . . . . . . . . . . . . . . . . . 158, 460 Art 19(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158 Art 19(3)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158 Art 20. . . . . . . . . . . . . . . . . . . . . . . . . 184, 666, 777 Art 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666 Art 22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 Art 25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Art 26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 Art 50. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314 Art 95. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314 Dir 2002/​22/​EC [2002] OJ L 108/​7 (Universal Service Directive) ������ 149, 320, 329, 495, 503, 627, 734, 774, 783 Recital 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 Recital 30. . . . . . . . . . . . . . . . . . . . . 493, 496, 500 Recital 40. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503 Recital 46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 Recital 48. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 Chapter IV. . . . . . . . . . . . . . . . . . . . . . . . 189, 495 Art 1(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492 Art 1(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321 Art 2(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 188, 327 Art 3(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 Art 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 Art 4(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 136, 188 Art 5. . . . . . . . . . . . . . . . . . . . . . . . . . 188, 328, 671 Art 6. . . . . . . . . . . . . . . . . . . . . . 188, 321, 322, 328 Art 6(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188, 328 Art 7(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 Art 8(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 Art 8(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190 Art 9(2)–​(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 Art 10(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 674 Art 11(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 Art 11(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 Art 11(4)–​(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 Art 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20, 192 Art 12(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 Art 13(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192 Art 13(1)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190 Art 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 Art 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Art 17. . . . . . . . . . . . . . . . . . . . . 176, 190, 364, 457 Art 17(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325 Art 17(1)(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190 Art 17(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190

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Art 18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 Art 19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364, 443 Art 20. . . . . . . . . . . . . . . . . . . . . . . 496–​7, 499, 500 Art 20(1)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 775 Art 20(3)(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 776 Art 21. . . . . . . . . . . . . . . . . . . . . . . . 500–​1, 509–​10 Art 21(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505 Art 21(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 501, 510 Art 22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189, 502 Art 22(3) . . . . . . . . . . . . . . . . . . . . 153, 189, 775–​8 Art 23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338 Art 23a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 Art 23a(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Art 25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 671 Art 26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 Art 27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 Art 27(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 Art 30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503–4 Art 31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 706 Art 32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 Art 33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 Art 36. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 Annex, Part A(a). . . . . . . . . . . . . . . . . . . . . . . . 674 Annex II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 501 Annex III . . . . . . . . . . . . . . . . . . . . . . . . . 189, 502 Annex IV, Part A. . . . . . . . . . . . . . . . . . . . 20, 192 Annex V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 Dir 2002/​58/​EC [2002] OJ L 201/​37 (Privacy Electronic Communications (PEC) Directive)������������������������� 149, 155, 321, 495, 634, 646, 648, 650, 681, 746, 774–6 Recital 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 Recital 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651 Recital 32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 Recital 33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 674 Recital 34. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678 Recital 35. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 652 Recital 37. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675 Recital 39. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 671 Art 1(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 647, 649 Art 1a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668 Art 2(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668 Art 2(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 652 Art 2(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651–​2 Art 2(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 652 Art 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649

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Art 4(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667 Art 4(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667 Art 4(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667 Art 4(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668 Art 5(1) . . . . . . . . . . . . . . . . . . . . . 653, 655, 657–8 Art 5(1b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 656 Art 5(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673 Art 5(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 676 Art 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666 Art 6(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 661, 665 Art 6(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665 Art 6(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665 Art 6(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666 Art 6(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666 Art 6(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666 Art 7(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 674 Art 7(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 674 Art 8(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677 Art 8(1)(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677 Art 8(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677 Art 8(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677 Art 8(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677 Art 9(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666 Art 9(2). . . . . . . . . . . . . . . . . . . . . . . . . . . 666, 676 Art 9(3). . . . . . . . . . . . . . . . . . . . . . . . . . . 666, 677 Art 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678 Art 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675 Art 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 Art 12(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 671 Art 12(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 672 Art 13(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679 Art 13(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679 Art 13(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679 Art 13(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679 Art 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651 Art 15(1). . . . . . . . . . . . . . . . . . . . . . . . . . 655, 669 Dir 2002/​77/​EC [2002] OJ L 249/​21 (Competition in the Markets for Electronic Communications Networks and Services)���������������������������163 Dir 2004/​18/​EC [2004] OJ L 134/​114 (Public Service Contracts Directive)����������������������������������163 Dir 2004/​4 8/​EC [2004] OJ L 157 (Enforcement Directive) Recital 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 747 Recital 24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 747

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Art 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 747 Art 2(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 747 Art 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 746–​7 Art 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 746 Art 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 747 Dir 2005/​29/​EC [2005] OJ L 149/​22 (Unfair Commercial Practices Directive) ����������������������������������������������������721 Dir 2006/​24/​EC [2006] OJ L 105/​54 (Data Retention Directive)������655, 661, 776 Art 15(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 655–​6 Dir 2007/​65/​EC [2007] OJ L 332/​27 (Audiovisual Media Services Directive) �������������������������������������������615, 685 Dir 2008/​63/​EC [2008] OJ L 162/​20 (Competition in the Markets in Telecommunications Terminal Equipment)����������������������������������������� 168, 651 Dir 2009/​24/​EU [2009] OJ L111/​16 (Computer Programs Directive) Art 1(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551 Art 6(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551 Dir 2009/​114/​EC [2009] OJ L 274/​25 (GSM Directive)����������������������� 171, 386, 404, 421, 432–3 Dir 2009/​136/​EC [2009] OJ L 337/​11 (Citizens’ Rights Directive)���������� 155, 313, 321, 324, 338, 495, 504, 509, 648, 734, 776 Recital 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 Recital 32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505 Recital 42. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 Art 1(14) . . . . . . . . . . . . . . . . . . . . . . . . 496, 501–2 Art 1(21) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503 Art 2(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 656 Art 8(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 Dir 2009/​140/​EC [2009] OJ L 337/​37 (Better Regulation Directive) ������ 155, 310, 313, 315, 317–​19, 324, 331, 414, 423, 452, 734, 775 Recital 26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 Recital 33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 Art 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320 Art 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318 Art 3(6)(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331 Art 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 Art 4(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320

Art 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 Dir 2010/​13/​EU [2000] OJ L 178/​1 (Audiovisual Media Services Directive, AVMSD)���������� 322, 683–​93, 697, 703, 712, 714, 716, 731 Recital 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 Recital 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 687 Recital 22. . . . . . . . . . . . . . . . . . . . . . . . . . . 687–​8 Recital 23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 687 Recital 24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 Recital 28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688 Art 1(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 686 Art 1(a)(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 734 Art 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 734 Art 2(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688 Art 2(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 690–1 Art 2(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 691 Art 2(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 691 Art 2(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 691 Art 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688 Art 3(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689 Art 3(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689 Art 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689 Art 4(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 690 Art 4(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 Art 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692 Art 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692, 718 Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692 Art 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692 Art 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723 Arts 9–​11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692 Art 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723, 727 Art 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692 Art 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 708 Arts 14–​15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692 Art 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709 Art 15(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709 Art 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 710 Art 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692, 710 Art 18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 710 Art 19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 725 Arts 19–​26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692 Art 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 725 Art 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 726 Art 22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723 Art 23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 725 Art 24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 726

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Art 27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692 Art 28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692, 709 Dir 2011/​83/​EU [2011] (OJ L 304/​6 4) (Consumer Rights Directive) Art 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 499 Art 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 499 Dir 2011/​92/​EU [2011] OJ L 333 (Child Exploitation Directive) Recital 47. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 762 Art 25(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 761–​2 Dir 2014/​24/​EU [2014] OJ L 94 (Public Procurement Directive) Art 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 Dir 2014/​30/​EU [2014] OJ L 96/​79 (Electromagnetic Compatibility Directive) (EMC)�������������������������������168, 404 Dir 2014/​35/​EU [2014] OJ L 96/​357 (Low Voltage Directive) (LVD)�����������������168, 404 Dir 2014/​53/​EU [2014] OJ L 153/​62 (Radio Equipment Directive) (RED)��������� 321, 403 Recitals 4–​8. . . . . . . . . . . . . . . . . . . . . . . . . . . . 397 Recital 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Chapter IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Art 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403 Art 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403 Art 2(1)(12). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Art 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164, 168 Art 3(1)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404 Art 3(1)(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404 Art 3(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404 Art 3(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404 Art 3(3)(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651 Art 3(3)(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410 Art 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Art 10(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404 Art 44. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651 Art 48. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Dir 2014/​61/​EU [2014] OJ L 155 (Broadband Cost Reduction/​ Deployment Directive)�������� 363, 466–​7, 607 Recital 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333 Recital 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464 Art 2(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465 Art 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464 Art 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464 Art 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464

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Art 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464 Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464 Art 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465 Art 9(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465 Dir 2015/​1535/​EU [2015] OJ L 241/​ 1 (Technical Standards and Regulations Directive) ������������������� 150, 716 Art 1(1)(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 633 Dir 2016/​1148/​EU OJ L194/​1 (NIS Directive) Art 1(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667 Annex II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667 Annex III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667 European Electronic Communications Code Directive (EECC, proposed) ���������������������313–​16, 318–​23, 325, 328, 329–​30, 332,334, 407, 410, 413 Recital 42. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 Recital 93. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412 Recital 94. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412 Recital 95. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412 Recitals 113–​114. . . . . . . . . . . . . . . . . . . . . . . . 406 Art 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 Art 2(5). . . . . . . . . . . . . . . . . . . . . . . . . . . 634, 650 Art 2(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 632 Art 2(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 632 Art 2(26). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407 Art 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 408, 411 Art 4. . . . . . . . . . . . . . . . . . . . . . . . . . 408, 411, 414 Art 5(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 330, 406 Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413 Art 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410 Art 13(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411 Art 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 Art 19(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 Art 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 638 Art 20(1). . . . . . . . . . . . . . . . . . . . . . . . . . . 329–​30 Art 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 Art 22(3). . . . . . . . . . . . . . . . . . . . . . . . . . . 329–​30 Art 22(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 Art 23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 Art 28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 408 Art 30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329, 411 Art 30(2). . . . . . . . . . . . . . . . . . . . . . . . . . 329, 331 Art 31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331 Art 32(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413 Art 33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413 Art 35. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409, 412

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Art 35(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405 Art 35(1)(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407 Art 35(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409 Art 35(2)–​(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . 405 Art 37. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405 Art 42. . . . . . . . . . . . . . . . . . . . 332, 405, 408, 412 Art 42(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412 Art 42(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412 Art 45. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411, 414 Art 45(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411 Art 45(2) . . . . . . . . . . . . . . . . . . . . . . . . 405–​8,  411 Art 45(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411 Art 46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 406–​9 Art 46(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 406, 410 Art 47. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410–​11 Art 47(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411 Art 47(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411 Art 48. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410 Art 49(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405 Art 51. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411, 415 Art 51(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415 Art 54(1)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 408 Art 54(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 408 Art 54(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407 Art 55. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407 Art 59(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326 Art 59(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 Art 65(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326 Art 65(5)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333 Art 77. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326 Art 79. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326–​7 Art 81(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 Art 82. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 Art 89. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 Art 110. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326 Annex I Part A . . . . . . . . . . . . . . . . . . . . . . . . . . 323, 410 Part B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410

Part C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410 Part D. . . . . . . . . . . . . . . . . . . . . . . . . . 405, 410 Part D(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410 Part D(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410 Annex V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 Part B(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327

Decisions Dec 82/​861/​EEC (OJ L 360/​36)������������������������161 Dec 91/​396/​EEC (OJ L 217/​31)�������������������������� 170 Dec 92/​264/​EEC (OJ L 137/​21) ������������������������ 170 Dec 94/​800/​EC (OJ L 336/​1)������������������������������838 Dec 96/​546/​EC (OJ L 239/​23) ��������������������������577 Dec 96/​547/​EC (OJ L 239/​57 ����������������������������577 Dec 97/​838/​EC (OJ L 347/​45)����������������������������169 Dec 128/​1999/​EC (OJ L 17/​1)���������������������������� 171 Dec 276/​1999/​EC (OJ L 33)��������������������������������756 Dec 1999/​468/​EC (OJ L 13/​12) Art 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Art 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Dec 676/​2002/​EC (OJ L 108/​1) ���������������383, 412 Art 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 Dec 2002/​622/​EC (OJ L 198/​49) ����������������������186 Dec 2002/​627/​EC (OJ L 200/​38) ����������������������185 Dec 1151/​2003/​EC (OJ L 162) ��������������������������756 Dec 2003/​778/​EC (OJ L291/​25)������������������������570 Dec 2005/​513/​EC (OJ L 187/​22) ����������������������413 Dec 2006/​621/​EC (OJ L 257/​11)������������������������� 13 Dec 2007/​116/​EC (OJ L 49/​30)�������������������������� 171 Dec 2009/​766/​EU (OJ L274/​32)��������������385, 413 Dec 2011/​251/​EU (OJ L106/​9)��������������������������384 Dec 243/​2012/​EU (OJ L81/​7)��������� 383, 385, 387, 414–​16 Dec 2012/​688/​EU (OJ L307/​8 4)������������������������ 171 Dec 2013/​195/​EU (OJ L 113/​18)�����������������������416 Dec 2014/​6 41/​EU (OJ L 263/​29) ����������������������416 Dec 2014/​1607/​EU (OJ L78/​16)������������������������641 Dec 2016/​687/​EU (OJ L 118/​4)��������������������������416

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Table of International Instruments Agreement between the European Communities and the Government of the United States of America on the application of positive comity principles in the enforcement of their competition laws, OJ L 173/28, 18 June 1998��������������������������������������������������24 Agreement Establishing the World Trade Organization 1994 ������������������������828 Art III(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 827 Agreement on Government Procurement ����������������������������������������������829 Agreement on Trade-​Related Aspects of Intellectual Property (TRIPS) 1994������������������������������������������� 828–​9 Agreement relating to the International Telecommunications Satellite Organization (INTELSAT) 1971 Art 1(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 798 Art IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 798 Art XVII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 799 Basic Telecommunications Agreement (BTA), 1997�������������������������������������������239–​40 Convention establishing the European Telecommunications Satellite Organization 1982 (EUTELSAT)�� 799–​800 Art III(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 799 Art XIV(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800 Convention for the Protection of Submarine Cables 1884 Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804 Art 311(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804 Convention on International Liability for Damage Caused by Space Objects 1972 Art I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795 Art I(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795 Art I(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795 Art II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796 Art III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796 Art IV.1(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796 Art V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795

Art VI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796 Art VIII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796 Arts XIV–​X X . . . . . . . . . . . . . . . . . . . . . . . . . . . 796 Convention on the International Maritime Satellite Organization 1976 (INMARSAT) ������������������������������������799 Convention on the Registration of Objects Launched into Outer Space 1975 Art IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796–​7 Convention Télégraphique Internationale de Paris (1865)����������������391 Council of Europe Convention for the Protection of Individuals with Regard to Automatic Processing of Personal Data 1981 Art 3(2)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649 Council of Europe Convention on Cybercrime 2001 Additional Protocol . . . . . . . . . . . . . . . . . . . . 758 Art 6.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 758 EC Treaty 1950 ����������������������������������������������������161 Art 30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166 Arts 34–​37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166 Art 50. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315 Art 60. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314 Art 81. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178, 569 Art 81(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541 Art 82. . . . . . . . . . . . . . . . . . . . . . . . . 178, 560, 569 Art 86. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166, 496 Art 86(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496 Art 95. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 Art 249 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 European Charter of Fundamental Rights of the EU 2000�������������� 491, 504, 762 Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . 645, 646, 655 Art 8. . . . . . . . . . . . . . . . . . . . . . 646, 655, 670, 674 Art 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 714 Art 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 754 Art 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709, 783 Art 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709, 783

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European Convention for the Protection of Human Rights 1950������������������������������762 Art 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649, 653 Art 8(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Art 8(2) . . . . . . . . . . . . . . . . . . . . . . . . 17, 654, 655 Art 10(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 751 Protocol 1, Art 1. . . . . . . . . . . . . . . . . . . . . 17, 751 European Convention on Transfrontier Television 1989 ������������������������������������������688 General Agreement on Tariffs and Trade 1947 (GATT)���������������������������������������828, 839 General Agreement on Trade in Services 1995 (GATS) ������������ 390, 822, 825, 828, 881 Part II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 830 Art I(2) ����������������������������������������������������������829 Art I(3)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . 831 Art II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 833 Art II(1). . . . . . . . . . . . . . . . . . . . . . . . . 308, 830 Art II(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 830 Art III . . . . . . . . . . . . . . . . . . . . . . . . . . 309, 831 Art VI . . . . . . . . . . . . . . . . . . . . . . 309, 831, 836 Art VI(2)–​(4) . . . . . . . . . . . . . . . . . . . . . . . . . 831 Art VIII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 831 Art VIII(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 831 Art IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 831 Art XIV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 832 Part III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 830 Art XVI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 832 Art XVII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309 Art XVIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . 835 Part IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 830 Art XX. . . . . . . . . . . . . . . . . . . . . . . . . . 830, 834 Art XXI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 830 Annex 308 . . . . . . . . . . . . . . . . . . . . . . . . . . 832–​3 para 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 832 para 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 832 para 4(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309 para 4(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309 para 4(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309 paras 5–​7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 830 para 5(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 843 para 5(b) . . . . . . . . . . . . . . . . . . . . . . . 833, 843 para 5(e). . . . . . . . . . . . . . . . . . . . . . . . 309, 833 para 5(f)(i). . . . . . . . . . . . . . . . . . . . . . . . . . . 309 para 5(f)(ii) . . . . . . . . . . . . . . . . . . . . . . . . . . 309 para 5(f)(iii). . . . . . . . . . . . . . . . . . . . . . . . . . 309 para 5(f)(iv). . . . . . . . . . . . . . . . . . . . . . . . . . 309

para 5(f)(v) . . . . . . . . . . . . . . . . . . . . . . . . . . 309 para 5(f)(vi). . . . . . . . . . . . . . . . . . . . . . . . . . 309 para 5(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 833 Fourth Protocol. . . . . . . . . 169, 833–​7, 839, 850 Interinstitutional Agreement on Better Law-​making������������������������������������������������159 International Radiotelegraph Convention 1906����������������������������������������394 International Telecommunications Convention 1947����������������������������������������806 International Telecommunications Convention of the ITU 1973��������������������812 International Telecommunications Convention of the ITU 1992��������������� 806–​7 s 5 (Arts 7–​12) . . . . . . . . . . . . . . . . . . . . . . . . . . 811 Art 1(2)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 811 Art 1(2)(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 811 Art 3(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 808 Art 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 812 Art 4(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 816 Art 6(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 816 Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807 Art 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807 Art 10(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807 Art 11(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 821 Art 11A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 809 Art 14(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 821 Art 14A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 809 Art 17A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 809 Art 19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 808–​9 Art 19(1)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807 Art 19(1)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807 Art 19(4bis) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807 Art 19(9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 808 Art 19(12). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 808 Art 20(5)(4bis). . . . . . . . . . . . . . . . . . . . . . . . . . 810 Art 28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 809 Art 33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 816 Art 33(5)(4bis). . . . . . . . . . . . . . . . . . . . . . . . . . 808 Art 34. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 816 Art 35. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 816 Art 36. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 816 Art 37. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 816 Art 38. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 821 Art 41. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 821 Art 42. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 819 Art 44(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 812

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Art 54. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 816 Art 54.3penter . . . . . . . . . . . . . . . . . . . . . . . . . 816 Art 54.5bis. . . . . . . . . . . . . . . . . . . . . . . . . . 816–​17 Art 56. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 821 Art 56(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 821 Optional Protocol . . . . . . . . . . . . . . . . . . . . . . 821 International Telecommunications Regulations (ITRs), 1988����������������� 818, 822 Art 1(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 820 Art 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 821 Art 6(2)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 824 Art 6(3)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 821 Art 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 819 International Telecommunications Regulations (ITRs), 2012 Art 1.1(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 819 Art 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 819 Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 819 Art 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 821 Art 8(2)(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 821 International Telegraph Convention (1865) Art 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 648 Radio Regulations (RRs), ITU Art 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 811, 820 Art 1(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 820 Art 4(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 820 Art 13.6(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 813 Art 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 820 Annex 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 813 Treaty of Lisbon 2009�������������������������������655, 754 Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space 1967��������������������796 Art II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 794, 812 Art VI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795 Art VII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795 Art VIII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795 Art XI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795 Treaty on the Functioning of the European Union 2010 ������������������������������159 Art 16(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 Art 46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 Art 49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 684

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Arts 49–​55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 691 Art 56. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314, 684 Arts 56–​62. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 Art 101. . . . . . . . . . . . 122, 267, 535, 538–​9, 562, 569, 579–​80, 582–​3, 585–​6, 592, 594, 621 Art 101(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 537 Art 101(3) . . . . . . . . . . . . . . . . . . . . . 541, 570, 580 Arts 101–​109. . . . . . . . . . . . . . . . . . . . . . . . . . . 155 Art 102. . . . . . . . 122, 161, 535, 553–4, 560, 562, 566, 569, 571, 582–​3, 585, 592, 594, 621 paras (c) and (d). . . . . . . . . . . . . . . . . . . . . . 553 Art 102(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 571 Art 106. . . . . . . . . . . . . . . . . . . 163, 170, 496, 535 Art 106(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 Art 106(2). . . . . . . . . . . . . . . 161, 162, 186–​7, 191 Art 106(3). . . . . . . . . . . . . . . 156–​7, 161, 163, 166 Art 114. . . . . . . . . . . . . . . . . . . . . . . . . . . . 155, 157 Art 207(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 839 Art 218(9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 417 Art 256 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 594 Art 256(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 594 Art 258 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 Art 263 . . . . . . . . . . . . . . . . . . . . . . . . . . . 160, 177 Art 267 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 Art 288 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158 United Nations Convention on the Law of the Sea 1982 (UNCLOS) Part V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804 Art 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803 Art 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803 Art 21(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804 Art 58. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804 Art 76. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803 Art 77. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803 Art 79. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804 Art 87. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804 Art 112. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804 Art 115. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804 United Nations Universal Declaration on Human Rights 1948 Art 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 645

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List of Contributors Ann Buckingham holds LLB(Hons) and BA degrees from Victoria University of Wellington, New Zealand, and a BCL degree from Oxford University, where she was awarded the Vinerian Scholarship. She is qualified in California (and formerly qualified in both England and Wales and New Zealand) and is a Partner in Latham & Watkins’ top-ranked communications and corporate groups, based in San Diego, California. Ann has advised numerous companies, investment banks, governments, and regulators on regulatory restructuring, licence auctions, corporate transactions, and privatizations in the communications sector, with a particular focus on developing countries. Email: [email protected]. Camilla Bustani holds a BA (Hons) from Harvard University and a Masters in International Affairs from Columbia University, as well as a BA (Hons) in Jurisprudence from Oxford University. She worked at Clifford Chance LLP for eight years, focusing primarily on telecommunications sector regulatory reform in developing countries, and public international law aspects of telecommunications regulation and sector liberalization. She has been at Ofcom since 2006, during which time she has been closely involved with a number of European legislative debates and the work of European regulatory networks. She is now the Director responsible for overseeing Ofcom’s international engagement in Europe and globally. Lisa Correa has over twenty years of professional experience as a regulatory/ competition economist working in the UK telecommunications industry, academia, economic consultancy and since 2005 at Ofcom, the UK communications regulator. She holds a PhD in economics from Queen Mary & Westfield College, University of London. Anne Flanagan is Professor of Communications Law in the Centre for Commercial Law Studies, Queen Mary University of London. She is LLM Director and lectures on the London LLM courses, as well as teaching distance learning courses in Privacy and Data Protection Law and European Communications Law. She is a New York State licensed attorney. Before coming to Queen Mary, she practised

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law for sixteen years as an associate with the law firm of Wilson, Elser, Moskowitz, Edelman & Dicker in New York and in the US financial services industry. Her experience includes insurance regulatory compliance, appellate litigation and state government relations for providers of life, health and property/casualty insurance and pension products. Among her varied functions as Senior Counsel at TIAACREF, the world’s largest private pension system, where she worked for seven years, Anne served as counsel to the IT divisions. Dr Karen Lee is a lecturer at the School of Law of the University of New England (Australia). Her PhD, for which she received the University of New South Wales’s PhD Research Excellence Award, involved an in-depth study of self-regulatory rule-making in the Australian telecommunications sector. Prior to becoming an academic, she worked in the TMT department of the London office of Denton Wilde Sapte (now Dentons), where she specialized in telecommunications regulation. She was seconded to the Office of Telecommunications in 1998–99 and to the Department of Trade and Industry in 2002. A graduate of the Indiana University Maurer School of Law, she is a qualified lawyer in New South Wales, Illinois, and England and Wales. She is the author of The Legitimacy and Responsiveness of Industry Rule-making (published by Hart) and has published in the Federal Law Review, the Media and Arts Law Review and the Australian Journal of Competition and Consumer Law. In 2016, she was the runner up for the Giandomenico Majone Prize for Best Conference Paper Written and Presented by Early-Stage Researchers, awarded by the European Consortium of Political Research’s Standing Group on Regulatory Governance. Daithí Mac Síthigh is Professor of Law and Innovation at Queen’s University Belfast. His research and teaching interests are in law and technology, with a particular interest in media law. He was convenor for media and communications law with the Society for Legal Scholars, gave oral evidence to the Leveson Inquiry on media regulation, was a part of CREATe (the Centre for Copyright and New Business Models in the Digital Economy), co-edits the Dublin University Law Journal, and is an Internet domain name dispute resolution panellist. Graeme Maguire is the global head of Bird & Bird’s Tech & Comms Group. He is based in London but usually somewhere else. His client work focuses on international tech transactions and communications regulatory issues including communications infrastructure projects, network sharing, spectrum/5G matters and IoT, OTT and telco cloud business models. He holds an MA in Natural Sciences/ Law from Downing College, Cambridge and a diploma in IP Law and Practice from Bristol University. Publications include the ‘Communications and Broadcasting

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Regulation’ chapter of the 4th edition of Graham Smith’s Internet Law and Regulations. Graeme has spent time on secondment in a competition policy role at Oftel (now Ofcom) and British Telecommunications and prior to joining Bird & Bird in 2005 was a partner at Linklaters TMT group. Email: graeme.maguire@ twobirds.com. Dr Bostjan Makarovic has had over sixteen years of experience in European and international telecommunications law and regulation. He was head of telecommunications division with the Slovenian telecoms regulator, acted as a regulatory advisor to a number of telcos and other ICT businesses, and consultant to regulatory authorities in the EMEA region on topics such as regulatory reform, the shift to NGA, and net neutrality. He acted as member of European Union Communications Committee (CoCom), member of European Regulators’ Group (ERG) Contact Network, and advised the Presidency of the Council of the European Union in relation to the 2009 review of the electronic communications regulatory framework. He holds Queen Mary, University of London PhD in the regulation of Next Generation Networks. He is the founder of Aphaia, a consultancy dealing with ICT regulation and policy, a fully qualified lawyer in Slovenia, and an IAPP-certified international privacy professional (CIPP/E). Chris Marsden is Professor of Internet Law at the University of Sussex and a renowned international expert on Internet and new media law, having researched and taught in the field since its foundation over twenty years ago (1996 was arguably Year Zero). Chris researches regulation by code—whether legal, software or social code. He is author of seven books and over 130 research publications on Internet law and regulation, including ‘Net Neutrality: From Policy to Law to Regulation’ (2017), ‘Regulating Code’ (2013 with Ian Brown), ‘Internet Co-regulation’ (2011). Chris was formerly Professor of Law at Essex (2007–13), having previously researched at RAND (2005–7), Oxford (2004–5), Warwick (1997–2000). He held Visiting Fellowships at Harvard, Melbourne, Cambridge, Oxford, USC-Annenberg, Keio, GLOCOM Tokyo, and FGV Rio de Janeiro. He has founded and led teams to successful completion of over twenty externally funded international collaborative projects, worth in total over £6m, including Openlaws.eu [2014–16] and FP7 European Internet Science (EINS) [2011–15]. Elizabeth Newman is a senior editor at Practical Law, a division of Thomson Reuters, where she writes on the regulation of telecommunications and on media and intellectual property law. She formerly practised as a solicitor in the intellectual property department of Lovells (now Hogan Lovells) and worked as the in-house lawyer for TalkTalk Direct, a subsidiary of Carphone Warehouse.

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Jamison Prime is an attorney with the US Federal Communications Commission in Washington, DC. As Chief of the Policy and Rules Division of the Office of Engineering and Technology, he oversees engineers, attorneys, and economists who work on rule-making proceedings that involve both licensed and unlicensed spectrum, as well as the coordination of spectrum use between the FCC and other US government entities. Prior to joining the Office of Engineering and Technology, he worked in the FCC’s Wireless Telecommunications Bureau on a broad array of issues, including spectrum licensing, the review of transfer and assignment applications in merger proceedings, and the regulation of communication towers. A 1996 graduate of the Mauer School of Law at Indiana University Bloomington, he served as managing editor on and was published in the Federal Communications Law Journal. He is an active member of the Federal Communications Bar Association, where he has served on several committees. He received a BA in History from DePauw University in 1993. Mr Prime’s contribution was prepared independently from his employment and should not be read as an official statement of FCC policy. Email: [email protected]. David Satola is Lead Counsel, Technology and Innovation, in the World Bank Legal Department, focusing on legal aspects (transactional and regulatory) of telecommunications reforms, internet governance, human rights on the internet, cybersecurity/cyber-crime and competition regulation involving ICTs. His work has spanned more than eighty-five countries. He was seconded to the UN’s Working Group on Internet Governance and acts as the Bank’s Observer to UNCITRAL and ICANN’s GAC. He is the Chair of the Internet Governance Task Force of the ABA. Vincent Smith is a competition lawyer with a wide-ranging experience of EU and competition law and enforcement. As well as varied private practice experience in both London and Brussels, he has been a Legal Director for competition issues at Oftel—then the UK’s telecommunications regulator—and was Senior Director for Competition at the UK Office of Fair Trading, leading the office’s competition enforcement effort. In addition to his private practice, he now teaches commercial and competition law to business and law Masters students. Joanne Wheeler is a leading expert in the field of communications and satellite regulation and commercial contracts, having worked at both Ofcom, the European Space Agency, and for over twenty years in private legal practice in this area. She was awarded an MBE for services to the UK space industry in 2017. She is ranked in Tier 1 in legal directories for her satellite and communications expertise. Joanne won the Financial Times European Legal Innovator of the Year award in 2014 for her work with the UK space industry and government. She is a founder

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and Co-Chair of the Satellite Finance Network (www.satellitefinancenetwork. org), and writes two regulatory columns for international satellite industry journals: Via Satellite; and Satellite Finance. She is a Fellow of the Royal Astronomical Society and the Royal Aeronautical Society. Lorna Woods is Professor of Internet Law at the University of Essex. Lorna started her career as a practising solicitor in a TMT practice in the City of London. She has extensive experience in the field of media policy and communications regulation, including social media and the internet, and she has published widely in this area, as well as contributed to a range of studies and parliamentary inquiries.

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Part I FUNDAMENTAL S

2

3

1 TELECOMMUNIC ATIONS L AW AND R EGUL ATION AN INTRODUCTION Ian Walden

1 .1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13 1.14

The Subject Matter  The Telecommunications Sector  Technology and Terminology  Telecommunications Law and Regulation  Liberalization and Regulation  Liberalization and Privatization  Policy, Law, and Regulation  Regulatory Framework  Regulatory Powers  Regulatory Models and Methods  Regulation and Competition Law  Regulation and Standards  Regulating in the Global Economy  Concluding Remarks 

3 4 5 8 9 11 12 14 16 19 21 22 24 25

1.1  THE SUBJE C T M AT TER This book examines national, regional, and international legal and regulatory frameworks governing the telecommunications sector, particularly the provision of all forms of network infrastructure, communication services, and equipment supplied for the transmission of data and information. The book is entitled ‘telecommunications’ rather than ‘communications’, despite the best attempts of European Union law to recast the terminology. Telecommunications remains the preferred term for a number of reasons. First, the change of regulatory terminology

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is still not reflected in industry discourse, let  alone among the wider general public. Second, the book is intended as a text for a global audience, not just the UK or Europe, so it does not seem appropriate for EU terminology to be imposed on our readers. Third, the many historical and cross-​jurisdictional aspects of the book recommend consistency as an aid to comprehension. The book does, however, use the terms ‘telecommunications’ and ‘communications’ interchangeably.

1. 2  THE TEL E COMMUNIC ATIONS SE C TOR The World Trade Organization’s (WTO) ‘Basic Agreement on Telecommunications’, in 1997, can be seen as a definitive moment in the international community’s commitment to the structural evolution of the sector from a primarily monopolistic environment to a competitive marketplace. Such acceptance has been driven by a recognition that telecommunications is a strategic economic sector, in terms of being both a tradable service in its own right as well as the infrastructure over which other goods and services are traded and, in an age of electronic commerce, delivered. There is no doubting the continuing dynamic nature of the telecommunications sector within the global economy. At the end of the twentieth century, world stock markets rose and fell in large part based on perceptions of the health and wealth of the sector. Indeed such was the dependency that financial regulators expressed concern over the exposure of the banking system to the fortunes of telecommunications companies.1 At the beginning of the twenty-​fi rst century, we saw large-​scale bankruptcies, such as Global Crossing, the exposure of fraudulent trading practices, such as WorldCom, and massive sectoral restructuring. Nearing two decades into the new century, it is estimated that the telecommunications sector will be generating revenues of some $1.5 trillion by 2021;2 although continued growth in the usage of services, especially broadband and mobile, has also seen providers experience a fall in revenues in certain markets, such as wholesale services.3 While the financial environment for the telecommunications industry fluctuates with the state of the world economy, the rapid technological developments that underpin the sector and the consequent product and service innovation have continued at the same frantic pace. As in any area of law, telecommunications involves use of a particular set of terminology with which a practitioner or student 1   See Financial Services Authority Press Release, ‘Telecoms lending—​fi rms must remain vigilant’, FSA/​PN/​ 153/​2000, 7 December 2000. 2  See . 3  Ofcom Communications Market Report: UK, 3 August 2017, at 1.3.

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needs to become familiar. Such terminology relates, in large part, to the technology being used, the structure of the industry, and the products and services being supplied. These issues are examined briefly in the next section.

1.3  TE C HNOLO G Y A ND TER MINOLO G Y 4 Only a few years ago, the scope of telecommunications technology would have been easy to define: telephony, fax, and mobile. However, now there is a rapidly changing technological environment, which means even systems that we use every day, like the telephone, are now regarded as being ‘legacy’ technology. The current drivers for change are simple: the ever increasing use of the mobile and the internet. In many countries, ‘fixed-​mobile substitution’ is common; while in developing countries, mobile is by far the most dominant technology. Voice over the internet applications and services has meant very cheap telephone calls from anywhere in the world by connecting over the internet to a service provider in the destination country, who then routes the telephone call locally. Going even further, instant messaging systems (eg Apple’s FaceTime and WhatsApp) provide the capability of making voice and video calls directly between devices free of charge. Such ‘over-​t he-​top’ or OTT services challenge traditional regulatory concepts and practices, which governments and regulators are still struggling to address.5 However, while these services and capabilities are evolving rapidly, a lot of the underlying technologies are common. In all systems there are fundamental categories of equipment that the telecommunications network, of whatever type, must use. These are: • • • • •

transmission systems; switching or routing equipment; terminal equipment; network management systems; billing systems.

In addition, it is important to distinguish between the ‘access network’ (the connection from the customer to the network) and the ‘core network’ (connections between network elements). Transmission systems transfer information from one location to another, with as low probability of error as possible, over wireline (ie physical) or wireless (ie radio) links. Nowadays most transmission systems in the core network use optical fibres,

  Professor Laurie Cuthbert, Queen Mary, University of London, helped draft this section originally.   See in particular Chapters 4, 14, and 15.

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although some legacy systems using copper cables still exist. Fixed point-​to-​point radio links, using microwave, are also used where the terrain is difficult or where the network node (particularly a base station in mobile networks) is isolated. At the level of the ‘access network’ there is a wide variety of different transmission systems. One of the challenges in getting broadband services to residential customers has been the cost of replacing the old ‘twisted metallic pair’ telephone cables, and much effort has been spent in improving the technology to allow higher bitrates over these copper cables, since the cost of replacing them is prohibitive. From ISDN to ADSL (Asynchronous Digital Subscriber Line) and G.fast, new techniques allow broadband to be offered to residential customers over their existing telephone lines, at least to those who are close enough to the telephone exchange. Other fixed access transmission systems use co-​a xial cables (cable TV), optical fibres, or point-​to-​point radio links. In mobile networks, the access network is the link between the mobile handset and the network base station (or BTS—​Base Transceiver Station). The type of network (GSM, 3, 4, or 5G) defines the type of transmission used over the radio link. Another radio access method that is very common is that for WLANs (Wireless Local Area Networks), often known as ‘WiFi’. The common standard for this is IEEE 802.11, with numerous iterations since it was first published in 1997 enabling ever greater capacity to be transmitted over the same radio link. Within organizations the predominant wireline access technique for computer communications is Ethernet, often using Unshielded Twisted Pair (UTP) cables, although WLANs are increasingly being implemented now that the security of such systems is being improved. While transmission systems get information from A to B, users want to be able to connect to different people, or to different websites—​t his means that connections have to be ‘switched’ or ‘routed’ to the right destination. With telephone networks this was done using switches (called ‘exchanges’ in the UK) but with internet-​t ype networks (IP networks) the devices performing that function are called routers. The reason for this difference is that telephone networks are traditionally ‘circuit-​ switched’, whereas IP networks are ‘packet-​switched’. Circuit-​switched means that a connection is set up for the whole duration of a telephone call; in packet switching, information is broken into units called ‘packets’ that are independently routed across the network. The important differences between the two techniques are that: • circuit-​switched networks need to have a method of setting up a connection from A to B before any information is sent, and packet networks do not; • the routing decision for every packet increases the flexibility and reliability of the network as packets can even be re-​routed during a call;

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• the delay in a circuit-​switched network is fixed, but in packet networks the nature of the packet routing means that delays between packets can be very variable; • it can be harder to guarantee ‘Quality of Service’ (QoS) over packet networks. Overall this meant that packet-​switched networks were generally better suited for data connections and circuit-​switched networks for voice (which is particularly sensitive to delay and variations in delay). However, the predominance of packet-​based IP (Internet Protocol) for computer communications has led to a major change in how networks are structured, with all communications networks moving to using IP rather than circuit switching.6 This change has been enabled as a result of intense research effort to get good quality voice communications with IP. The difference between routers and switches is in fact much more complex (and confusing) than the simple explanation above. IP traffic often passes through equipment called ‘switches’ in the local area network—​a nd these have a different function. To complicate matters even further, new architectures for IP networks introduce the concept of ‘switched routers’; such as MPLS (multi-​protocol label switching). In the business world, the local telephone system (PBX—​ Private Branch Exchange) has evolved from being a traditional telephony switch to a fully IP system with IP phones, or even with ‘soft phones’ on the PC. Of course, no network would work if the user did not have any equipment to use with it and it is often the capabilities of the terminal equipment that attracts users rather than that of the underlying network. An important aspect of any communications network is its reliability and availability, particularly when congestion occurs. Ensuring this is a function of network management systems, ie complex software programs that control the operation and performance of the various network elements; this is true of all types of network, whether telephony, mobile, or internet. Also of crucial importance is the billing system—​no network operator could survive in business without one! Modern telephony billing systems are very complicated, recording the details of every transmission and applying a wide range of tariffs based on the type of network user (eg retail or wholesale customer or interconnecting operator) and type of communication services (eg text messaging and voice calls). The internet has utilized very different tariff structures from traditional telephone networks, such as flat rate rather than minute-​based tariffs, which has enabled the implementation of much simpler (and cheaper) billing systems. However, there are now signs that volume-​based charging (where the user pays for the overall amount of data transferred) are starting to appear for internet

  In June 2015, BT announced that it plans to switch off its PSTN and ISDN networks by 2025.

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use, so billing systems to capture that information are becoming increasingly important.

1.4  TEL E COMMUNIC ATIONS L AW A ND R E GUL ATION This book is primarily concerned with the rules and regulations governing the provision of telecommunications equipment, network infrastructure, and services (eg the transmission of data), rather than the law governing the content of the traffic being sent across telecommunication networks. The latter is generally perceived as the domain of ‘media law’7 or ‘internet law’ rather than ‘telecommunications law’. However, one recurring issue in telecommunications law is the problem of distinguishing clearly between issues of carriage and issues of content, particularly with the emergence of apps offering communications functionalities and calls for ‘net neutrality’. This edition contains a section addressing various content-​related aspects, in respect of personal data and privacy (Chapter 13), the impact of broadcasting regulation (Chapter 14), and the position of ISPs regarding liability for, and control over, the content and services they provide (Chapter 15). Even the categorization of carriage as a service has evolved, with the development of commodity markets for trading carriage in terms of telecommunication minutes.8 Such economic re-​categorization can have profound implications for policy makers and regulators. The various aspects of telecommunications law addressed in this book can be broadly distinguished into competition or economic issues and non-​economic public policy issues. Competition law is primarily concerned with establishing and ensuring the sustainability of competitive markets, at a national, regional, and global level. Telecommunications as a sector capable of establishing a comparative advantage in international trade was recognized by the UK Government at the outset of liberalization, in the early 1980s. In the Telecommunications Act 1984, for example, four of the ten general duties imposed upon the regulator addressed trade-​related aspects of telecommunications, from encouraging the provision of transit services, traffic being routed through the UK, to the supply of telecommunications apparatus (s 3(2)). For developing countries, the prospect of becoming a regional hub in the emerging information economy is promoted as an opportunity arising from market liberalization. Non-​competition public policy issues have historically focused on the provision of telecommunication services to the population as a whole: the issue of universal

  eg Goldberg, Sutter, and Walden, Media Law and Practice (Oxford: OUP, 2nd edn, 2019).   eg RouteTrader .

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service. Concerns about the growth of a ‘digital divide’ between the information rich and poor is a manifestation of such political imperatives. However, other non-​ competition issues include consumer protection, environmental concerns, health and safety matters, as well as the protection of personal privacy and the debate over ‘network neutrality’ (see further Section 1.7 below). It is inevitable that the seismic shifts in the structure of the telecommunications sector are reflected in a complex and rapidly changing legal framework. The liberalization of the sector has usually required significant legal intervention, the classic exemption to the rule being New Zealand, which initially simply opened up the sector to competition without the imposition of a regulatory framework, but has subsequently had to establish a regulatory authority.9 In parallel with the pursuance of liberalization, the rapid and dramatic technological developments have compounded the problems faced by policy makers, legislators, and regulators when trying to establish legal clarity and certainty for an industry undergoing convergence with other industries.10 The internet is the classic example of this technological phenomenon. The existence of a clear legal and regulatory distinction between issues of carriage, the primary focus of the book, and issues of content is therefore dissolving in the face of such technological change. This chapter introduces some of the key themes present within the field of telecommunications law. These themes are then considered in greater detail in one or more of the following substantive chapters.

1.5  L IBER A L IZ ATION A ND R E GUL ATION The telecommunications industry has undergone a fundamental change in structure, from that of monopoly to one of competition. Many of the laws and regulations examined in this book are concerned with this process of change: regulating for competition. However, the notion of what type of competition is being sought has sometimes distinguished the response of legislators and regulators. The telecommunications market can be crudely divided into equipment, networks, and services. Liberalization of the market for telecommunications equipment has been subject to the broadest consensus among policy makers, reflecting conditions in the broader IT products market. The provision of telecommunications

9   All restrictions on the supply of services were removed in 1989. However, by 2001, a Telecommunications Commissioner was appointed within the Commerce Commission, with substantial further enforcement powers being granted to the Commissioner in 2006. 10   See Standage, T, The Victorian Internet (London: Phoenix, 1998), which describes the revolutionary impact of the telegraph and Carr, N, The Big Switch (New York: Norton, 2013).

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services has experienced a similar general consensus, except in respect of voice telephony. It is at the level of the network, constructing the physical communications infrastructure, that debate over liberalization continues to be heard. Historically it was argued that telecommunications networks were natural monopolies and replicating the physical infrastructure was inevitably uneconomic. Whilst such arguments seem arcane in most developed economies, there continue to be those that argue that some form of single network platform is a feasible policy alternative, particularly in developing countries and/​or driven by environmental concerns. In addition, the natural monopoly position continues to have relevance in the provision of wireless telecommunication services. Although technological developments are continually improving our exploitation of the radio frequency spectrum, the market for wireless services may remain oligopolistic if not monopolistic, with associated competition concerns. One of the historic myths of telecommunications liberalization was that it would arise through market deregulation; a characteristic of the related and converging markets for IT products and services. The reality has been much more mixed. The telecommunications sector has become a highly regulated sector, initially to ensure the transition to competition, but subsequently to govern persistent market features that militate against competition. The continuing importance of regulation is manifest, in part, by the increasing scope and volume of material covered in this book. Such regulation initially focused primarily on controlling the activities of the incumbent operator in order to facilitate market entry for new providers, but has since broadened out to address a much larger number of market players, such as those providing call termination and roaming services. While public policy concerns in respect of universal service and consumer protection issues continue to persist and evolve. As markets become fully competitive, deregulation remains a policy objective, often embodied in legislation. The shift towards deregulation has arisen not only because competitive markets are maturing, but also through technological developments, such as the internet, which have disrupted historic market structures. In the US, for example, the Telecommunications Act of 1996 imposes a general obligation upon the Federal Communications Commission to both forbear from the imposition of regulations under certain conditions, as well as engage in biennial reviews of the existing regulatory framework to remove those regulations identified as ‘no longer necessary in the public interest as the result of meaningful economic competition between providers of such service’ (47 USC §161(a)(2)). Similarly, in the UK, a specific duty has been placed upon Ofcom, the UK regulatory authority, to review the regulatory framework and remove any unnecessary burdens (Communications Act 2003, s 6).

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Complementing the move towards deregulation, some jurisdictions have also given explicit statutory recognition to the role of industry self-​regulation in certain areas. In Australia, for example, the Telecommunications Act 1997 states, The Parliament intends that telecommunications be regulated in a manner that . . . promotes the greatest practicable use of industry self-​regulation. (s 4)

Similarly, in the UK, the Communications Act 2003 requires Ofcom to have regard to the possibility of addressing regulatory matters through ‘effective self-​ regulation’ (s 6(2)). The technical complexity of the telecommunications market has always meant that much of the regulatory input on particular issues, such as interconnection, simply consisted of the convening and oversight of particular industry groups, intervening only in the event of impasse. However, as regulators reduce or withdraw from market intervention, then increasingly reliance is likely to be made upon industry to regulate itself.

1.6  L IBER A L IZ ATION A ND PR IVATIZ ATION A third concept often linked in the past with liberalization and deregulation was that of privatization: the conversion of the incumbent operator from being a state-​ owned public body to a privately owned entity. As with deregulation, the nature of the relationship with the process of liberalization has been far from straightforward. The policy drivers behind privatization of the incumbent have tended to be based around state revenue concerns rather than the objective of liberalization. The provision of a modern telecommunication infrastructure requires massive capital investment, a funding-​burden which governments have not been prepared to shoulder. Attracting private sector finance is generally seen as the only feasible mechanism for meeting the policy objective of modernizing this strategic economic sector. Concerns that a state-​owned incumbent might inhibit market entry have come a clear second to such revenue-​raising concerns. Indeed, governments have remained remarkably attached to the ‘national champion’, with the majority of the OECD countries continuing to have some stake in the incumbent.11 However, the process of privatization has, itself, sometimes acted as a barrier to the process of liberalization. In the UK, for example, the divestiture of BT occurred in three stages, 1984, 1991, and 1993. However, at the time of the second sale, the government was also undergoing a comprehensive review of the market, the ‘Duopoly Review’, in order to promote further liberalization (Chapter 3). During

11

 OECD, Communications Outlook 2013 (11 July 2013), at Table 2.6.

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this process, it was generally perceived that BT used the need to maintain share price for the forthcoming sale as an effective tool in its negotiations with the government. Government stake holdings in incumbent operators have also been an international trade issue. In the US, for example, concerns were raised in the US legislature about Deutsche Telekom’s proposed merger with Voicestream, on the basis that the German government continued to have a stake in its incumbent. After privatization, a government may continue to be concerned about the performance of the incumbent, particularly where, as in the UK, a significant proportion of the shares are held by the general public, ie the electorate to which the government is always accountable. In many countries, the need to attract international investment into the telecommunications sector, either through the sale of a strategic stake in the incumbent, through Build–​Operate–​Transfer schemes or financing new entrants, has actually driven the adoption of a comprehensive legal framework for the provision of telecommunications networks and services. A lack of legal certainty is seen as a significant discouragement to financial investment and therefore to market entry (see Chapter 17).

1.7  P OL IC Y, L AW, A ND R E GUL ATION The shift from monopolistic telecommunications markets to liberalized competitive markets arose primarily from a range of economic policy drivers, from the need to modernize existing infrastructure, to encouraging innovation and improving the nation’s communication infrastructure. However, the process of liberalization is also subject to certain non-​economic public policy objectives, such as maintenance of universal service, protection of consumer interests, and individual privacy. Some of these non-​economic objectives can perhaps be best understood as being centred on the ‘public interest’ nature of telecommunications. One ‘public interest’ factor is the use of public resources, manifest most starkly in the enduring conviction that spectrum is the property of the state, subject to controls to ensure that, as a ‘public good that has an important social, cultural and economic value’,12 it is utilized for the maximum welfare of all. Second, telecommunications often resides uneasily and uncertainly between the utilities sector and the IT sector. As a networked utility with substantial infrastructure, it is often viewed as a supplier of an ‘essential service’ akin to electric, gas, and water companies.13 ‘Universal

  Framework Directive, Article 9(1).  eg Ofcom Report, ‘Results of research into consumer views on the importance of communications services and their affordability’, 22 July 2014. 12 13

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service’ is the embodiment of the ‘public interest’ in telecommunications, with the desire to ensure that all citizens have access to a certain minimum set of services at an affordable price, which evolve over time.14 As well as being considered ‘utility-​like’, telecommunications is also recognized as being part of a nation’s critical national infrastructure, which engenders its own distinct ‘public interest’ concerns with service providers being subject to regulatory obligations to ensure the ‘integrity’ of their service, including the ability to carry state broadcasts in the event of an emergency.15 A  fourth element of the ‘public interest’ nature of telecommunications is the role of service providers in law enforcement and national security matters. Telecommunication operators are often subject to ex ante obligations to build intercept capabilities into their networks and to retain data, as well as ex post obligations to disclose communications content, traffic, and subscriber data.16 The desire to retain control over such matters has sometimes limited the enthusiasm of governments to accept foreign ownership of national champions. A final ‘public interest’ component is the fact that in many states, the incumbent national operator continues to be wholly or partly owned by the state, positioned as both national incumbent and champion.17 This relationship has caused the EU regulatory problems, such as Germany’s attempt to grant Deutsche Telekom a ‘regulatory holiday’ and France’s offer of loans to France Télécom, which were successfully challenged by the European Commission.18 Taken together, these ‘public interest’ factors have significantly interfered with the process of liberalization and the achievement of some of the economic policy objectives. Governments generally set the broad policy objectives governing the telecommunications market, whether independently, within regional bodies such as the European Union, or through international agreement and institutions. These objectives are then enshrined in national and international legal instruments, conferring rights and obligations upon the various parties. The extent to which a market entrant may rely upon, reference, and enforce such rights and obligations against others, will obviously depend on the legal nature of the instrument. Such legal instruments may impose obligations directly upon operators to address the policy objectives, or lay down principles to which the regulator should have reference when intervening in the market.

  See further Chapter 4, at Section 4.8.   eg UK General Conditions of Entitlement, Condition 3 ‘Proper and effective functioning of the network’ (May 2015). See further Chapter 6. 16   See further Chapter 13, at Section 13.3. 17   See OECD, Communications Outlook 2013 (11 July 2013), at Table 2.6. 18   See Case C-​424/​07, Commission v Federal Republic of Germany [2009] ECR I-​11431 and Commission decision (2006/​621/​EC) on the state-​a id implemented by France for France Télécom, OJ L 257/​11, 20 September 2006, respectively. 14

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Another aspect of telecommunications law concerns the legal relationships that exist between regulator and regulatees, between market participants (at a wholesale level) and between providers and their customers (at a retail level). An operator’s licence, authorization, or approval to supply networks, services, or equipment, as an instrument of public law, may be used to provide for legal certainties absent in the statutory framework, or contain detailed obligations controlling every aspect of an operator’s activities (Chapter  6). While private law agreements, such as interconnection agreements and those involving consumers, are often subject to significant regulatory intervention (Chapters 8 and 9). Other commercial agreements, such as capacity and outsourcing contracts, are largely left to the freedom of the parties (Chapters 11 and 12). The third component of the governing framework is the establishment of a regulatory authority with a specific remit to intervene in the operation of the telecommunications sector and independent from vested interests, whether from operators or the government, when it is a shareholder in the incumbent. Most countries have adopted such an institutional approach to the telecommunications sector. In the long term, the sustainability of a sector-​specific regulator may come under examination. The phenomenon of convergence has already led to a re-​assessment of the appropriate regulatory structures for issues of carriage and content. In 1999, the European Commission proposed that there be a single regulatory framework for all forms of communications infrastructure, whether voice telephony, data, or broadcasting.19 In 2003, the UK Government created the Office of Communications (Ofcom) through a merger of five existing regulatory bodies, with responsibility for both infrastructure and content.20 At the same time, it continues to be argued that once a fully competitive market matures then the need for intervention may simply rest upon traditional competition law principles, enforced by the national competition authority rather than a telecommunications-​specific regulator. To date, however, no country has felt in a position to take such a decisive step.

1. 8  R E GUL ATORY FR A ME WOR K The regulatory framework for the telecommunications sector is multifarious, both horizontally and vertically. At a national level, states may divide the regulation of the sector between different authorities. In the UK, for example, the 19   See Commission Communication, ‘Towards a new framework for Electronic Communications infrastructure and associated services: The 1999 Communications Review’, COM 1999, 539, 10 November 1999. 20   A sixth, Postcomm, was subsumed into Ofcom on 1 October 2011, reuniting post and telecommunications at a regulatory level, even though the industries remain distinct, while the incorporation of the BBC Trust’s regulatory functions into Ofcom represents a seventh.

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Communications Act 2003 places concurrent jurisdiction upon the Competition and Markets Authority and Ofcom for competition matters (Communications Act 2003, ss 370–​371). In federal legal systems, such as the United States, such jurisdictional complexities are multiplied, sometime requiring recourse to the courts to establish and clarify the right to regulate (Chapter  5). Regulatory multiplicity, with regulators exercising concurrent as well as exclusive jurisdiction, may in itself constitute a barrier to market entry, as operators try to work their way through the maze of procedures and peculiarities presented by each of the various institutions.21 Vertically, an operator may also need to look to regional organizations, whether as a legislative body to whom representations may be made, such as the European Commission, Parliament, and Council; or in terms of standards-​making, where participation in the decision-​making process may be a commercial imperative, such as the European Telecommunications Standards Institute (ETSI). At an international level, there exists another layer of laws and regulations under the World Trade Organization’s (WTO) multi-​lateral trade agreements and the regulations, recommendations, and standards of the International Telecommunication Union (ITU) (Chapter 16). The construction of global communication systems, such as Globalstar’s satellite network,22 requires large-​scale regulatory activity at both a national and international level. Applications for appropriate orbital slots will need to be made through the ITU, while operating licences or authorizations may have to be obtained in every jurisdiction into which the services are provided. In contrast, companies may offer voice telephony or instant messaging services over the internet without submitting themselves to any regulatory approval or notification process. Such a layering of regulatory bodies inevitably raises important questions of legal order: the applicability and enforceability of the rights and obligations arising under various legal instruments, before national and supra-​national judicial or dispute settlement bodies; and against either governments or market competitors. In less developed countries, much developmental assistance from organizations such as the World Bank, the International Finance Corporation (IFC), or the European Bank of Reconstruction and Development (EBRD) is directed towards the telecommunications sector, as a strategic part of a country’s economic infrastructure. Usually these lending institutions will impose conditions upon any

21   See generally Coates, K, ‘Regulating the telecommunications sector: Substituting practical cooperation for the risks of competition’, in McCrudden (ed), Regulation and Deregulation (Oxford: Clarendon Press, 1998), at 249–​274. 22  .

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such financial assistance, which may require the recipient jurisdiction to adopt a pro-​competitive legislative and regulatory framework for the telecommunications market (Chapter 17). Indeed, such conditional financial assistance to developing countries has been an extremely influential tool in the international harmonization of telecommunications law.

1.9  R E GUL ATORY P OWER S What powers does a regulatory authority have to intervene in the operation of a telecommunications market? The key authority is that of authorization or licensing:  granting the right to build, operate, and supply telecommunications equipment, networks, and/​or services. Liberalization is about the entry of competitors into a market, therefore the process by which a new entrant can obtain the necessary authorizations may itself be critical to the liberalization process. Most jurisdictions distinguish between authorizing those wanting to provide telecommunications services and those wanting to provide the networks or infrastructure for the carriage of such services. The nature of the activities associated with the latter category, such as digging up the streets to lay cables, has tended to mean more substantial legal obligations being placed upon such operators (Chapter 6). In addition, the incumbent will fall in this category. It is also generally the case that barriers to market entry are greater for the provision of networks than services and, therefore, there is often more scope to engage in anti-​competitive practices. With regard to telecommunications equipment, regulatory intervention tends to be limited to procedures ensuring that such equipment is unlikely to cause harm to either the user or the networks to which it is connected. Allied to the issue of authorization is that of access to scarce resources. Where scarce resources are an element of the service provision, then such resources need to be distributed on an appropriate basis that will not unduly restrict or distort competition. The key scarce resource in telecommunications is the electromagnetic spectrum for use in wireless communications. Historically, spectrum was distributed between the incumbent, the military, and various related public service providers, such as broadcasters and the police and emergency services. With liberalization, access to the spectrum available for commercial usage becomes a key regulatory control. As a scarce resource, spectrum is also usually seen as a public asset that should be utilized and managed in the best interests of society as a whole. One current trend is to auction spectrum on the basis that this is the most economically efficient mechanism for distributing such scarce and public resources. In the UK and Germany, auctions for the 3G mobile spectrum netted their

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governments $30 billion and $50 billion respectively. However, as with much economic theory, rational actors often act irrationally, paying sums through fear of market reaction as much as the business rationale. As a result, serious questions have been raised about whether the benefits in terms of public revenue will be achieved at the expense of the development of the market itself: through delayed roll-​out and higher charges for services. Another important scarce resource is telephone numbers. Access to a number and the right to control access to numbers needs to be subject to regulatory control in order to facilitate market liberalization. However, strategic national planning for the use and distribution of telephone numbers into the future can be an extremely difficult task and one which, if mistakes are made, can generate substantial adverse public feeling towards the national regulatory authority. The domain name and IP addressing scheme utilized for internet-​based communications has also generated regulatory issues, relating to its governance, scarcity, and impact on other legal regimes, such as trade marks. The right to access or utilize the private property of another for the provisioning of networks and services is an issue that has sometimes been viewed as similar in nature to the use of a scarce resource. Whilst the granting of rights of way need not be limited, the exercise of a statutory right to interfere with another’s property has such potentially significant consequences for the owner and/​or occupier of the property that regulatory controls are inevitably necessary. Not least, the exercise of such rights interferes with an individual’s right to enjoy their possessions and their right of privacy, as enshrined in national and international law.23 As telecommunications networks proliferate in a competitive market, it is possible that people challenging the exercise of statutory rights may increasingly raise such human rights concerns against operators building networks across private land. Recognized limitations to an individual’s right of privacy on grounds such as the ‘economic well-​being of the country’ or the ‘rights and freedoms of others’24 may be sustainable as a basis upon which to interfere during the process of liberalization, but may seem less ‘necessary’ once a market is fully competitive. The construction of international telecommunications networks raises issues of access to public resources, both state-​based, such as the electromagnetic spectrum, as well as resources recognized under public international law as the ‘property of all mankind’, specifically outer space and the high seas (Chapter 16). Public policy makers and regulators are also giving greater consideration to environmental concerns, such as the siting of transmitters for wireless communications

23   eg the European Convention for the Protection of Human Rights and Fundamental Freedoms, Art 8(1), and Protocol 1, Art 1. 24   Ibid, at Art 8(2).

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systems. Co-​location and facility-​sharing obligations are designed to address environmental as well as competition concerns (Chapter 8). One critically important area of regulatory intervention is that of dispute resolution. As the Competition Appeal Tribunal has noted, Dispute resolution is intended to be an additional form of regulation exercised in parallel with SMP regulation and general competition law . . . dispute resolution is an autonomous regulatory process which forms part and parcel of the overall regulatory framework.25

Disputes and complaints may arise between market participants, between the regulator and the regulatees, and between providers and their customers. In the latter case, especially where consumers are involved, sectoral dispute settlement schemes are designed both to redress an inevitable imbalance between the parties, as well as facilitating access to justice for the consumer. Intervening in disputes between market participants has been a critical component of the liberalization process, primarily because of the position of the incumbent. Where markets are fully competitive, however, such regulatory intervention may be seen as an unnecessary use of public money when the parties have equal recourse to alternative legal processes.26 The manner in which a regulator exercises its powers is an issue of concern to telecommunication lawyers. As with any public authority, the regulator will be continuously required to exercise its discretion in respect of when, where, and how it intervenes in the operation of the market. The complex nature of regulatory invention in the sector, particularly in respect of cost-​related matters such as price controls, may require that regulatees have the right to appeal against regulatory decisions through a de novo appeal procedure (Chapter 4). Regulatory decisions will also be subject to judicial review on procedural grounds, challenging a decision on the basis of irregularity, irrationality, illegality, and proportionality. The frequency and manner in which decisions are challenged will also impact on the operation of the whole regulatory framework. Legal activism by operators, frequently challenging the decisions made by the regulator, may effectively slow down the decision-​making process, as regulators become cautious and excessively procedural in order to stem legal challenges and the associated commitment of public resources. Legal interventions in regulatory decision-​making are more often of benefit to the incumbent, than new entrants.

  T-​Mobile, BT, H3G, C&W, Vodafone & Orange v Ofcom [2008] CAT 12, at paras 89 and 94.   See, eg, Ofcom, Dispute Resolution Guidelines, 7 June 2011.

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1.10  R E GUL ATORY MODEL S A ND ME THOD S The importance of the regulatory authority in the telecommunications market requires consideration to be given to the structure and the manner of working of the authority being established. Generally, regulatory authorities can be distinguished into one of four models: • an autonomous quasi-​judicial commission (eg the US Federal Communications Commission (FCC)); • an independent official or office outside a government ministry (eg the Autorité de Régulation des Télécommunications in France); • an independent official or office inside a government ministry (eg PTS in Sweden); or • a government ministry (eg Cambodia). Regulatory authorities often initially experience a number of problems in the telecommunications sector. First, the inevitable lack of expertise amongst the regulator’s staff, particularly in the early years, may render the authority excessively dependent on information and even personnel supplied by the incumbent operator. Such dependency obviously raises accusations of ‘regulatory capture’ from new entrants. Second, as with any dynamic sector of the economy, the large differential in remuneration rates between public authorities and private sector operators means staff retention can be a significant concern for a regulator trying to build and retain institutional experience. Personalities are always likely to influence the prevailing regulatory environment and the manner in which policies are pursued. Where the regulatory authority is invested in a single individual, the influence of personality is likely to be greater. Some countries vest authority in a committee, generally representative to varying degrees of relevant interest groups, such as consumers, operators, and general business end-​users. In the UK, the background and interests of the Director General of Telecommunications (DGT) were seen as being critically important in setting the overall direction of regulatory policy. Don Cruickshank (DGT 1989–​97), for example, came from the airline Virgin Atlantic and was perceived as being pro-​ new entrant and naturally untrusting towards BT as the incumbent. Conversely in a committee or commission-​based structure, inter-​personnel rivalries may surface and render the authority ineffective or undermine its credibility in the eyes of the industry, such as the FCC in the US. The tools of regulation policy are various; however, a feature of a liberalizing market is the need to direct regulatory controls towards the activities of the

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incumbent operator and other operators with similar market influence, such as in the mobile sector. Within Europe, such asymmetric regulatory controls are placed on organizations designated as having ‘significant market power’ (Chapter  4); while at an international level, the equivalent term in the WTO’s Reference Paper is ‘major supplier’ (Chapter 16). Much of the literature in the field adopts a fundamental distinction between so-​ called ex ante and ex post regulatory controls. For the purpose of this book, the phrase ex ante is used in respect of regulatory measures that proactively control the structure and/​or behaviour of market players going forward; while ex post refers to measures that arise in reaction to the decisions and activities of entities. Establishing the costs associated with the provision of telecommunications networks and services is key to their effective regulation. Interconnection charges can represent from a third to a half of a new entrant’s costs; therefore regulatory control over such charges through ‘cost-​orientation’ requirements is critical to enabling competition (Chapter  8). Likewise, universal service policy requires the identification of those service elements that are ‘provided at a loss or provided under cost conditions falling outside normal commercial standards’,27 before regulators provide appropriate financial support mechanisms. However, determining and verifying such cost-​based obligations is often an extremely controversial regulatory process, in terms of attribution, calculation methodology, eg whether historical or forward-​looking, and the establishment of appropriate cost accounting systems by regulated operators (Chapter 2). Tariff controls are present under most regimes, whether at a retail or wholesale level. Such controls are generally perceived as being the most appropriate mechanism for ensuring that a dominant operator is controlled whilst providing sufficient incentives to encourage economic efficiency. Such controls are, however, notoriously difficult to get right in terms of balancing the interests of customers, competitors, and the dominant operator. Related to tariff controls are requirements upon operators to disclose information about various aspects of their business activities, either to the regulator, competitors, or consumers: eg tariff filings and technical standards for interconnection. Information asymmetry is an inevitable regulatory problem in a complex sector such as telecommunications. Transparency obligations are designed to remove the likelihood of anti-​competitive practices and to provide a certain degree of legal certainty, for example, through obligations to publish standard contractual terms and conditions (eg a Reference Interconnection Offer). The publication

27   Directive 2002/​22/​EC on universal service and users’ rights relating to electronic communications networks and services, OJ L 108/​7, 24 April 2002, at Art 12 and Annex IV, Part A.

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of information also helps develop international regulatory best practice in the sector, by enabling regulatory authorities to use benchmarks based on figures made available from comparative jurisdictions (Chapter 2).

1.11  R E GUL ATION A ND COMPE TITION L AW . . .  competition should be the organizing principle of our communications law and policy.28

Competition law is inevitably an important component of telecommunications law (Chapter 10). However, a distinction needs to be made between the reactive ex post application of traditional competition law principles to activities in the telecommunications sector, and proactive ex ante regulatory intervention in the operation of the telecommunications market to achieve a competitive market.29 Both are of interest to a telecommunications lawyer and are examined in this book; however, it is the latter aspect that comprises much of the unique terrain of telecommunications law. The only example of a jurisdiction that initially pursued market liberalization through reliance solely on the application of traditional competition law has been New Zealand. It is widely accepted, however, that such an approach simply led to delays in the process of liberalization through the need for the lengthy and ineffective recourse to judicial intervention.30 Competition law can be effective against blatant anti-​competitive practices, such as refusals to supply interconnection; but is less effective against minor but persistent obstructive tactics, such as delaying negotiations, or where ongoing oversight of commercial relationships is required. As noted by the US Supreme Court, No court should impose a duty to deal that it cannot explain or adequately and reasonably supervise. The problem should be deemed irremedia[ble] by antitrust law when compulsory access requires the court to assume the day-​to-​day controls characteristic of a regulatory agency.31

In such circumstances, ex ante regulatory intervention by a specialist regulatory authority has proved critical. It is interesting to note that in the European Commission’s review of the regulatory framework for the telecommunications

  FCC Report, ‘A New Federal Communications Commission for the 21st Century’, 1999.  See Emtel Ltd v The Information Technology and Communication Technologies Authority & ors (2017) SCJ 294, at para 253. 30   See case Telecom Corporation of NZ Ltd v Clear Communications Ltd (1992) 4 NZBLC. 31   The words of Professor Areeda, quoted with approval in Verizon Communications Inc v Law Offices of Curtis V. Trinko (02-​6 82) 540 US 398 (2004), at 15. 28 29

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sector, the ‘1999 Communications Review’, significant emphasis was placed on shifting from the current ex ante controls to a more hands-​off ex post competition law regime. However, during the consultation exercise, new entrants expressed strong reservations that such a move was premature and would enable incumbent operators to entrench their existing positions.32 As a result, the EU’s 2002 regulation framework retained many of the ex ante controls (Chapter 4). The interest of competition authorities in the telecommunications market can be sub-​d ivided into issues of anti-​competitive agreements and practices, mergers and joint ventures, abuses of a dominant position, and, to a lesser degree, state aids. A feature of the telecommunications sector is clearly the possibility for an abuse of a dominant position, arising from the position of national incumbent operators. Notification procedures imposed upon certain types of agreements and mergers enable the authorities to exercise prior restraint over players in the market. In addition, the nature of the telecommunications industry as a ‘networked’ industry, with parallels in industries such as airlines and power, give rise to certain characteristics that raise particular competition concerns, such as issues relating to ‘essential facilities’, ‘network effects’, and ‘collective dominance’.33 Finally, it is important to note that in many jurisdictions, such as the Asian ‘tiger’ economies, competition law is a relatively underdeveloped discipline. As a consequence, domestic operators, regulators, and the courts have little experience of the application of competition principles and practices. In such jurisdictions, foreign operators will often be more reliant on telecommunications specific regulations, whether statutory or licence-​based, for the protection of their commercial rights.

1.12  R E GUL ATION A ND S TA NDA R D S In our information society, more and more technical standards are used in formulating laws, regulations, decisions etc . . . standards are becoming more important in drafting contractual obligations and interpreting the meaning thereof, whether or not in the courtroom.34

32  Communication from the Commission, ‘The results of the public consultation on the 1999 Communications Review and Orientations for the new Regulatory Framework’, COM(2000)239, Brussels, 26 April 2000. 33   See generally Shapiro, C, and Varian, H, Information Rules:  A Strategic Guide to the Network Economy (Harvard: Harvard Business School Press, 1999). 34   Stuurman, C, ‘Legal aspects of standardization and certification of information technology and telecommunications: an overview’, in Amongst Friends in Computers and Law (Netherlands: Computer/​L aw Series, No 8, 1990), at 75–​92.

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The nature of the communications process requires that the various parties adhere to a certain agreed standard, whether in terms of language, protocol, numbers, or physical connection. The need for standardization to communicate across national boundaries gave rise to the establishment of the International Telecommunication Union, one of the oldest inter-​governmental organizations (Chapter 16). As the quote highlights, there is proliferation of standards within the laws, regulations, and agreements governing the telecommunications market. Standards are critical to the process of liberalizing a market. New entrants will be as dependent on the technical certainty that arises from the existence of published standards, as they require legal certainty upon which to base their investments. The absence of appropriate standards has been used by incumbents to delay the introduction of competing services. Within the European Union, standards have been critical in the establishment of an Internal Market for telecommunications equipment, networks, and services (Chapter 4). Numerous standards-​making bodies operate in every aspect of the telecommunications market, as well as at a national, regional, and international level. Historically, such bodies have tended to operate in accordance with complex bureaucratic procedural mechanisms, which led to inevitable delays in decision making. With the appearance of new technologies and environments, such as the internet, such institutions have increasingly faced competition from new entities, such as the Internet Engineering Task Force (IETF), operating under more flexible and rapid processes. Participation in the work of such bodies can require operators to devote significant financial and management resource, while failure to participate may effectively hand control over the development of a particular market to your competitors. One important aspect of standards in the technology field is the possibility that a particular standard may constitute the intellectual property of a company, such as a patented process. In 1999, a dispute arose between Ericsson and Qualcomm over the ownership of certain patents related to Code Division Multiple Access (CDMA) technology, which underpins third generation mobile telephony. In such circumstances, competition law principles may be applicable, particularly the ‘essential facilities’ doctrine. 35 However, regulators may be concerned to ensure that ex ante measures are in place to prohibit such practices (Chapter 10).

  eg Cases C-​2 41 and 242/​91, RTE v Magill [1995] 4 CMLR 718.

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1.13  R E GUL ATING IN THE G LOB A L E CONOM Y As discussed, the inherently global nature of telecommunications has meant that the sector has been the subject of international agreements since its beginnings. It is also worth noting, however, that the transnational nature of the industry is also reflected at various levels in national regulatory policy. Mention was made previously of the use of benchmarks as a mechanism for regulating the behaviour of the incumbent in areas such as tariffing, by reference to prices available under prevailing market conditions. Such benchmarks may be based on figures obtained within the national market, but equally regional or international figures may be utilized.36 Through such mechanisms, the national regulatory framework can come to reflect and embody international ‘best practice’, particularly where the benchmark reference sites are those markets considered more advanced or liberalized. Conversely, the imposition of benchmarks on national operators may be used as a tool to encourage further liberalization in other national markets, raising issues relating to the exercise of extraterritorial jurisdiction. The classic example of this is the FCC’s 1997 Benchmark Order for International Settlements, which required US-​l icensed operators to only pay international settlements rates laid down by the FCC, on the basis of country-​by-​country benchmarks, rather than reached through normal commercial negotiations between operators (Chapter 16). The objective of the Order was to prevent operators from non-​l iberalized markets leveraging their domestic monopolistic position to the detriment of the US consumer. Another feature of the telecommunications market is the amount of joint venture and merger activity taking place, as companies try to position themselves to take advantage of the increasingly global economy. Such agreements inevitably give rise to competition concerns at a national and regional level. To address such industry globalization, competition authorities have entered into their own agreements in order to coordinate their response to such developments; for example, between the United States and the European Community.37 National concerns about the impact of transnational merger activity on the national incumbent may also be the subject of regulatory intervention. For example,

36   eg Commission Recommendation ‘On Leased lines interconnection pricing in a liberalized telecommunications market’, C(1999)3863, 24 November 1999. 37   See Agreement between the European Communities and the Government of the United States of America on the application of positive comity principles in the enforcement of their competition laws, OJ L 173/​2 8, 18 June 1998.

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during BT’s abortive attempt to merge with MCI in 1997, the Director General of Telecommunications in the UK expressed concerns that one of the potential consequences were the merger to be successful was that BT may end up with a substantial proportion of its assets residing overseas, as well as its investments, at the expense of the domestic market.38 To address this concern, BT’s licence was modified to include an annual reporting requirement whereby BT would effectively guarantee that sufficient resources were maintained to meet its domestic obligations.

1.14  CONC LUDING R EM A R K S For many countries, the pursuance of a policy of market liberalization coupled with the pace of technological development has meant that the telecommunications sector has gone from an environment of scarcity to one of relative or actual abundance. The legal framework governing such abundance should become less complex than that required during the process of transition from a monopolistic environment. Indeed, a number of jurisdictions are currently addressing the problem of scaling down the regulatory framework for telecommunications. Competition law provides the core principles upon which this ‘second generation’ of telecommunications law is based, although the pace of change in some sectors of the market has proven more stubborn to competition than anticipated, which has required renewed regulatory intervention (Chapter 8). Oligopolistic markets also seem a defining feature of a mature telecommunications industry, whether through spectrum limitations imposed on mobile telephony or the impact of globalization on merger activity, which may require traditional competition law principles to be reconsidered. At the same time, the unique ‘public interest’ nature of telecommunications continues to constrain the sector from becoming a ‘normal’ competitive marketplace. Governments are also examining the implications of convergence, which raises important issues of content regulation, for which little international consensus has been reached. Regulating content may become an increasingly prominent aspect of a telecommunications lawyers’ work, compared to issues of establishment and operation. Telecommunications law is evolving rapidly in parallel with the market it purports to govern. Any book is therefore destined to date quickly in respect of some

  See Oftel publication ‘Domestic Obligations in a Global Market’, July 1997.

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details. However, the process of liberalization in Europe and the US, as well as in many other countries, is sufficiently well advanced to provide us with a clear outline of some of the key aspects of international best practice in law and regulation for the telecommunications or communications sector over the next five to ten years.

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2 THE ECONOMIC S OF TELECOMMUNIC ATIONS R EGUL ATION Lisa Correa1

2.1 Introduction  27 2.2 Rationale for Regulation  28 2.3 The Principles of Economic Regulation  29 2.4 The Economics of Telecoms  30 2.5 Scope of the Regulatory Control  34 2.6 Forms of Economic Regulatory Control  40 2.7 Important Considerations when Setting Regulatory Controls  41 2.8 Structure of the Regulated Industry  46 2.9 Privatization and Liberalization of Communications in the UK  48 2.10 Retail Price Regulation in the UK  54 2.11 Tariff Rebalancing Issues  58 2.12 Social Obligations and Further Constraints on Retail Prices  59 2.13 The Need for an Effective Interconnection Regime  63 2.14 Interconnection Cost Methodologies  64 2.15 Interconnection and Access Regulation in the UK  68 2.16 Concluding Remarks  97

2 .1 INTRODUC TION This chapter is primarily intended as a work of reference, providing an overview of the economics of telecoms regulation and summarizing the key economic regulatory concepts of the industry. While the focus is mainly on the economic regulatory developments in the UK, the conclusions and discussion should be relevant to all countries that have embarked on telecoms liberalization.

1   The author would like to thank Federica Maiorano for comments. Any views expressed in this paper are those of the author and do not necessarily reflect the views of the various institutions for which she works.

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Before describing the system of economic regulation, it is useful to place it within a basic analytical framework. Increasingly, regulatory agencies and the courts focus on more complete and complex analyses of markets, and on how the behaviour of firms—​their actions or conduct—​are likely to affect competition. Lawyers need to be familiar with the language of economic theory; economic jargon increasingly shows up in legal briefs, court and regulatory decisions. Therefore, while it is clearly essential for those who work in regulation—​whether in companies, government, or regulatory bodies themselves—​to be familiar with the content of telecoms law, it is also important that practitioners should understand the concepts of telecoms economic regulation and what it is intended to do.

2 . 2  R ATION A L E F OR R E GUL ATION Traditionally throughout the world, telecoms services were provided in each country by one monopoly carrier. Such carriers were almost always owned by the government and operated as state agencies, often as part of the postal service. Beginning in the 1980s and continuing into the 1990s, the telecoms industry in almost all countries experienced privatization or at least some degree of corporatization. The privatization of these previously large state-​owned carriers involved, however, serious problems of remaining monopoly power or market failure due to the accreted advantages conferred upon these carriers by their history and position as compared with those of potential competitors. In particular, these newly privatized companies benefited from having: • 100 per cent share of the market at the time of privatization and thus 100 per cent control of customers; • The accumulated assets, and economies of scale2 and experience of the telecoms market; and • Ownership of vital networks or privileged use of public rights of way to which potential competitors must perforce have access if they were to compete. If unchecked, these firms would be able to exploit their dominant position and act to the detriment of consumers and society in terms of excessive retail prices, low-​quality services, under-​i nvestment, and serving only high-​value customers. Even as markets have become near fully liberalized, there remain (or have emerged) segments of the market that tend towards monopolistic characteristics. Consequently, policy makers put in place economic regulation of the incumbent to prevent these outcomes. 2   Economies of scale are the cost advantages that firms obtain due to size, output, or scale of operation, with cost per unit of output generally decreasing with increasing scale as costs are spread out over more units of output—​see discussion in Section 2.4.4.

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2 .3  THE PR INC IPL E S OF E CONOMIC R E GUL ATION Before discussing the alternative forms and implementation of economic regulation in the UK, there are some core principles of economic regulation (see Table 2.1). These will be referred to throughout this chapter.

Table 2.1  Core principles of economic regulation Aim of economic regulation

What does this mean?

Prevent possible abuse of monopoly power

Economic regulation should be focused on preventing abuse of monopoly power. Such abuse may arise if prices are very high in relation to costs so that super-​normal profits3 are earned. Abuse may also arise if costs are higher than they ought to be, or are likely to be in a competitive situation.

Regulation should not distort business decisions

Only where there is a demonstrable competitive or market failure,4 is there a need for regulatory intervention as economic regulation will always be inferior to effective competition. For example, if regulation were to cover both competitive and monopoly elements of the industry, there would be strong incentives on the incumbent to focus its efforts against the competition whilst continuing to earn high profits in the monopoly part of the business. Economic regulation should not provide a means for either incumbent or non-​ incumbent operators to distort the competitive playing field and so due care must be taken in its implementation.

Costs of regulation should be limited to that which is essential

An important part of the rationale for privatization was to reduce detailed control by government departments over essentially business decisions. Therefore, economic regulation should ensure that excessive control under a nationalized industry scenario is not replicated under regulation.

Regulation should try to ‘mimic’ the likely operation of a competitive market

There is general agreement that competition can lead to choice for customers both between operators and in the range of services that are available to them. If regulation can replicate competition, it means that customers’ short-​and long-​term needs will be met efficiently.

3   Super-​normal profits relate to the concept of monopoly profits. In a competitive situation, it is assumed that any excess profit will be competed away by competition. However, in a monopoly environment, this is not the case and hence super-​normal or excess profit is earned. 4   The rationale for imposing regulatory measures is generally based on the notion of market failure. This situation exists when a market fails to function properly. Market failure can arise under various circumstances. In such cases the introduction of appropriate regulatory measures can provide a way of eliminating, or at least reducing, the market failures thereby providing protection to citizens and consumers, and businesses.

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2 .4  THE E CONOMIC S OF TEL E COMS In addition to highlighting the core principles of regulation, it is also worthwhile briefly setting out some of the salient economic features of the sector. These are important in implementing economic regulation to ensure that business decisions are not distorted.

2.4.1  Strong presence of common costs Common costs are a strong feature of communications networks. When a communications provider constructs its network underneath the streets (or on telephone poles), its choice of which homes and businesses to pass with such lines determines its target market. However simply laying the copper or fibre does not connect the homes so passed. If a home or business wished to be connected, additional electronic equipment at each end of the connection (ie at the customer’s location and the communications firm’s location) must be installed to use the copper/​fibre for transmission purposes. In essence, the communications firm must make three capacity investment decisions: (i) how much common capacity to install to handle actual usage; (ii) how much access connection capacity to install to handle the number of customers; and (iii) how big a network to build and which households to pass with the network (ie which target markets to serve). Once a network is built for a particular scope, it can then be used to provide service to everyone within that area. In other words, the network is built not just to deliver a single service within a single market, but to deliver a range of services, spanning multiple markets. In a large multi-​service communications network, there are significant costs (such as duct, copper, and fibre) which are common to a variety of services which can be used to provide numerous different wholesale and retail services. These costs—​so-​called ‘common costs’—​a re incurred regardless of whether any one service is supplied. The effect of this is that up to the available capacity, additional output can be produced at nearly zero marginal or incremental cost.5 A more detailed discussion of marginal and incremental cost is provided in Section 2.14.2. However, in the presence of common costs, pricing to just recover incremental costs would not be sustainable as not all costs would be recovered and the firm

5   Marginal cost is the cost associated with the provision of an additional unit of output while incremental cost is the cost associated with an additional specified increment of output.

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would make a loss. In setting charges for services, communications networks need to make some allowance for common cost recovery. In general, in markets with significant common costs, an efficient pricing structure will be one where prices lie between the incremental and standalone costs of those services. Standalone costs refer to the costs of producing a product or service in isolation. They therefore include the incremental cost for that service plus all the common costs that would be incurred regardless of whether only one service is supplied. This means that the standalone costs of a service would be significantly higher than the incremental cost of that same service. This large gap between incremental and standalone costs means however that there are various methods of recovering common costs (see Section 2.14.3). From an economic point of view, an efficient structure for the recovery of common costs should reflect the demand conditions for different products. More price inelastic products (where the demand for the product does not increase or decrease correspondingly with a fall or rise in its price) should attract a higher proportional mark-​up to incremental costs—​t his is often referred to as ‘Ramsey pricing’.6 However, the overall sizes of different product markets will also influence how a firm recovers its common costs across its product set. A  large product market may make a significant contribution to overall common cost recovery by virtue of high volumes, even if the per unit mark-​up for common costs for that product is not particularly high. Given the preponderance of common costs, there is much opportunity for various kinds of price discrimination.7 The degree to which this is possible is however dependent on the demand conditions in the market.

2.4.2  Pricing when demand exceeds capacity levels As set out above, once a network is built for a particular scope, up to the available capacity, additional output can be produced at nearly zero marginal or incremental cost. However, when demand exceeds capacity levels, given possible cost constraints, output may need to be rationed but this could give rise to a negative externality.8 The firm’s three capacity investment decisions (discussed earlier) are

  Named after Frank P Ramsey, who set out this issue in 1927.   Price discrimination often features in economic theory as a manifestation of monopoly power. However, in communications, the presence of significant economies of scale and scope means that price discrimination between different customer groups (depending on its structure) may provide a means of not only allowing the firm to recover its costs, but it could also lead to an increase in output and to customers who might have otherwise been priced out of the market, being served. 8   An externality is the cost or benefit which is not internalized by the person that consumes the service. 6 7

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critical to scale the network but it is likely to make these decisions based only on the direct cost of and profit opportunity from production. The firm is unlikely to consider the indirect costs to those harmed by an incorrect decision. Specifically, if demand exceeds capacity and the network is congested, it would be the consumer (not the firm) who suffers because his/​her calls or data packets are not delivered.9 In this situation, this may mean that some high-​valued demands may not be served. This negative externality effect together with the systematic variation of demand over time means peak-​load pricing10 schemes are common.

2.4.3  Network externalities Although capacity constraints can result in negative externalities, the two-​way nature of communications also gives rise to an important positive network externality. A  fundamental characteristic of communications is that new customers joining a network not only benefit themselves, but create extra opportunities for existing customers.11 There is, moreover, some evidence of dynamic benefits for the economy arising from the development of the communications sector.12 The presence of these positive externalities has important policy implications for pricing structures in communications. Specifically, it provides a justification for subsidising connection charges or line rentals to encourage new users to join the network. Moreover, it also has important implications for policy on interconnection between rival networks (especially with a calling party pays principle13), for without interconnection, a small network could be severely disadvantaged relative to the larger one.14 This is because under a calling party pays regime,

9   In this example, the firm would not suffer and in fact could benefit from this incorrect decision because if demand needs to be rationed, a mechanism to do this would be to raise price. 10   Firms that deal in markets with fluctuating demands such as peak and off-​peak periods will incur some costs that are common to both periods and other costs which are separable to whichever is served. In the case of communications, due to the level of common and fixed costs in the network, costs are low in off-​peak periods hence resulting in low prices, whilst in peak periods prices are high because of lower available capacity. 11   If there is only one customer on a telecoms network, there is not much point as one would not want to call oneself. If however other individuals join the network, the calling opportunities increase and so from a social viewpoint, everyone benefits. 12   See the ITU World Telecommunications Development Report 1994 and Saunders RJ, Warford JJ, and Wellenius B, Telecommunications and Economic Development (Baltimore MD:  John Hopkins University Press, 1983). 13   The calling party pays principle is a billing option whereby the person making the call is charged for its full costs. The total cost of each call placed by a subscriber is split in two parts. The first part is the amount that the caller’s provider is charging to provide the service to the calling party. However, another part of the charge is the amount that the provider of the call-​receiver will charge the caller’s network, to terminate the call onto his network. 14   If there are two networks, one large with many customers and another which is just starting up, then no-​ one would want to join the smaller network, unless the two networks were interconnected.

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customers are attracted to an operators’ network based on the cost of call origination, not the cost of termination.15 There is no incentive for the called party to be connected to more than one network operator and in the unlikely event that this did occur, it could entail wasteful duplication. In essence, the called party network has control over a bottleneck monopoly, in which it can gain monopoly profits by inflating the call termination fees. This means there is a strong case for regulation of this service and its charges not only today, but for some considerable time to come on those operators with significant market power.16

2.4.4  Economies of scale and scope Once a network is built for a particular scope, it can be used to provide service to everyone within that area. Given the ubiquitous nature of most incumbent networks, they are subject to considerable economies of scale and scope. In considering the feasibility and efficiency of competition, the regulator must weigh the pros and cons of the possible benefits of competition versus the lost scale and scope economies from having multiple competitors. If having multiple firms competing in the market leads only to modest cost increases, competition is likely to be feasible and efficient and any small losses in scale economies will be more than offset by the additional dynamic (or long-​term innovation) benefits from competition. However, if the scale and scope losses are significant, then efficiency may be better served by viewing the activity as a natural monopoly. In such circumstances, opening access to the network elements subject to scale and scope economies may allow competition to be introduced in related markets ie service-​based competition not infrastructure-​based competition. In communications, the naturally monopolistic elements are call termination and origination. Termination is a ‘strong’ bottleneck in communications because of

15   In Europe, Australia, and New Zealand, the calling party pays (CPP) principle has generally applied. In contrast, in the US and Canada, the receiving party pays (RPP) principle applies. The choice of RPP or CPP generally reflects historical choice. Other things being equal, a charge for receiving calls under RPP may discourage receipt of calls and in some circumstances, may discourage subscribers from connecting to the network. On the other hand, CPP may discourage the making of calls but may via discounted subscriptions encourage greater subscriber penetration. In the early days of communications in UK and Europe, the view was that encouraging subscriber penetration was important, and so CPP was adopted. CPP means however that call termination is a bottleneck, and so where CPP is in place, every network has market power over call termination. 16   See further Chapter 4, at Section 4.6. It is possible to have SMP in both origination and termination but it is less likely to be the case that everyone would have SMP in origination. It is more likely that there would be a tight oligopoly. If there were sufficient countervailing buyer power, operators would likely switch to a ‘bill & keep’ regime, depending on traffic flows and the billing costs. In the fixed market, all operators have SMP on termination but because the regime is based on pure LRIC, which is very low, they have adopted a bill & keep regime because that is less costly than actually billing other operators.

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the calling party pays principle, while origination is mainly a bottleneck because of sunk costs17 and economies of scale.

2 .5  S COPE OF THE R E GUL ATORY CONTROL As noted in Section 2.3, only where there is a demonstrable competitive or market failure, is there a need for regulatory intervention. To limit regulation to where there is persistent market failure, it is normal to carry out a review of competition. In general, setting the scope of the regulatory control has two parts: 1. definition of the relevant market or markets; and 2. assessment of competition in each market, in particular whether any companies have significant market power (SMP) in a given market

2.5.1  Market definition and the SSNIP test Market definition is not an end in itself, but a means to assess effective competition for the purposes of focusing ex ante regulation on those areas where it is required.18 There are two dimensions to the definition of a relevant market: the relevant products to be included in the same market and the geographic extent of the market. Market boundaries are determined by identifying constraints on the price-​ setting behaviour of firms. There are two main competitive constraints to consider: how far it is possible for customers to substitute other services for those in question (demand-​side substitution); and how far suppliers could switch, or increase, production to supply the relevant products or services (supply-​side substitution)19 following a price increase, within a reasonable timeframe and at negligible cost. The concept of the ‘hypothetical monopolist test’ is a useful tool to identify close demand side and supply-​side substitutes. A product is said to constitute a separate

17   A sunk cost is a cost that has already been incurred and cannot be recovered if the firm exits the market, eg an optical fibre once laid will not be removed and reused. 18  Often markets are defined based on competition law principles, specifically upon the principle of the ‘hypothetical monopoly’. This concept is already well established in antitrust legislation, both in the European Union and in the US, and provides the standard framework for market definition analysis in competition policy cases. 19   eg the supply of paper for use in publishing. See Case IV/​M166 OJ (1992) C58/​20, Torras/​Sarrio [1992] 4 CMLR 341. For customers, different grades of paper are not viewed as substitutes, but because they are produced using the same plant and raw materials, it is relatively easy for manufacturers to switch production between different grades. If a ‘hypothetical monopolist’ in one grade of paper tried to set prices above competitive levels, manufacturers producing other grades could easily start supplying that grade; market power is thus constrained by substitution by suppliers.

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market if a hypothetical monopoly supplier could impose a small but significant, non-​t ransitory price increase (SSNIP) above the competitive level without losing sales to such a degree as to make this unprofitable. If such a price rise would be unprofitable, because consumers would switch to other products, or because suppliers of other products would begin to compete with the monopolist, then the market definition should be expanded to include the substitute products.20 The SSNIP test provides a standard framework for market definition analysis and asks whether a hypothetical monopolist could profitably implement a small but significant non-​t ransitory increase in price above the competitive level. In sectors with a very large number of providers, the prevailing price level could be used as a proxy for the competitive price level. In markets that are however served by only either one firm or a few firms, the current price cannot be assumed to be a proxy for a ‘competitive’ price. The reason is because any profit-​ maximizing firm will always set prices where a further increase in price would be unprofitable. As such, if there is market power in the sector under investigation and current prices are assumed to be at the ‘competitive’ price level then at this price level, the ‘relevant’ market may be defined too widely.21 In other words, many products may appear to be close substitutes when in fact they would not be if the ‘true’ competitive price level was used. Therefore, if ‘current’ prices were used as proxies for ‘competitive’ prices, the SSNIP test could lead to a situation where the market was erroneously defined. This is known in competition policy analysis as the ‘Cellophane Fallacy’. 22 Given this, wherever there is a suspicion that market power exists, the prevailing price level should be treated with care.

20   eg if we were to consider the market for bottled waters and found that via the SSNIP test, the monopolist could charge a small but significant non-​t ransitory price premium above the competitive level then the relevant market, in this case, would be bottled waters. However, if the SSNIP test showed that the monopolist was prevented from charging a small but significant non-​t ransitory price premium above the competitive level then we would need to repeat the test with the inclusion of the closest substitute such as all non-​a lcoholic beverages etc. 21   In the situation where there is market power and current prices are assumed to be at the ‘competitive’ price level, then if prices are increased, sufficient switching would likely occur for it to become unprofitable. This is what we would however expect in a sector with market power because if the price rise was profitable, the firm would have implemented it already. 22  See United States v E.I du Pont de Nemours & Co. 351 US 377 (1956); 76 S. Ct. 994; L. Ed. 1264. In that case, Du Pont argued that cellophane did not constitute a separate market since it competed directly and closely with other flexible packaging materials such aluminium foil, wax paper, and polyethylene. The problem with this argument was that Du Pont, as the sole supplier of cellophane, is likely to have set the prices for its products at a level where alternative products only provided a constraint on the pricing of cellophane if the prevailing price was used as the ‘competitive’ price.

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2.5.2  Assessment of competition in each market Once the market is defined using the principles outlined above, the next step is to consider whether any firm in that market has SMP. In general, SMP is equivalent to the competition law concept of dominance, as defined by the Court of Justice of the European Union (CJEU): a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of consumers.23

Market power is not, however, an absolute term but a matter of degree; the degree of market power will depend on the circumstances of each case. In assessing whether there is dominance, a case-​by-​case review is needed of: • the structure of the market and the nature of competition prevailing in the market; • barriers to entry into the market; and • countervailing buyer power. 2.5.2.1  The importance of market structure ‘Market structure’ refers to the number and relative size of firms in the market or sector. The fewer firms in a market, the more likely that competition may be weak and that one or more firms may have a degree of market power; that is, they may be able to behave without proper regard to their competitors or to customers. Nonetheless, if firms within the market all have low market shares (ie each serves a relatively small segment of the market) there is less of a chance that any will have market power. If however one or more firms have a higher market share, there will be a greater risk that these firms have at least some market power and competition may be weaker.24 Given this, market shares (of both the undertaking and competitors) are commonly used as a preliminary indicator of dominance. Although, they are not conclusive on their own, the CJEU has stated that dominance can be presumed in the absence of evidence to the contrary if an undertaking has a market share persistently above 50 per cent.25 Market shares between 40 per cent and 50 per cent could

  Case 27/​76, United Brands v Commission [1978] ECR 207, [1978] 1 CMLR 429.   eg if a firm has 35 per cent of the market, it might still be dominant if it has sixty-​five competitors each with 1 per cent. Where two firms have roughly equal market shares, even if they are high then single firm dominance is unlikely to be found but collective dominance, whereby a group of firms jointly occupies a dominant position, may be found under EU law. 25   Case C62/​86, AKZO Chemie BV v Commission [1993] 5 CMLR 215. 23 24

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also be considered consistent with dominance if other factors (ie weak position of competitors) are also indicative of it. In the case of market shares below 40 per cent, the EC considers it unlikely that an undertaking will be individually dominant if its market share is below this threshold, although dominance could be established below that figure if other relevant factors (ie the degree of vertical integration or the firm’s control of essential inputs that are required by its competitors—​see discussion below) provided strong evidence of dominance. Market shares can be assessed by volume or value of sales. The appropriate measure can vary between markets. Often volume measures are used for bulk products such as wholesale conveyance minutes, and value measures for differentiated products such as retail products. Whichever measure is used, for the assessment of dominance, it is important that the history of the market shares of all undertakings within the relevant market is considered. This is more informative than considering market shares at a single point in time, partly because such a snapshot might hide the dynamic nature of a market. For example, where markets are growing fast, high market shares are less indicative of market power than in a more mature or slow-​g rowth market. It is important in these types of markets to thus have a proper picture of the structure of the market to ensure that any designation of dominance does not prevent innovative activity from occurring.26 2.5.2.2  Barriers to entry As mentioned above, high shares in a relevant market need not necessarily indicate dominance. This is particularly so if there are low barriers to entry into the market. If there were no barriers, attempts to exploit a large market position, e.g. through excessive pricing, would attract new entrants so that prices and services would be restored to their competitive levels. Barriers to entry are defined as a cost that must be borne by a firm entering a market that does not need to be borne by an incumbent already operating in the market. The presence of entry barriers can reduce the scope for competition, so that incumbents can raise prices above competitive levels.27 Entry and exit conditions 26   In many fast-​g rowing industries, it is often the case that a particular firm takes the innovating initiative which involves considerable up-​f ront investment and so becomes the market leader. Other firms then enter the market and adopt the practices of the first-​mover firm. Now because of customer inertia (ie customers take time to switch their allegiances), initially, the first-​mover firm is likely to have a higher market share. This may not however reflect a dominant position because if it is relatively easy to enter the market then over a short period, market shares could be eroded quickly. If the undertaking with a high market share was designated as dominant, this could be detrimental for competition and the development of the industry in the long run as there would be negative incentives on firms to innovate and become the first-​mover in an industry. 27   An exit barrier is a similar concept: a cost borne by a firm leaving a market that a firm remaining in the market does not have to bear. The existence of exit barriers can be important when considering sunk costs since exit costs reduce the disposal value of an incumbent’s assets if it chooses to leave a market and may therefore equally deter new entry.

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are thus important in assessing whether a firm possesses market power. To get a better picture of the state of the market, it is important that the regulator has hard evidence of the recent history of the market. Such evidence might include a historical record of entry into and exit from the market (or closely related markets) or, if possible, fully documented evidence of plans to enter. Growth, or prospective growth, in a market could also have a bearing on the likelihood of entry, as entry will usually be more likely in a growing market than in a static or declining one. The reason is because it will be easier in a growing market for an entrant to be accommodated without any significant declines in prices and profits. The rate of innovation may also be important. In markets where high rates of innovation occur, or are expected, innovation may overcome barriers to entry relatively quickly. Indeed, any profits that result from an entry barrier created by successful innovation may be an important incentive to innovate. All of these issues need to be examined as part of a market review of competition and dominance. The existence of fully informed customers should also be considered. If customers are fully aware of the options open to them then a dominant firm is likely to find it difficult to leverage its market power. In the UK, three types of entry barrier (see Table 2.2) are often distinguished, although they may overlap at times:

Table 2.2  Barriers to entry Types of entry barrier

Examples

Absolute advantages—​access to important assets which are not available to entrants

• Examples are: o Spectrum licences—​u nless tradeable, they can act as an entry barrier; o Access to an essential facility—​i f access is indispensable and duplication is difficult or undesirable then this may represent a significant barrier to entry; and o Intellectual property rights (IPR) may provide an absolute advantage. However, whilst an IPR could be an entry barrier in the short term, a rival could overcome it by its own innovation, so care must be taken when making entry barrier assessments based on IPRs • Examples are: o If the incumbent develops a reputation for aggressively reducing prices when entry occurs, this can deter potential entrants into the market;

Strategic advantages—​a n incumbent’s first-​mover advantage can allow it to shape the way the market develops to deter the potential for market entry

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Examples o The presence of sunk costs could also affect entry into the market. The incumbent would already have incurred its sunk cost investment. This means that it might not need to earn as high a rate of return as a new entrant who will have to make these investments to enter the market. In addition, if the incumbent excessively invests in sunk assets, then strategically, it could signal to potential entrants that it has spare capacity, which it could use to aggressively respond to market entry; o If the incumbent benefits from economies of scale and scope, it can respond aggressively to any potential entrant, which can act as an inhibitor to entry; and o Access to finance could also be an important entry barrier. An incumbent may be seen as being lower risk as a result of a proven track record. It also may have better information about the market and so may be able to present a more convincing business case.

Exclusionary advantages—​ behaviour by the incumbent can also act as a barrier to entry

• For example: o Vertical integration can encourage dominance in two ways. First, it can make entry harder because the incumbent firm has control of both upstream and downstream markets. Second, it provides the potential for the incumbent firm to leverage its market power upstream or downstream thereby adversely affecting competition; o Predation might also deter entry if a firm secured a reputation for aggressive behaviour; and o Refusal to supply may also constitute a barrier to entry. If, for example, an upstream firm were the sole supplier of inputs to a downstream industry and if there were barriers to entering the upstream market, the firm’s refusal to supply a potential entrant in the downstream market could constitute a barrier to entry in the downstream market, even if no other entry barriers existed at that level

2.5.2.3  Countervailing buyer power Another aspect that should be assessed in a market assessment is countervailing buyer power. Buyer power exists where buyers have a strong negotiating position with their suppliers, which weakens the potential market power of a seller. Even if firms have very high market shares, if they possess countervailing buyer power, they may not be able to significantly impede effective competition, in particular by

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acting to an appreciable extent independently of their customers. Countervailing buyer power may be present if the following conditions hold:28 (a) the buyer is well informed about alternative sources of supply and could readily, and at little cost to itself, switch substantial purchases from one supplier to another while continuing to meet its needs; (b) the buyer could commence production of the item itself or ‘sponsor’ new entry by another supplier (e.g. through a long term contract) relatively quickly and without incurring substantial sunk costs; (c) the buyer is an important outlet for the seller (i.e. the seller would be willing to cede better terms to the buyer in order to retain the opportunity to sell to that buyer; (d) the buyer can intensify competition among suppliers through establishing a procurement auction or purchasing through a competitive tender.

It should be noted though that while the conditions mentioned above are important to analyse in a market assessment, buyer power does not always benefit the final consumer. For this reason, a careful analysis of vertical relationships in the market, on a case-​by-​case basis, is often also required.

2.5.3  Key issues—​scope of regulatory control As noted above, regulation should be limited to markets where there is persistent market failure. Setting the scope of a regulatory control requires considerable analysis of the market involving: • • • •

market definition exercises; examining the structure and level of competition prevalent in the market; investigating possible entry barriers; and investigating whether countervailing buyer power is present in the market.

The SSNIP test provides the standard framework for market definition analysis. Once the market has been defined, the dominance assessment can then begin.29 As discussed, market shares are not conclusive on their own. The complex nature of competition in the market, potential barriers to entry, and buyer power must also be examined.

2 .6  F OR MS OF E CONOMIC R E GUL ATORY CONTROL Once the scope of the regulatory control has been specified, the next step is to determine the appropriate form of economic regulatory control to be imposed where there has been a finding of SMP. 28   Office of Fair Trading, December 2004, ‘Assessment of market power’, at . 29   See Sections 2.9 and  2.15 for a discussion as to how these concepts have been applied in the UK  and see Chapter 9.

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At the time of privatization, the favoured form of economic regulation outside the UK to prevent excessive pricing was Rate-​of-​Return (RoR) regulation. The RoR approach takes as its starting point the regulated company’s own costs, with profit levels set by applying an allowed weighted average cost of capital (WACC)30 to an established regulatory asset base. This form of regulatory control essentially places a ceiling on the profits that a company can keep from its regulated business. Under RoR regulation, the firm is more or less guaranteed to receive its cost of capital provided it operates within the rules. A perverse outcome of RoR is however that companies subject to this sort of regulation generally do not improve their efficiency, since they have no incentive to do so. If they reduce their costs, the consequence under RoR regulation is that their allowed revenues go down, to maintain their returns at the level of the cost of capital. Conversely, if their costs increase, their allowed revenues increase. Firms subject to RoR regulation tend therefore to ‘gold plate’ their investment to obtain the regulated return on a higher asset base. To address the failings of RoR, Professor Stephen Littlechild developed the now well-​k nown ‘RPI  –​X’ formula. This formula caps a selected basket of the incumbent’s prices for a period of four to five years. These prices can then increase annually by a designated measure of retail price inflation31 minus X (where X is a measure of the presumed movement of productivity and costs within the industry). Within this four to five year period, the regulated company can then keep any extra profits generated by increased efficiency, with new controls imposed at the end of the review period.32 Economists deemed this rule to be attractive because it was easy to implement, it encouraged cost-​reducing activities, and (via the basket of services) it could be used to target those aspects of the business where regulation was most needed. Furthermore, it was viewed as a regulatory tool whose usage would decrease as effective competition developed.

2 .7  IMP OR TA NT CONSIDER ATIONS WHEN SE T TING R E GUL ATORY CONTROL S However, designing an appropriate price cap is complex; an inappropriate price cap can have a significant negative impact on the development of competition. Consequently, getting the scope and structure of the price cap right is important 30   The WACC is the minimum return that a company must earn on an existing asset base to satisfy its creditors, owners, and other providers of capital, or they will invest elsewhere. 31   In the UK, the measure of retail price inflation used was the Retail Price Index (RPI), which measures the change in the cost of a representative sample of retail goods and services. Since 2013 it has been superseded by the Consumer Price Index (CPI). 32   The extent to which the RPI –​X approach provides incentives to improve productive efficiency is in part a function of how the efficiency gains in one control period are treated in the next period. If the efficiency gains in one charge control period are shared between the firm and consumers in the following charge control period, then the firm has an incentive to find those gains.

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if regulatory control is to be effective. It is worth noting though that, even if this is implemented correctly, this alone may not be sufficient to ‘mimic’ the likely operation of a competitive market. There are several important considerations: • how the services to be regulated are to be grouped (ie the tariff baskets) and whether further mechanisms are then necessary when controlling the different groups (ie sub-​caps etc); • the duration of the price cap; • how the firm’s movements of costs and productivity change over the life of the price cap; • how capital costs should be valued; • the interaction of the price cap with quality; and • demand-​side factors that may hinder consumer choice.

2.7.1  Grouping of services to be regulated The grouping of services to be regulated largely depends on the nature of the market and entity being regulated, the scope of the control, and the regulatory duties and objectives to be achieved. In general, it is quite rare for price controls to be set on individual services within a market. As noted in Section 2.4, a key economic feature of communications networks is that there are significant common costs. In setting charges for services, communications networks need therefore to make some allowance for common cost recovery. If price controls were set on individual services, there is a risk that if there were unexpected changes to market demand during the price control period, individual service price controls would limit the firm’s ability to respond to such changes. The firm may find therefore that it is unable to recover its common costs. For this reason, often a basket control approach is taken to price controls. This provides the firm with the flexibility to set a pricing structure over the period of the control that will cover the common costs in a reasonably efficient way, as changes occur. However, the national regulatory authority (NRA) needs to be mindful of how much flexibility is provided to the incumbent firm. If the structure of the price control is too flexible, this could allow the incumbent firm to act on its incentive for anti-​competitive pricing behaviour. For example, under a broad cap, a dominant firm (if it is able to) will likely focus price cuts on those sectors of the market where competition is greatest, whilst attempting to earn monopoly profits in sectors where there is the least amount of competition. Such behaviour could be dangerous to existing and nascent competition and could be predatory. Predatory pricing can occur in both a capped and an uncapped market but under a broad cap, it is less costly for the dominant firm to engage in predation. In these

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circumstances, the NRA should consider whether there is a need for additional safeguard controls to provide a regulatory safety net for certain customer groups.

2.7.2  Duration of the control The duration of the control is the length of time over which the price control will be expected to operate. It is an important consideration for the NRA in setting a price cap. In particular, if it is set for too short a period, it could deliver inappropriate incentives for the incumbent to undertake cost-​reducing activities which pay back within the designated timescales. On the other hand, if the control is set for too long a period, the incumbent may benefit from too lax a control and consumers could suffer as a result. As such, when determining the duration of a price control a balance needs to be achieved. The period needs to be sufficiently long to provide the company with a strong incentive to make efficiency savings whilst ensuring it is short enough that efficiency savings achieved by outperforming the price control can be returned to customers relatively promptly.

2.7.3  Firm’s movements of costs and productivity change over the life of the price cap The setting of a price cap requires a large amount of information about the future structure of the market. In particular, the NRA needs to factor into the price cap model the potential output and pricing structure of the company. Additionally, it needs to take account of the company’s movements of costs and productivity over the life of the price cap. However, forecasting growth and efficiency rates in an industry, such as communications, driven so strongly by technological and regulatory developments, is a complex exercise. The complexity of this operation is further magnified when there is nascent competition in the market. In these circumstances, the regulator not only needs to forecast the growth and efficiency rates of the incumbent, it also needs to take into account the impact of competitors’ outputs and pricing strategies on the incumbent’s output and prices and vice versa. This difficult exercise is compounded by the asymmetry of information problem that exists between the regulator and the firm. Decision-​makers within the firm are far more knowledgeable than regulators can ever be about circumstances facing them, and the regulator can neither observe nor infer all aspects of the firm’s behaviour. In this situation, the regulator can only condition its policy on what it knows and try and design an incentive mechanism to induce the firm to act in the public interest.

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2.7.4  Valuation basis for capital costs Capital costs are another factor that needs to be considered. Given the importance of capital costs in setting the price cap, its measurement plays a key role in the modelling exercise. In particular, the manner in which the asset base is valued can have a major impact on the cost structure of the incumbent. Assets can be measured either historically33 or using current costs.34 Generally on a total cost basis, the two measures do not differ significantly. The construction costs of trenches and ducts measured in current terms have increased but the price of electronic equipment such as switches has declined substantially due to technological progress. This may suggest that for the purposes of allowing the incumbent firm to recover its costs, either measure is appropriate. However, where entry is plausible and efficient, if prospective entrants were considering the costs of entry and incumbent costs (and hence their prices) were based on historical costs, then from a business planning perspective, prospective entrants may not be able to gauge the true resource costs of their entry costs vis-​ à-​v is the incumbent’s. As a result, from an economic perspective where entry is considered feasible, there is a preference for the use of current costs because it provides correct, current, and efficient entry signals to all market players.

2.7.5  Price caps and quality When setting a price control, the NRA also needs to be mindful of the incentives that price caps can have on service quality. Specifically, regulatory schemes that incentivize the incumbent operator to decrease costs can also incentivize the operator to lower service quality. If through the regulatory regime, the regulator solely focuses on the price variable, then this could be at the expense of quality. The regulator can respond to these incentives by regulating service quality. Such regulations can take the form of minimum standards, rewards for improving quality, and penalties for substandard quality. Regulating service quality involves identifying the preferred level of service quality, designing an incentive system so that the operator offers this service quality, and developing a system for monitoring service quality and enforcing the standards. The preferred level of service quality should reflect the value customers place on quality and the operator’s cost of providing service quality. This is however difficult to determine in practice, but

  Historic Costs relate to what the assets cost in the first place, minus depreciation.   Replacement or Current Costs—​w hat it costs to replace old assets with modern equivalent assets of equal remaining life. This reflects general inflation, plus specific effects such as technical progress. 33

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customer quality preferences may be gleaned through survey instruments, the complaint process, and benchmarking studies.

2.7.6  Demand-​side factors that may hinder consumer choice The previous discussion has mainly focused on the factors to be considered in placing a price control on a firm to control it so that it cannot act on its incentive to exploit its market power. However, this control (by itself) may not be sufficient to ‘mimic’ the likely operation of a competitive market. This is because there may be some demand-​side factors which prevent consumers exercising effective choice. For consumers to gain the benefits of competition, they need to be able to exercise informed choice but their ability to do so may be hindered for several reasons—​for example because they find it difficult to compare offerings or face artificial barriers to switching. These demand-​side factors do not necessarily stem from the presence of market power and can be a general feature of the market rather than specific to one firm. Their presence may mean though that even if price controls are put in place to control the behaviour of the firm with SMP, customers may not benefit sufficiently from competition. It is inevitably the case that even with price controls; a firm with SMP will make some allowance for common cost recovery. If customers are hindered in their ability to exercise choice and are therefore inactive, then firms will focus their pricing to recover common costs on these customers. In a competitive market, these customers would exercise choice and switch product or provider, but if for whatever reason they do not, they may face price hikes. Therefore, it is important that the NRA does not just rely on supply-​side remedies (such as price controls), it also needs to consider whether it needs to intervene on the demand-​side to help consumers make informed choices and protect particular customer groups. For example, if there is a lack of information and transparency for consumers leading to them being unable to make the best choices, relevant and targeted informational remedies may be a solution.35 If consumers find that they cannot switch provider easily, then the NRA may need to work with industry to ensure easy switching between providers so consumers can act on their choice. And if some consumer groups find it particularly difficult to engage effectively with the market regardless of the information available, then more direct action may be needed to protect the most vulnerable.

35   It is imperative that if informational remedies are implemented that they are tested to be accessible, relevant, and targeted. Just providing more information may not be sufficient because behavioural factors (biases) may mean customers do not engage with it. See OFT, ‘What does Behavioural Economics mean for Competition Policy?’, March 2010, OFT1224, at .

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2 . 8  S TRUC T UR E OF THE R E GUL ATED INDUS TRY Economic regulation has taken various forms in different industries and countries. This is partly because each industry/​country has an individual NRA, allowing personal differences to manifest themselves. More fundamental, however, are the underlying differences in the structure of the regulated industry. For effective regulation to occur, an effective model or industry structure needs to be developed to allow effective competition to emerge. The main model of competition in communications is one based on access to a vertically integrated incumbent’s bottleneck facilities. This is because of the significant scale and scope economies in telecoms networks (see Section 2.4). The incumbent also uses those same facilities to compete downstream against competitors to whom it supplies access to the bottleneck facilities. A key issue is that control of the bottleneck facilities (see Section 2.5) potentially puts the incumbent in a position of advantage with respect to its competitors in the downstream market. This may allow it to have both the incentive and ability to distort competition in the downstream market through the way it exercises its control of the upstream bottleneck input. There are several ways in which the regulator can constrain the vertically integrated firm’s incentives and ability to distort competition in the downstream market. In particular, the regulator can pursue a range of different models of separation (see Table 2.3 below). Broadly, each model provides successively stronger constraints on the ability of the vertically integrated incumbent to act on this incentive to distort competition in the downstream market. However, at the same time, the measures imposed become more intrusive for the firm.

Table 2.3  Models of Separation 36 1. Accounting separation

Separate financial reporting comprising of profit and loss statements and balance sheets for the upstream and downstream entities

2. Creation of a wholesale division

Model 1 accompanied by the creation of a special wholesale (or otherwise named) unit, with a dedicated management but with no guarantee of non-​d iscrimination between affiliated and competitive access seekers

3. Virtual separation

Model 2 with an obligation to offer services to internal and external customers on equal terms, without any physical separation of the business

36   Table 2.3 is based on an article by Martin E Cave, ‘Six Degrees of Separation—​Operational Separation as a Remedy in European Telecommunications Regulation’ (2006) 64 Communications & Strategies 89–​103, at .

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4. Functional separation

Model 3 accompanied by the physical separation of the business and its processes eg location, staff, branding, management information systems

5. F  unctional separation with local incentives

Model 4 with different management incentives to those of the wider firm

6. Functional separation with independent governance

Model 5 but with the addition of a separate divisional Board with non-​executive members who act independently from the group Board

7. Legal separation

Upstream business is established as a separate legal entity within the wider group, but remains under the same overall ownership

8. Structural separation

Split of the vertically integrated operations into separate legal entities, with no significant common ownership and ‘line-​of-​business’ restrictions to prevent them re-​entering each other’s markets

Models one to seven comprise behavioural remedies. These try to remove the ability of the vertically integrated firm to engage in discriminatory conduct but they do not remove the underlying incentives of the vertically integrated firm to discriminate. They do however allow for flexibility of structures as technology and market developments occur but because the underlying incentive to discriminate still exists, they suffer from the asymmetry of information problem, and so require considerable regulatory scrutiny. Model eight, in contrast, comprises of a structural remedy, which removes both the ability and the underlying incentive of the regulated firm to discriminate against competitors. However, while this model removes the ability and incentive to discriminate, structural separation may not in itself change the bottleneck division’s incentives to operate efficiently, invest, or deliver a good quality of service. Therefore, the NRA would still need to continue to regulate the structurally separate bottleneck division to protect consumers in the absence of strong competition. Structural separation could additionally see the loss of efficiencies made possible by a vertically integrated structure, such as cost synergies and the removal of double mark-​ups.37 It is also a one-​off intervention that is difficult to reverse. If technological advances, regulatory changes, and differing trading patterns emerge, model eight can institutionalize a structure that could become obsolete. 37  One of the oft-​c ited benefits of vertical integration is that firms can benefit from a number of cost synergies. In non-​i ntegrated operations, every step in production may involve mark-​ups so the reseller can earn profit. By selling directly to end buyers, vertically integrated firms can ‘cut out the middle man’ removing one or more steps of mark-​ups along the way. This can therefore lead to lower prices for consumers.

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Given the pros and cons of the different separation models above, whichever model is adopted is highly dependent on the concerns that have been identified at a point in time and the costs and benefits of intervention.

2 .9  PR IVATIZ ATION A ND L IBER A L IZ ATION OF  COMMUNIC ATIONS IN THE UK We now turn to a discussion as to how some of the concepts above were implemented in the UK. Arguably, the UK experience can be divided into three phases of liberalization and economic regulation (i) privatization and the early development of competition; (ii) the end of the UK duopoly policy; and (iii) increasing convergence between telecoms, broadcasting, and information technology. Below, we take each of these in turn:

2.9.1  Privatization and the early development of competition The early debate on liberalization in the UK began with customer premises equipment, followed by services, and quickly spread to the beginnings of network competition in response to intense demand for leased circuits in the UK. In response to the government’s offer to license network competitors in the leased circuits area, Cable & Wireless and Barclays Bank, with subsequent financial support from British Petroleum formed Mercury Communications. The consortium decided however that leased circuits alone did not provide a viable business and sought a licence extension to provide national and international switched services. The large investment required for this purpose persuaded the group that it needed a period as the single alternative switched network if it was to develop as an effective competitor to BT. This duopoly policy was adopted by the government in the autumn of 1983. The duopoly policy, to which the government committed itself for seven years from the date of its announcement, set the tone of the subsequent comparatively slow and cautious development of network competition in the UK. The government, right from the start, was however, determined to introduce competition into all segments of the UK market. In particular, to encourage the development of competition in mobile services, it licensed in 1985 competing cellular operators, Vodafone and Cellnet and required them to sell through separated retailers. The market structure was determined by spectrum capacity and other licensing decisions, and given that mobile was viewed as a minority service, retail mobile prices were not controlled. The effect of this was that for the next ten years, both companies charged high and generally parallel prices.

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To open up the possibility of additional local network competition, the government also licensed cable operators to provide all forms of communications services in addition to television programme services. However, in deference to the duopoly policy, the cable operators could only provide switched voice telephony in association with BT or Mercury. Since BT was not keen to compete with itself, this meant that in practice competing local switched voice telephony services could only be developed by agreement with Mercury during the duopoly period. In 1984 BT was privatized. After extensive debate about the structure of the industry and the model of competition and separation that should be adopted (see Section 2.8), the government shunned the structural separation policy adopted in the US and instead privatized BT as a vertically integrated company. BT’s dominant position throughout the industry meant, however, that there was a clear need for a framework of regulation to contain BT’s market power. In particular, regulatory intervention was necessary to ensure that Mercury—​and any other subsequent licensed telecommunications operator—​had access to actual and potential customers via BT’s local circuits at a non-​monopolistic price and that customers on Mercury’s network were able to contact customers on BT’s network and vice versa. Herein therefore lies the eternal debate on an effective access and interconnection regime.38 In addition to the requirement for access and interconnection regulation, there was also a requirement to protect consumers against BT’s monopoly power. As such considerable discussion occurred as to the appropriate vehicle for price control in the UK. Given the substantial arguments against rate-​of-​return regulation, discussed in Section 2.6, Littlechild’s proposal of RPI –​X was adopted.

2.9.2  The end of the UK duopoly policy In 1991, the government decided to end the duopoly policy and adopt a policy of licensing fixed networks without formal limit.39 Whilst the government recognized that fixed telephony networks have significant scale economies, it set out that the loss in scale economies from having multiple firms in the market would be more than offset by the long-​term benefits from competition and innovation. In adopting this policy, the government concluded that the cable television companies should be licensed to provide switched voice telephony in their own right allowing them to benefit from the economies of scope between television and telephony. But the constraints on the established networks, particularly BT, from providing television programme services and mobile services under its main licence would continue for the rest of the decade. Further, a decision was also taken in 1991 to license competing

  See further Chapter 8.  DTI, Competition and Choice: Telecommunications Policy for the 1990s (London: HMSO, 1991 cm1461).

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personal communication networks (PCNs) to extend the reach of mobile competition. The effect of this was that mobile prices came down and mobile take-​up grew at a remarkable pace, again without any regulatory intervention on retail price. In 2000, five licences for 3G mobile services were auctioned. Four of these went to the existing mobile companies but the fifth was awarded to a new entrant. Therefore, the end of the duopoly policy put the UK decisively on the path of network diversity and infrastructure competition. However, protection of consumers against BT’s monopoly power continued to be debated in regulation and the access and interconnection debate in fixed telecoms became even more heightened alongside the issue of interconnection between mobile operators and fixed operators. In particular, with the proliferation of downstream competitors, it became clear that it was in BT’s interests to heap as many of its cost as possible onto wholesale services bought by its retail competitors. These magnified charges gave BT a double competitive advantage:  its own costs were more fully recovered while its rivals were raised. Given this, as soon as the duopoly period ended, Oftel started to require BT to account separately for its main activities –​retail network and access (essentially model 1 in Table 2.3 above). The granularity of such accounts grew in the 1990s, as did the auditing to which they were subject.40 In addition, it became clear that BT was putting in place demand-​side barriers to prevent consumers switching to alternative providers. Therefore, to address this, Oftel commenced work to implement number portability to enable customers to keep their number when switching provider. BT fought this but eventually by 1996, portability became available for customers moving from BT to another operator. Oftel committed however to ensure that all customers can benefit from number portability such that any operator can request portability from any other operator on a ‘like for like’ basis. Extending number portability to the whole industry was however a slow and arduous journey. Both competing fixed and mobile operators did not want to provide it. They believed that it should solely be mandatory for BT (as it had market power). Extensive debate and cajoling eventually meant that it was only by 2003 that fixed number portability was in place and it took until 2008 for mobile number portability to be agreed. This demonstrates the difficulty that NRAs face in implementing demand-​side remedies. This phase of competition and regulation laid therefore the conceptual foundation in the UK for the more competitive markets which can now be found. These include more interconnection products available at standard prices and other terms and conditions; regular reviews of the competitiveness of individual markets to see what form of regulation they require; accounting separation to support such price setting, and its extension to mobile termination and intervening on the

  It could be argued that by 2003, it had evolved to model 3 in Table 2.3 above.

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demand-​side to empower consumers. The period also saw a switch in emphasis in price control from retail to wholesale or network products (see Sections 2.10 and 2.15).

2.9.3  Increasing convergence between telecoms, broadcasting, and information technology In 2003, significant changes took place in UK and European communications regulation. Given the increasing convergence between telecommunications, broadcasting, and information technology, five new EU Communications Directives were introduced which took effect on 25 July 2003.41 Under the new regulatory framework for electronic communications networks and services, NRAs had to carry out reviews of competition in communications markets, to ensure that regulation remained proportionate in the light of changing market conditions. The European Commission also issued guidelines on market analysis and the assessment of significant market power (the ‘SMP Guidelines’42). NRAs are required to take the utmost account of these guidelines when identifying a market and when considering whether to make a market power determination. Oftel already carried out market reviews but the new EU Directives did lead to some changes on how it evaluated competition and it also meant that its analysis was now subject to scrutiny from the European Commission. The transposition of the EU Directives into UK law resulted in the formation of Ofcom and the Communications Act 2003. Shortly after, Ofcom launched the Strategic Review of Telecommunications (oft referred to as the Telcoms Strategic Review or the ‘TSR’).43 Its aim was to assess whether the then current regulatory approach governing both fixed and mobile services was still appropriate. The main conclusion for mobile was that competition looked good. There was competition between five network operators, as well as service providers purchasing capacity in the wholesale market. However, in 2010, Deutsche Telekom and France Télécom agreed to merge their UK mobile operations (Orange and T-​ Mobile) into Everything Everywhere (now EE), thereby reducing the number of mobile network operators in the UK market from five to four. Ofcom was looking to reduce barriers to entry in the provision of wireless services via its spectrum management activities such that further spectrum could be released for mobile services.44 This manifested itself in 2013 when five licences for 4G mobile services   See further Chapter 4.   Commission guidelines on market analysis and the assessment of significant market power under the Community regulatory framework for electronic communications networks and services, OJ C 165/​6, 11 July 2002. 43  Ofcom, ‘Strategic review of telecommunications Phase 2 Consultation’, 2004, at . 44   See further Chapter 7. 41

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were auctioned. As in the previous auction award, four of these went to existing mobile companies (EE, O2, Vodafone, and H3G) but the fifth was awarded to a new player (in this case BT).45 In contrast, for fixed services, the main conclusion from the TSR was that although liberalization had led to a number of downstream retail markets being opened to competition, the strong presence of common costs and economies of scale in fixed networks meant that most competitors still rely on upstream wholesale inputs provided by the incumbent, BT. Ofcom decided therefore that the focus of economic regulation should be on opening access to the network elements subject to scale and scope economies to allow competition to be introduced in related markets. It argued however that BT’s market power in the provision of fixed infrastructure and its vertically integrated structure into the downstream markets for which that infrastructure is a critical input meant that BT (given its then current structure) would always have an incentive and the ability to engage in discriminatory behaviour against its competitors. In particular, Ofcom highlighted that while price discrimination may be easier to detect, verify, and enforce, non-​price discrimination (such as delaying access to key inputs to competitors etc) is not. Ofcom believed that its then current powers did not suffice to deal with the problem. Consequently, it put forward a proposal to introduce a form of functional separation and to strengthen the then current non-​d iscrimination rules (from model 3 to model 5 in Table 2.3 above). This manifested itself in what is termed Equivalence of Input (EoI) supported by the organizational separation of BT and the creation of Openreach as a functionally separate entity.46 In March 2015, ten years after the TSR, Ofcom launched a Strategic Review of Digital Communications (DCR). Whilst Ofcom set out that the UK’s telecoms users have enjoyed largely positive outcomes in the last decade, some concerns remain.47 In particular, Ofcom highlighted that given the increasing dependence on communications, more needs to be done to make sure there is widespread availability of superfast fixed broadband and better mobile coverage. Moreover, more generally Ofcom pointed out that there are continuing concerns about the quality of service delivered by some providers and argued that as future demand for data grows more network investment will be required to deliver it.

45   Ofcom Press Release, ‘Ofcom announces winners of the 4G mobile auction’, 2013, at . 46  Ofcom, ‘A notice under Section 155(1) of the Enterprise Act 2002’, 2005, at . 47   Ofcom, ‘Initial conclusions from the Strategic Review of Digital Communications’, 2016, at .

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In response to these concerns and to empower consumers to make informed choices, Ofcom set out that it would publish service quality performance data on all operators, and look to introduce automatic compensation for consumers and small businesses when things go wrong. Alongside this, it said that it would introduce tougher minimum standards for Openreach with rigorous enforcement and fines for underperformance. Ofcom also said that (with universal service as a backstop48) it will encourage the roll-​out of new ‘fibre to the premise’ networks to homes and businesses, and will require BT to open up its network, allowing easier access for rivals to lay their own fibre cables along BT’s telegraph poles and in its underground cable ‘ducts’ (see Section 2.15). This marked a shift from the previous strategic review in that Ofcom was now implying that the focus of economic regulation should be more towards fostering network competition rather than just competition based on access regulation. Ofcom recognized though that where the private sector cannot offer competing infrastructure investment, competitors will still be reliant on Openreach to provide service to retail customers. It said that while functional separation and EoI (essentially model 5 from Table 2.3 above) have achieved good outcomes, they do not remove BT’s incentive to discriminate. Therefore, it pointed out that there are still risks to competition. In particular, Ofcom said that while Openreach is required to provide services to all competing providers including BT on an equivalent basis, there still may be scope for BT Group to influence the design and investment of such services in a way that makes them more favourable to BT than to its competitors. In February 2016, Ofcom stated that Openreach needs to change, taking its own decisions on budget, investment, and strategy, in consultation with the wider industry.49 In March 2017, BT notified Ofcom of voluntary commitments to reform Openreach.50 These commitments comprise of BT agreeing to legally separate Openreach so that it becomes a distinct company with its own staff, management, purpose, and strategy and a legal purpose to serve all of its customers equally. This is essentially model 7 in Table 2.3 above. Ofcom responded that it considered that BT’s March Notification sufficiently addressed its competition concerns. In March 2017, Ofcom published a consultation of the commitments51 and an explanation of how it will monitor compliance with the new arrangements and ultimately assess whether they deliver positive outcomes for consumers and businesses.   See Section 2.12 for a discussion about universal service.   Ofcom, ‘Making communications work for everyone:  Initial conclusions from the Strategic Review of Digital Communications’, 2016, section 6 at . 50   Ofcom Press Release, ‘BT agrees to legal separation of Openreach’, 2017, at . 51  Ofcom, ‘Delivering a more independent Openreach:  Update on BT’s voluntary notification under s.89C Communications Act 2003 and consultation on releasing the BT undertakings pursuant to section 154 Enterprise Act 2002’, 2017 at . 48 49

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The discussion above provides a whistle-​stop tour of the broad phases of liberalization and regulation in the UK since the privatization of BT. In the following sections, we now turn to a more detailed discussion of the regulations that were implemented at the retail and wholesale levels drawing on the economic concepts discussed earlier.

2 .10  R E TA IL PR IC E R E GUL ATION IN THE UK A core principle of regulation is that as effective competition develops regulation should be lessened. However, as set out in Table 2.4, in the early days of UK communications regulation, there was both a tightening of the price cap control and an extension of the coverage of the control.

Table 2.4  Summary of UK retail price controls52 Dates

Control

Price control coverage

1984–​1989

RPI –​ 3%

49%

1989–​1991

RPI –​ 4.5%

55%

1991–​1993

RPI –​ 6.25%

67%

1993–​1997

RPI –​ 7.5%

64%

1997–​2002

RPI –​ 4.5%

26%

2002–​2006

RPI –​ 0%

Not applicable

In 1984, the first price cap was set at RPI –​3 per cent and the basket of controlled services covering approximately half of BT’s revenues was set for five years. In the subsequent Price Review of 1988, Oftel tightened the price cap to RPI –​4.5 per cent, and added additional services to the basket increasing the coverage of the cap to just over half of BT’s revenues. These arrangements were supposed to stand for a duration of four years but the Duopoly Review in 1990 meant that these commitments were jettisoned and new arrangements were put in place. These tightened the price cap further from RPI –​4.5 per cent to RPI –​6.25 per cent. Moreover, because routine monitoring of BT’s international calls showed profits were rising sharply, out-​going international call charges were added to the price cap basket. Oftel’s next review of the BT price cap also tightened the cap further to RPI –​7.5 per cent and as in the previous review, more services were added to the control. By 1997, nearly 70 per cent of BT’s revenues were covered by the control. 52   Source:  Cave, M, ‘The Evolution of Telecommunications Regulation in the UK’ (1997) 41 European Economic Review 691–​699.

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This ever-​tightening regulation however changed considerably in 1997. After Oftel conducted a market study of competition,53 it reverted to the core principle that retail controls should only be implemented where consumer protection was absolutely required. This led to the coverage of the switched services price cap being targeted on the lowest spending 80 per cent of residential customers and the cap being loosened from RPI –​7.5 per cent to RPI –​4.5 per cent. The effect of this was that 26 per cent of BT’s group revenues were now subject to retail price caps compared with nearly 70 per cent previously. In February 2001, Oftel determined that the 1997 retail price controls on BT should be extended until July 2002. Then in June 2002, Oftel loosened the price controls further with a safeguard cap of RPI –​RPI for the lowest 80 per cent of residential customers. As an incentive on BT, Oftel suggested that if BT developed an effective wholesale line rental (WLR) product, 54 the cap would be further reduced to RPI + 0 per cent. In July 2006, Ofcom announced the removal of retail price controls. This followed both the conclusion of Ofcom’s TSR and the specific public consultation, launched in March 2006, on removing retail price controls. 55 Ofcom stated that deregulation was because of the rapid growth of competition and continued reductions in the cost of phone services to retail customers. This is therefore a good illustration of the removal of retail regulation as effective competition becomes prevalent, though Ofcom recognized that regulation would continue to be required for some time to come at the wholesale level. The rolling-​back of economic price control regulation as competition became effective did not mean however that the regulator ignored market circumstances at the retail level. It recognized that it still needed to keep an eye on the effectiveness of competition for consumers, otherwise there was a risk that consumers could be harmed. In this regard, in 2010, Ofcom began a review of consumer switching processes prioritizing switches involving fixed voice and broadband services made over the Openreach copper network. It found that switching processes differed substantially amongst operators leading to customer confusion and customers seeing the switching process as a hassle. Working with industry, in 2013 Ofcom put in place agreed consistent switching processes, which means that consumers can

53   See Section 2.5 for a discussion about how the extent of competition in communications markets is examined for the purposes of deciding whether regulatory controls are required or not. 54   Wholesale Line Rental (WLR) is intended to stimulate competition by allowing suppliers to provide an integrated service comprising calls and access, renting the exchange line from BT and sending customers a single bill. 55  Ofcom, ‘Retail price controls:  explanatory statement and proposals’, 2006, at .

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exercise choice and switch quickly without loss of service.56 In addition, it has put in place a number of informational remedies targeted at consumers to help consumers through the process of switching. To further inform consumers of their available options, Ofcom has also prioritized publishing service quality performance data on all operators. This acts as a bit of a ‘name and shame’ of poor performing operators and so provides a mechanism for consumers to be informed of alternative providers and an incentive for operators to improve their quality of service.57 The incentive for operators to improve their quality of service is also reinforced by Ofcom’s proposal to introduce automatic compensation for consumers and smaller businesses when things go wrong.58 Alongside, the demand-​side remedies above, Ofcom has also been keeping an eye on operators’ behaviour at the retail level. Even though retail regulation had been removed in the UK, in 2016, prompted by concerns over rapidly rising prices for standalone landline telephone services (ie the sale of telephone services to those people who buy such services in a standalone contract and not as part of a bundle with other services such as broadband or pay TV) Ofcom launched a review of the retail market for standalone landline telephone services.59 In 2017, it provisionally concluded that there is a distinct market for standalone landline telephone services, with BT holding significant market power. To prevent BT from using this market power against standalone landline telephone customers, Ofcom proposed to regulate BT’s standalone telephony services through a retail price control, with an initial price cut of between £5 and £7 in monthly line rental, and a basket cap on prices of line rental and calls to limit future price increases to no more than the rate of inflation. In addition, Ofcom also proposed to require BT to work with it to trial—​a nd, if appropriate, deliver—​consumer information to encourage its standalone telephony customers to look for better value deals to promote competition. In response to these proposals, in October 2017, BT voluntarily agreed to put these measures in place for a period of three years.60

56   Ofcom, ‘Consumer switching: A statement and consultation on the processes for switching fixed voice and broadband providers on the Openreach copper network’, 2013, at . 57  Ofcom, ‘Comparing service quality’, 2017, at . 58  Ofcom, ‘Automatic compensation’, 2017, at . 59   Ofcom Press Release, ‘Landline prices review to protect elderly and vulnerable’, 2016, at . 60   Ofcom, ‘Review of the market for standalone landline telephone services: statement’, 2017, at .

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2.10.1  Operation of retail price caps in the UK As detailed above, excluding developments from 1997, the price cap regime within the UK communications industry tended to intensify over time. Firstly, the coverage of the price cap, in terms of the goods and services that were subject to regulatory control, tended to expand. Secondly the severity of X, the deduction factor, was typically tightened at successive review periods. This led to an enforced decline in real prices, which in the short term was of immediate benefit to consumers. However with the coverage of the cap so wide, there was less consideration given to the long-​term impact of price cap regulation on competition and in particular the effect of price regulation on nascent competition. In a monopoly environment, the setting of a price cap is a relatively simple exercise. The regulator sets X commensurate with an efficient operator level of profit. The regulated firm then sets prices as per the RPI –​X formula and the resultant profit level is then greater or less than forecast depending on cost control and volume changes. However, in a potentially competitive environment, designing an appropriate cap is more complex. The reason is because if severe price caps are imposed on the incumbent operator, this has the consequence of also forcing competitors to parallel any incumbent-​led price cuts to penetrate the market. If operators have to extend their investments in the development of new services and their deployment of lower cost technologies, then this could have an impact on their market entry. As such a balance needs to be reached between consumer effects and competition effects in setting a price cap.61

2.10.2  Key issues—​retail price caps In summary, the asymmetric nature of a price cap, in that it prevents price rises but allows price decreases, while being irrelevant in a monopoly market can become of critical importance when potential competition is prevalent. Regulatory intervention should only be initiated if there is a demonstrable competitive or market failure. When reviewing a price cap regime, the regulator should examine the competitiveness and potential competitiveness of the market and should ensure that if the price cap regime is to continue, that a balance is reached between protecting consumers against high prices and not impeding the development of an effectively competitive market.

61   Where there is the potential for competition, NRAs need to define markets in a dynamic manner. They should take account of the changing nature of the industry otherwise erroneous regulatory decisions could be made which could distort the workings of the sector.

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2 .11  TA R IFF R EB A L A NC ING  ISSUE S Governments generally feel it desirable that individuals should have access to communications facilities, to exercise their political rights, and on social grounds, to prevent a gulf emerging between ‘’information-​rich’ and ‘information-​poor’ groups. This alongside the positive externalities and dynamic benefits for the economy has meant that dominant operators have historically been encouraged in monopoly environments to set prices for network access as low as possible. Prices for other services, such as long distance and international calls, have been kept high to subsidise low access prices. This has, however, led to tariffs being out of balance with underlying costs, which with the introduction of privatization and liberalization policies has meant that competitive activity has been targeted to wherever these imbalances have occurred. In terms of economic efficiency, an unbalanced price structure has a number of adverse effects. Firstly, it provides incorrect signals to potential entrants and so could lead to inefficient entry. Secondly, it results in a loss of economic welfare. Where the price of a service is in excess of long run marginal cost,62 potential customers, whose valuation of the service exceeds the cost, but not the price, are deterred from using it. Where price is below long run marginal cost, there will be consumers whose valuation of the service falls below its cost, but use it because price is below cost. The potential economic welfare benefits from rebalancing can hence be substantial. Before discussing rebalancing in more depth, it is worthwhile considering exactly what is meant by the concept of rebalancing. Tariffs for two services are said to be balanced if they are set at levels which reflect their costs. A policy of rebalancing in the communications sector seeks therefore to increase access prices, and reduce prices for services that have traditionally subsidised low access prices. The objective is to ensure that the price for each service reflects the underlying cost of providing that service. Increased network access prices under tariff rebalancing generally have a relatively small impact on overall subscriber numbers. This is because demand for network access is usually not very responsive to changes in price. In addition, low prices for usage can stimulate demand for access, helping to mitigate the effects of increased prices for access. While the economic benefits of tariff rebalancing are clear from a theoretical point of view and empirical evidence supports the existence of these benefits, rebalancing is difficult to implement. Firstly, it is difficult to separately define costs

  See Section 2.14 for a discussion about marginal costs.

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where two services are closely linked. Secondly and more importantly from a political perspective, rebalancing can be difficult for politicians to sell to the public. This is because rebalancing generally requires that the majority (ie the voters) pay more whilst the better-​off pay less. Rebalancing became a prominent issue in the UK when BT made its first price changes as a private company in the 1980s. It was keen to rebalance quickly as having tariffs out of balance exposed it to competition targeted exclusively at the high margin calling business. It argued that line rentals priced below cost ‘distorts the market and encourages inefficient and misplaced investment’.63 BT managed to carry out some rebalancing actions but these tended to favour large users over smaller users and involved price cuts in areas where competition was prevalent and price increases where it was not. (The incentives on BT for rebalancing were therefore similar to the incentives produced from price regulation as discussed in Section 2.7.) Rebalancing, if pursued too vigorously, could undermine the liberalization process. Oftel was concerned about this and so concluded in 1986 that no further rebalancing between local and long-​d istance charges should occur. The view was that the liberalization process needed to be protected and if effective would lead to natural cost reductions and rebalancing over a number of years.

2 .12  S O C I A L OBL IG ATIONS A ND FUR THER CONS TR A INT S ON R E TA IL PR IC E S In addition to tariff rebalancing issues, social obligations on retail prices are an additional consideration for NRAs. Economics of density 64 in communications means, certain classes of customers are profitable to serve whilst others are unprofitable. In a pure competitive market, if this occurred, firms would not serve unprofitable customers. To prevent certain customer classes from being excluded from service, there is therefore usually a requirement to cross-​subsidize between profitable and unprofitable customers. This can take the form of geographically averaged retail tariffs alongside a requirement to provide service to all customers demanding service (otherwise known as the universal service obligation or USO). Subsidization by profitable customers to unprofitable customers, like the subsidization by long distance and international call charges to line rental and local call charges, has historically been encouraged by governments. The rationale for

  BT’s response to Oftel’s statement ‘Effective Competition: Framework for Action’, para 7.1.   An industry exhibiting economies of density is one where the more closely packed together the customers are, the lower the unit costs. 63

64

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imposing a USO is both social and economic. The social policy goal is to provide individuals with access to communications facilities to avoid a gulf emerging between groups in society. The economic rationale, on the other hand, relates to the presence of externalities, not taken into account by individuals in their private decision-​making. New customers joining a network not only benefit themselves, but create extra opportunities for existing customers. There is, moreover, evidence of dynamic benefits for the economy arising from the development of the communications sector. The presence of these externalities and the social and political considerations mentioned above thus create a case for imposing a USO sharing mechanism as long as it can be proven that costs outweigh benefits. It should, however, be recognized that the main aim of the obligations will differ at different periods. At the time of network build-​out and mass-​market take-​up, the objective of universal service obligations is likely to be primarily economic. Once the network is completed, however, the goal of universal service shifts to being primarily a social one. In the former stage, it is desirable to keep installation prices low so as to stimulate demand and to take account of the network externality. In the latter stage, the emphasis is likely to be upon targeting subsidies to ensure that the telephone is affordable to all and adapted to those with special needs. Traditionally in a monopoly environment the costs of the USO have been covered by a cross-​subsidy. When competition has been introduced, however, the incumbent has asserted, as with rebalancing, that having a USO, exposes it to competition targeted exclusively at the profitable business thereby resulting in it having inadequate funds to cover the costs of serving unprofitable customers. As a consequence, it claims that the costs of this should be shared amongst operators to ensure competition on equal terms.

2.12.1  Costing the USO The costs of meeting the USO comprise the sum of the losses incurred by the USO operator in serving customers whom it is obliged to serve but whom it would not otherwise serve had it not been a USO operator. To estimate the cost of the USO, a detailed examination of the costs and revenues associated with customers is needed. Given that only a few customers are likely to impose net USO costs, the estimation should focus on the costs of loss-​ making customers on an avoidable basis. In other words, the calculation should try to elicit how much would be saved (ie costs) and how much would be lost (ie revenues) if loss-​making customers were removed from the network. The calculation of the cost side of the equation comprises detailed economic modelling, the aim of which is to determine the maximum number of customers

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that can be served economically. Once this has been identified, it should then be possible to derive and cost the shortfall or the cost of serving loss-​making customers. Once the avoidable costs of delivering universal service have been quantified, any commercial benefits such as good public relations, perception of marketplace ubiquity, reduced churn, simplified credit procedures arising from serving remaining customers must be quantified. All incremental revenues emanating from loss-​making customers must also be included on the revenue calculation. This should comprise call charges, line rental charges, as well as revenue of incoming calls to loss-​making customers. This is of key importance to the calculation as this would be lost to the operator if the customer left the network. The cost of delivering universal service is then the amount by which the cost of serving loss-​making customers exceeds the benefits and incremental revenues associated with serving these same customers.

2.12.2  Funding the USO If costs outweigh the benefits such that it imposes a significant burden on the incumbent, there is then a case for imposing a sharing system so that competition occurs on a ‘level playing field’. A number of mechanisms exist for funding and sharing the costs of the USO. If the rationale for the USO is social policy, so that the cost of funding the USO ultimately represents a tax on customers to fund extended services for others, then it may be appropriate for the costs to be met by general taxation. Governments, generally however, find this option unpalatable and so, it is usually the case that the costs of USO are financed from within the communications sector. This can be done in several ways. A fund or virtual fund can be set up where the costs of the universal service are shared out between carriers according to the size of each operator’s traffic share, as is the case in Australia. Alternatively, costs could be divided to reflect service revenues minus payments to other operators. Whichever approach is adopted, it is however important that how the USO is allocated and financed does not lead to market distortions.

2.12.3  Operation of the USO in the UK In the UK, a study of the USO was conducted in 199665 and was estimated to be less than £0.05 billion. Oftel argued that the transaction cost of administering and funding the USO would exceed the delivery cost, and so it concluded that

65   Oftel, Universal Telecommunications Services, Statement, 1997, at .

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the delivery of the USO should not be funded by the industry as a whole. Ofcom stated however that the costs and burden of universal service would be kept under review.66 If an undue burden from the USO is found the funding methods outlined above can be used. The efficacy of using a fund or virtual fund could, however, be improved if alternative service providers are present in the market. For example, permitting the incumbent to contract out the USO to the most efficient service provider or equally, franchising the USO to the most efficient service provider and then making the appropriate transfers could potentially improve the efficiency of USO delivery. In November 2015, the government set out its intention to introduce a broadband USO.67 This is intended to give everyone a right to a decent broadband connection, with a download speed of 10Mbit/​s, on request. The government proposed introducing this USO in recognition of the increasingly important role broadband plays in people’s lives. Ofcom was commissioned by the government to provide technical analysis and advice to support the design of the broadband USO.68 In December 2016, Ofcom published its advice for government on how it might secure its overarching policy objectives.69 This comprised of, amongst other things, a high-​level consideration of the scope and level of the USO, the costs of delivering the USO, options for USO designation which delivers value for money, views on the extent of any market distortion arising from the implementation of a broadband USO, and mechanisms for funding the USO. In July 2017, BT made an offer to provide the required infrastructure on a voluntary basis, avoiding the need for regulation, and recouping the cost through customer bills. In December 2017, the government rejected this offer and decided to press ahead with adoption of a regulatory USO, to provide everyone with minimum 10 Mbps line speeds by 2020.70

66   Notification of Proposals for the Designation of Universal Service Providers and Setting of Conditions, Consultation Document, 12 March 2003. Under the Communications Act 2003, s 65 et seq, Ofcom have the right to review such matters for the purpose of making a universal service designation. Document, at . 67   Government press release, ‘Government plans to make sure no-​one is left behind on broadband access’, 2015, at . 68   Letter from DCMS to Ofcom, March 2016, at . 69   Ofcom, ‘Achieving decent broadband connectivity for everyone: Technical advice to UK Government on broadband universal service’, 2016, at . 70  See . The obligation will be made through a ‘universal service order’, issued by the Secretary of State under the Communications Act 2003, s 65 (as amended by the Digital Economy Act 2017, s 1).

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2 .13  THE NEED F OR A N EFFE C TIV E INTERCONNE C TION R E G IME 7 1 As detailed in Section 2.4, the value of belonging or being connected to the network increases with the number of people on the network. This means that competition between separate networks is unlikely to be sustainable, as the larger any one network gets the greater becomes its advantage over the others. The solution to this problem is for networks to interconnect, in effect forming one single network. Therefore, regulators need to impose an obligation to interconnect or to terminate calls to enable members of one network to call members of another. In addition to ‘interconnection’ services, regulators usually also demand that incumbent operators provide a number of ‘access’ services72 to competitors at a regulated price. As noted above, a number of call origination services are often considered naturally monopolistic because of sunk costs and economies of scale. Opening access to the network elements subject to scale and scope economies may allow competition to be introduced in related markets. However, this requires regulatory intervention because without it, the incumbent would not have an incentive to provide access to these network elements. Whilst intervention to oblige operators to provide access and interconnection services can be helpful, it provides no guarantee that access and interconnection will be provided on reasonable terms.73 Interconnection and access charges are key cost components of entrants’ tariffs. If high interconnection and access charges are set, new entrants in evaluating whether they should enter and provide service could conclude that business is not viable and may not enter the market. Existing entrants’ investment behaviour could also be affected. If interconnect and access prices are kept at inflated levels, existing entrants in the marketplace are likely to try to minimize costs by bypassing the incumbent’s network and building their own network components to compensate. However, if these network components have natural monopoly properties,74 this duplication of network may be inefficient.

72   See also Chapter 8.   See further Chapter 8.   The effectiveness of an entrant’s challenge to an incumbent is dependent on not only price but the non-​ price terms of access and interconnection services. 74  A  natural monopoly is defined by economists as an activity which exhibits economies of scale throughout the entire stretch of its unit cost curve. Such a condition could make one firm the inevitable winner and only survivor in any competitive contest with others in that line of activity which exhibits natural monopoly features. See Vickers, J and Yarrow, G, Privatisation: An Economic Analysis (Cambridge: MIT Press, 1998). 71

73

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In contrast, if interconnect and access charges are set too low, this could inefficiently encourage prospective competitors to buy access rather than build their own networks. Moreover, if charge levels are too low, the incumbent may be at risk of not being able to efficiently recover its network costs. If this is the case, it could result in investor uncertainty and therefore a corresponding decrease in investment and innovation in the industry. As a result, future network build-​out may be less robust because capital funding that might otherwise have been used for network and service construction may not readily be available. In addition, technology choices may be driven by a short-​term focus of recovery of network costs rather than a long-​term focus of over-​a ll industry growth. This could therefore have potentially irreversible consequences for service provision and the development of competition in the industry. Striking the appropriate balance of interconnect and access charge levels is crucial to ensure the efficient development of competition and of the industry. The NRA’s role in setting these charges is critical to establish a sustainable interconnect and access regime. To prevent the dominant operator from abusing its position, the NRA must have the appropriate powers and penalty mechanisms to control for this, both for creating the conditions for effective competition and also for a system of minimum regulatory intervention.

2 .14  INTERCONNE C TION CO S T ME THOD OLO G IE S Establishing the right arrangements for setting interconnection and access charges is probably the most important element in the communications regulatory framework. Getting an understanding of the underlying costs of the network is important because in general, to ensure efficient use and development of the network, prices should be set in relation to costs.75

2.14.1  Fully allocated costs (FAC) Historically, regulators and communication operators have used FAC, when setting interconnect and access charges. FAC is calculated by attributing to any service whatever costs are directly determined or caused by that service. So for

75   Determining such costs has been subject to judicial consideration in a  number of jurisdictions. See eg Telecom Corporation of NZ Ltd v Clear Communications Ltd (1992) 4 NZBLC; Verizon v FCC 535 US 467, 122 S Ct 1646, and the CJEU decision in Case C-​5 5/​0 6, Arcor AG & Co. KG v Bundesrepublik Deutschland, 24 April 2008.

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example, large parts of the local loop costs can be associated with the provision of access to customers or the costs of an international switch can be associated with the provision of international calls. There are, however, costs that could be viewed as ‘common’ to a number of services that cannot be allocated on a causative basis. For example, the costs associated with running regulatory departments, legal departments, administration, human resources and the Chief Executive’s office. To ensure recovery of these common costs, under the FAC method, these are normally allocated to the respective service on the basis of either output, gross revenues, or the direct costs of each service. Although FAC (for the purposes of interconnect and access charging) ensures that all costs are recovered, the procedures for deriving and agreeing the costs is complex. The process for calculating FAC is heavily reliant on information that the incumbent dominant operator supplies the regulator. ‘Strategic’ cost allocations, by the incumbent operator, can allow it to raise competitors’ costs and so keep them at a permanent cost disadvantage. These ‘strategic’ cost attribution procedures can be very intricate and complex and so regulatory scrutiny of them can be difficult. Another difficulty of using FAC is that many costs cannot be allocated on a causative basis and so must be attributed using a particular rule ie the output, gross revenues, direct costs of each service etc. However, changing the rule can substantially change the results. Given the criticisms on FAC, many have suggested that the use of FAC for interconnect and access services is inefficient. Consequently, in recent years discussions about the relevant cost standard for setting interconnection and access charges has shifted towards incremental or marginal costs.

2.14.2  Marginal and incremental costs Marginal costs represent the forward looking costs associated with the provision of an additional unit of output of any particular good or service. Hence the marginal cost of access would be the costs associated with attaching a new subscriber to the local loop and the marginal cost of a long distance call would be the marginal costs of local conveyance at both ends, the marginal cost of switching and the marginal cost of long distance conveyance. Economic theory generally suggests that prices should reflect marginal cost. When a firm decides whether it should increase or decrease output, the firm looks to the incremental effects on revenues and costs. If it priced below marginal cost, the firm would be better off by ceasing production entirely as it would be incurring losses on every item produced and if price was above marginal cost, it would be better off by producing more until such time that prices and marginal cost were equated.

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There are two basic types of marginal cost: Short Run Marginal Cost (SRMC) and Long Run Marginal Costs (LRMC): • SRMC reflect the costs that occur when a unit of output is changed when only some inputs can be varied. Those that cannot be varied therefore represent fixed costs and are not included in the calculation of SRMC. • LRMC reflect the costs that occur when a unit of output is changed when all inputs can be varied. Hence product specific costs that can be efficiently varied with marginal changes in output over the long run are included in the calculation of LRMC. LRMC is often considered a better measure than SRMC for regulatory purposes. The reason is because if a company is producing at capacity, increasing output by one unit could mean significant levels of SRMC, whereas when it is not producing at capacity SRMC can be negligible. SRMC is quite ‘lumpy’ depending on when the demand change is assumed to occur. In contrast, because LRMC reflects the costs that occur when all inputs can be varied in response to a sustained demand change, this ‘lumpiness’ can be smoothed out. As such, it can provide better signals to consumers and the market. LRMC is however rather difficult to calculate in practice. Inputs (such as staff, vehicles, and machines) can only be sensibly varied in larger discrete amounts in response to variations in much larger volumes of outputs (and not just an additional unit of output). Consequently, in practice, the increment of output considered is often much larger and the cost calculated is long run incremental costs (LRIC). This is defined as the cost of adding an increment of output. The size of the increment can either be small (perhaps a 5 per cent change in the volume of a service) or large—​consisting of a whole service or a group of services. So for example, the incremental cost of long distance calls is the extra costs of providing all long distance calls given the availability of access expressed on a per unit basis. Thus with the same output increment, marginal and incremental costs may be the same. Marginal and incremental costs can be calculated in two ways. The first, known as ‘bottom-​up’ cost modelling involves the construction of an engineering/​economic model of an optimal telecommunications network. The idea is to design and cost an efficient network which can meet any given set of demands.76 By changing certain demand parameters for individual services, it is then possible to calculate the marginal or incremental costs of that service. The alternative approach, known as ‘top-​down’ cost modelling, starts from the incumbent’s management accounts

76   The bottom-​up model in designing an optimal communications network rather than the actual network in place removes the margin of inefficiency implicit in most incumbent’s network thereby allowing only efficient costs to be recovered through interconnect charges.

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or fully allocated costs. The first step involves (where necessary) re-​valuing the assets on the basis of their replacement (or current) costs (see Section 2.7). The non-​ incremental costs such as non-​attributive ‘common’ costs are then removed from the accounts and the remaining costs are used to calculate the incremental costs of service on a per unit basis. It is normal for both methods to be used in determining incremental or marginal costs. The reason is that the two models act as an auditing mechanism for each other. Each has strengths and weaknesses that ensure that the reconciliation between the two models allows for only relevant costs to be recovered. If the NRA relied exclusively on the top-​down model derived from the fully allocated costs of the incumbent, the resulting incremental costs could lead to a skewed outcome in favour of the incumbent where inefficiencies in the incumbent’s cost structure could be passed on to competitors in interconnection and access charges. The bottom-​up model has the important advantage of being derived in an open and transparent way but because it is based on a theoretically efficient network rather than the actual network in place, the assumptions underpinning the model may be unrealistic. As a consequence, the use of both models yields advantages and allows the regulator to scrutinize more closely the cost structure of the incumbent operator.

2.14.3  Mark-​ups for common cost recovery Incremental costs include only the costs that are caused by the provision of a defined increment of output. In other words, any shared costs between the defined increment of output and other services would be excluded. A  large proportion of network costs and overheads are shared between products, and so the incremental cost incurred by a single given product using the network is likely to be low. However, where the increment includes a group of aggregated products, the incremental cost of this would include the costs shared between them but would exclude the shared costs between this group of aggregated products and other products. If a firm bases its pricing decisions on LRIC estimates, which did not include common costs, this may leave the company with inadequate revenues to meet these shared costs. For this reason, where LRIC estimates are used for price setting purposes, it is fairly standard practice to mark-​up LRIC by an amount considered appropriate to cover a reasonable proportion of common costs. As set out in Section 2.4, there are various methods of recovering common costs. From an economic point of view, Ramsey pricing is often considered to be efficient. Ramsey pricing involves marking-​up services where demand is not responsive to price. In other words, it involves varying the price to incremental cost ratio in inverse proportion to the elasticity of demand. The principle generally implies,

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therefore, the highest mark-​up for those services where customers are price insensitive. The Ramsey pricing formula for calculating the mark-​up depends strongly on the type of competition between the incumbent operator and its competitors, the relative sizes of the firms, the differences in the costs of supplying the final output and the cost of interconnection or access. The complexity of the information required to put Ramsey prices into practice means that at a practical level, it is difficult. The problems of estimating the various elasticities which are required in the Ramsey approach are considerable particularly when dynamic effects have to be factored in somehow. Therefore, whatever appeal the approach has at a theoretical level, in practice, pure Ramsey pricing is not often used. Given the practical difficulties with Ramsey pricing, the alternative is to use an accounting rule to recover common costs. For example, if the common input was used to produce two separate, regulated services, one simple rule would be to split the common cost equally between the two services. An alternative rule is to recover common costs in proportion to the incremental cost of the two services. This method of allocating costs is known as the equal proportionate mark-​up (EPMU) and is an approach that is often used in the calculation of fully allocated costs to cover ‘common’ costs. While these rules allow the firm to recover their common costs, they lack any of the theoretical economic justifications which, despite the practical problems associated with their implementation, Ramsey pricing at least partly possesses. It means therefore that the NRA needs to have a level of scrutiny to ensure that price signals are not distorted.

2 .15  INTERCONNE C TION A ND ACC E SS R E GUL ATION IN THE UK In light of the theoretical discussion above on interconnection and access, it is worth considering how the UK regulatory regime has dealt with this.

2.15.1  Fixed communications interconnection and access regulation in the UK The history of interconnection and access regulation in the UK has been a long one and has evolved considerably taking account of changing market circumstances, but at the core have been the principles of economic regulation, discussed earlier. In this sub-​section, the history of UK interconnection and access regulation is set out starting with a discussion of the approach that was taken when BT was privatized and ending with a discussion of Ofcom proposals from its recent Strategic Review of Digital Communications.

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2.15.1.1  Early days of interconnection and access regulation Given the structure of the market and the barriers to entry, a clear case for interconnection and access arose when Mercury was licensed for operation. BT had no incentive to provide interconnect to Mercury, but its licence stated that it had an obligation to interconnect. Nonetheless, the licence did not specify how the interconnect charges should be set. Consequently, from 1982 to 1984, BT played out an effective series of interconnection and access negotiations with Mercury that delayed Mercury’s entry into the market. Given these obstacles, in early 1985 Mercury sought determination from Oftel. Over subsequent periods, BT had little interest in reaching agreement over interconnect and access services. It is only when forced to do so by the regulator on an annual basis, following the breakdown in commercial negotiations, that BT reluctantly supplied access to its ‘bottleneck’ services. It did not, however, ask Mercury for interconnect to enable BT customers to call those directly connected to Mercury’s network. This, therefore, added an additional obstacle for Mercury’s market entry as it meant that, given BT’s dominance in the market, customers directly connected to Mercury had the inconvenience of requiring separate BT incoming lines if they wanted to receive calls from BT customers. In June 1992, Oftel stipulated that detailed ‘Accounting Separation’ between BT’s different businesses was necessary (as per model 1 in Table 2.3 above) for the continuing development of competition, and for public confidence that BT was not abusing its dominant position.77 The application of accounting separation to BT’s business was in the form of BT’s ‘retail’ and ‘network’ arms. BT-​ Network was responsible for the sale of wholesale access and interconnect network services to all retailers including BT-​Retail at non-​d iscriminatory regulated prices, determined on an annual basis using the fully allocated costing approach outlined above. BT-​Retail, in contrast, was responsible for selling on these services to final customers. Other results of the Accounting Separation process were a set of standard interconnection and access charges and a methodology for determining undue discrimination (in terms of BT’s retail prices versus interconnection and access prices). Via this approach to accounting separation, some transparency was introduced into BT’s costs. It is of course debatable quite how transparent any system based on BT’s own accounts can be given the asymmetry of information that existed between Oftel and BT. This is one of the reasons why there was a strong lobby for a move to incremental costing.

77   This policy is to be contrasted with the more radical policy in the US of structural separation of the RBOCs from AT&T. See Chapter 5.

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2.15.1.2  A new regime of network charge controls In 1996/​97, the change in network costing from FAC, based upon historic cost accounts, to LRIC plus an EPMU mark-​up, reflecting the replacement (or current) cost of capital assets, got underway. In addition, Oftel proposed a move away from the need of annual interconnection determinations and instead opted for a more flexible approach based on a network price cap.78 Traditionally, the use of price caps were only used for retail services, Oftel, however, felt that the methodology for setting retail price caps could also be applied to network and wholesale prices.79 This new approach marked a significant departure from the norm since in other countries NRAs were just starting to get more deeply involved in the direct regulation of interconnection and access. In setting the network price cap, Oftel allowed BT to recover in its wholesale prices the incremental costs of providing the relevant service which included an appropriate return on capital and a proportion of common costs. The requirement for incremental cost measures provoked Oftel to develop, in conjunction with the industry, incremental cost models, both ‘bottom-​up’ and ‘top-​down’. A  detailed analysis of differences between the models led to a reconciliation which produced ‘hybrid’ figures as the best measure of the relevant incremental costs. Given that under the new network charge controls, charges would no longer be determined annually but would be set by BT within the confines of network price caps, Oftel set a new framework of rules. These rules set out that BT’s flexibility to set interconnection/​access charges would depend upon the competitiveness of the relevant interconnection or access market. This kept regulatory intervention at a minimum and focused on areas where there was risk of abuse. In addition, like the retail price cap equivalent, the network charge control encouraged efficient investment unlike the annual determination process. On the basis of this new framework of rules, Oftel proposed that from 1 October 1997 and ending in September 2001,80 BT should be free to set the charges for competitive services, subject only to general competition legislation. For prospectively competitive services, BT would set charges subject to a safeguard cap of RPI + 0 % and for non-​competitive services, BT would set charges within three network baskets, each subject to a charge cap formula of RPI –​8 per cent. To allay fears from competitors that BT would manipulate charges for its own benefit, Oftel put in place guidelines setting out how it would deal with reasoned 78  Network Charges From 1997, Oftel Consultative Document, December 1996, at . 79   See Sections 2.6 and 2.7 for a discussion on the methodology for setting price caps. 80   Oftel Statement, ‘Network charges from 1997’, May 1997, at .

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complaints on BT’s charges. In particular, it set out that anti-​competitive behavioural investigations would normally involve the comparison of the tariff for a particular service with its cost estimates, with the use of price floors and ceilings playing a significant role in the investigation. If prices were below price floors: set at incremental costs, then (subject to there being no objective justifications) prices may be predatory. In contrast, if prices were above price ceilings: set at the standalone cost81 of providing the particular service in question, then it could indicate excessive prices in the marketplace. During 2000, Oftel began its review of the future structure of the network charge controls and, in February 2001, concluded that competition had not increased sufficiently to remove the controls introduced in 1997.82 Oftel determined therefore that new charge controls should be introduced which ran from 1 October 2001 to 30 September 2005. Again, like the previous controls, these were based on the extent of competition in the relevant interconnection and access market. As before, Oftel concluded that controls should not be applied to competitive services. For new interconnection services, however, Oftel proposed to retain the power to ‘charge control’ new services before they are introduced or after their introduction. For prospectively competitive services, Oftel concluded that the ‘safeguard’ cap of RPI + 0 per cent should be maintained. However, the expectation was that competition rather than the safeguard cap would be the binding constraint on the charges for these services. In the case of non-​ competitive services, Oftel concluded that interconnection and access services should continue to be subject to charge controls. Oftel proposed however that they should be grouped into five ‘baskets of services’ rather than the previous three with each basket having a different value of ‘X’. These groupings took account of the prospects for competition and were set in a way to ensure that BT would not have too much flexibility to act on its incentive to price its services in a way to thwart competition. 2.15.1.3  The early days of local loop unbundling (LLU) At the same time as the network charge controls review, Oftel was also considering how to implement an EU Regulation, which made it compulsory, from 2 January

81   Standalone costs refer to the costs that would be incurred by an efficient entrant if it were to decide to produce only a specified set of commodities, e.g. access lines or call minutes. There are generally significant common costs associated with access lines and minutes. These costs would be incurred regardless of whether only one service is supplied. This means that the standalone costs of a particular service would be significantly higher than the incremental cost of that same service. 82  For more information see, (1)  Price Control Review—​ Possible Approaches for Future Retail and Network Charge Controls, Consultation March 2000; (2)  Price Control Review, Consultation October 2000; (3) Proposals for Network Charge and Retail Price Controls from 2001. (February 2001). These are available at .

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2001, for BT to meet reasonable requests for unbundled access to the local loop.83 The aim of the Regulation was to address the lack of competition on the local network where incumbent operators continued to dominate the market for voice tele­ phony services and high-​speed internet access. By allowing entrants access to the incumbent’s local loop (rather than expecting them to build their own local loop), the Commission believed that increased competition in this area would allow higher bandwidth services such as high speed always on internet access and video on demand to develop more rapidly. Further, they believed that increased competitive pressure in this area could lead to a wider range of services for consumers and better value for money. In May 2000, Oftel published a consultation document proposing prices for operators leasing unbundled loops.84 The key pricing principles were that the price of the loop would be cost oriented, the starting charges would be geographically averaged, and that BT should be able to recover the costs associated with setting up co-​location facilities. On 29 December 2000, Oftel published the final wholesale prices to be applied until 31 March 2002 and suggested that in April 2002, it would introduce an RPI –​X cap on the charges.85 In March 2002, Oftel concluded that the market for the provision of LLU services had not developed as quickly as originally anticipated. However, being aware of the forthcoming European Directives, it decided to roll over the price controls from December 2000 and said that it would review in early 2003. 2.15.1.4  The increasing importance of leased lines regulation In making provision and setting wholesale prices for LLU, Oftel mandated a form of unbundling in which BT made local access lines available as leased circuits to other operators.86 Wholesale leased lines had previously not been subject to regulation let alone a price control. The effect of the LLU regulations meant however that leased lines became more important in facilitating delivery of higher bandwidth services to consumers and SMEs. The European Commission recognized the increasing importance of competition in leased lines and in July 1999, the

83   Regulation (EC) No 2887/​2000 of the European Parliament and of the Council of 18 December 2000 on unbundled access to the local loop, OJ L 336/​4, 30 December 2000. 84  Oftel, ‘Access to Bandwidth:  Indicative prices and pricing principles’, 2006, at . 85   Oftel, ‘Determination under Condition 83.16 of the Licence of British Telecommunications Plc relating to the charges for the provision of metallic path facilities and associated internal tie circuits’, 2000, at . 86   Leased lines are permanently connected communications links that are used by business and other operators for services such as voice and data traffic and internet access.

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Competition DG of the European Commission opened a formal sector inquiry into the price of leased lines across the EU. In November 1999, the Commission expressed its concern in a draft Recommendation that despite the fact that the provision of leased line services had been liberalized in Europe since 1 July 1996, competition was slow to develop. The Commission issued ‘recommended price ceilings’ for leased line interconnection services. At the same time, Oftel began its review of national leased lines. In August 2000, Oftel consulted on the state of competition in both the relevant retail and wholesale markets for national leased lines. Oftel found that competition was not effective in the retail market resulting in prices higher than they would be in a competitive market. Its analysis suggested that the reason for the lack of effective competition in retail leased lines was the lack of effective competition in the wholesale market. In 2001, Oftel proposed therefore to require BT to provide wholesale leased lines at all digital bandwidths on non-​discriminatory terms and at cost-​oriented prices.87 Oftel expected BT to negotiate with operators but stated that if prices could not be agreed then it would set prices, taking into account the extent of competition for the service. If the service was effectively competitive or moving towards a competitive market structure, Oftel said it would interpret the requirement for cost orientation as meaning any price between the long run incremental cost (LRIC) floor and standalone cost (SAC) ceiling, subject to any relevant combinatorial and non-​discrimination tests also being satisfied. If, by contrast, the relevant economic market was not effectively competitive, Oftel would be inclined to interpret the cost orientation requirement to mean that prices should be set on a LRIC basis with some allowance for common cost recovery. Following this direction from Oftel, BT began offering wholesale leased circuits in August 2001, although take-​up was low because operators had concerns about BT’s applicable terms and conditions. To boost the development of broadband in the business market, in 2002 Oftel announced a two-​phase review. The first phase directed BT to make a number of improvements to its wholesale leased line products to promote greater take-​up of the products by other operators.88 The second phase review, completed in December 200289 considered pricing and service level agreements. The conclusion of this review was that Oftel set prices for 87   It maintained safeguard caps on analogue retail leased lines since the competitive pressures created by its wholesale policy options were likely to stimulate sufficient retail competition to constrain retail prices for all other services. 88   Oftel, ‘Phase 1 direction to resolve a dispute concerning the provision of partial private circuits’, 2002, at . 89   Oftel, ‘Partial Private Circuits, Phase Two—​a Direction to resolve a dispute concerning the provision of partial private circuits’, 23 December 2002, at .

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leased lines that were considerably lower than BT charges (typically 50 per cent lower for connection and 20 per cent lower for rental). Further, it backdated these charges to the launch of the products, which meant that BT had to provide considerable refunds to operators. In addition, Oftel confirmed a number of improvements for BT to make to its service level agreement. These improvements included BT paying compensation to other operators in the event of late delivery. 2.15.1.5  Implementation of the European Directives The EU’s New Regulatory Framework 90 in 2002 required NRAs to carry out reviews of competition in communications markets, which Oftel carried out in accordance with the guidelines set out by the Commission.91 In most of the market reviews, where SMP was found, Oftel put in place charge controls based on RPI –​X to constrain BT’s ability to exploit its market power. These controls were often set on multiple baskets with sometimes a number of sub-​caps being imposed. This was to prevent BT from rebalancing its charges in a way which undermined competition. Oftel did not however solely rely on using RPI –​X. In the case of LLU services, Oftel concluded that LLU services should be charged on a LRIC plus EPMU basis. In addition, it imposed charge ceilings for a number of LLU services to prevent BT from increasing charges in a way that undermined competition. It deferred however setting the charge ceiling for the fully unbundled rental charge because a high proportion of the total cost of this charge is determined by the cost of laying and maintaining the copper loop, the costs for which Ofcom was in the process of reviewing. In the wholesale broadband market review, (unlike in other markets) Oftel/​ Ofcom was reluctant to impose cost-​based pricing because it feared that doing so could deter investment in broadband technologies. Broadband was still an emerging technology so there was a high degree of uncertainty on costs, and the timing of cost recovery and the appropriate rate of return. As such, Oftel/​Ofcom proposed that access should be priced on a ‘retail minus’ basis. This pricing approach does not set the absolute level of the charges, but requires that a margin exists between the relevant wholesale charges and the relevant downstream prices (ie the prices of retail and intermediate products) which covers the necessary additional costs of providing the downstream products. This allows other providers to purchase access services and compete effectively against the regulated firm’s downstream arm by ensuring that no margin squeeze takes place. Retail minus should in principle guarantee that no discrimination takes place

  See Chapter 4.  Oftel EU directive implementation, at . 90 91

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between independent service providers and the service providers of the operators with market power, while allowing for the regulated firms to set charges according to their commercial judgment. 2.15.1.6  The evolution of economic regulation since the Telecoms Strategic Review As noted earlier, the TSR was designed to set the strategic direction for Ofcom’s activities in relation to telecoms. The TSR was launched in response to a number of perceived problems: • There were enduring economic bottlenecks (as a result of economies of scale and scope) in fixed telecoms preventing effective and sustainable end-​to-​end competition; • The competition that had delivered benefits to consumers to date might not have been sustainable going forward; there were limited scale competitors in both residential and business markets and LLU had been ineffective as a means of promoting competition in broadband; • Companies who wished to compete had to rely on BT for access to parts of the network where competition was not sustainable and there were on-​going concerns about non-​price discrimination; • There was a need to promote timely and efficient investment in emerging technologies and platforms as existing copper switched networks became due for replacement. The TSR led to the implementation of two main interventions. The first involved a renewed focus on and increased use of LLU. Given the scale and scope economies in networks, there was a recognition that it would be difficult to get multiple competing networks so the aim was to encourage the number of competitors to BT in residential telecoms services via access regulation. By using charge controls, this promoted market entry by scale competitors to BT who invested in installing equipment and backhaul in local telephone exchanges, while maintaining the opportunity for BT to make a fair return. The second addressed the concerns about non-​price discrimination. To ensure that competitors were granted access to infrastructure on an equal basis, two parallel interventions—​equivalence of inputs and the organizational separation of BT—​ were imposed. More generally, the TSR laid out seven principles for regulation to address the issues in the market at the time:92

92   See para 1.25 of Ofcom, ‘Strategic Review of Telecommunications Phase 2 Consultation’, 2004 (link at n 43).

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• Promote competition at deepest level where effective and sustainable; • Focus regulation to deliver equality of access ie competitors should be treated the same as BT’s downstream retail operations; • Withdraw from regulation when competitive conditions allow; • Promote investment and stimulate innovation; • Different regulation for different products and different geographies; • Create scope for market entry that can remove bottlenecks over time; and • In the wider value chain, adopt a light-​touch approach, and rely on competition law where possible. Following the TSR and the removal of regulatory controls in retail services, Ofcom undertook market reviews following the economic principles outlined above. These reviews essentially covered the following: • Wholesale narrowband—​ie the services in the network charge controls, such as wholesale call termination, wholesale call origination, wholesale fixed analogue exchange lines, and wholesale ISDN30 and ISDN2 lines; • Wholesale local access—​ie fixed telecommunications infrastructure; the physical connection between a home or business and the local telephone exchange/​ street cabinet. This connection is needed to support fixed line services such as voice calls and broadband internet access; • Wholesale broadband access—​ie wholesale broadband products that communications providers provide for themselves and sell to each other and are one of the building blocks of the retail broadband offers that consumers buy. The wholesale broadband access market sits between the retail broadband market, which relates to the products that consumers buy, and the wholesale local access market, which relates to the access connection between the consumer and the network; • Business connectivity—​this concerns the retail provision of leased lines and wholesale provision of terminating segments and trunk segments in the UK. Below we consider each of them in turn and set out how economic regulation has evolved in these markets since the TSR.93 Wholesale narrowband market reviews  Following the TSR, in 200594 Ofcom completely deregulated inter-​tandem conveyance and inter-​tandem transit—by removing charge controls and all other regulations. This followed Ofcom’s finding that BT no longer had SMP in these markets. Furthermore, it loosened regulation

  See also Chapter 8, at Section 8.5.   Ofcom, ‘Explanatory Statement and Notification of decisions on BT’s SMP status and charge controls in narrowband wholesale markets’, 2005, at . 93

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by moving BT’s charge control on local-​tandem conveyance to a ‘safeguard cap’ that limited charge increases for that service to below inflation. This was to take account of the prospects of competition in this segment. On the non-​competitive baskets, Ofcom disaggregated the baskets into eight non-​competitive baskets—​ each with a different value of ‘X’. Further, for most of the non-​competitive baskets, the value of ‘X’ was reduced in comparison with the previous controls. This approach ensured that controls were focused on areas that required regulation. In addition, the disaggregation of baskets meant that while BT had some flexibility within the baskets to recover its costs, it was not too flexible to allow it to act on its incentive for anti-​competitive pricing. In 2009,95 the value of ‘X’ set for call termination and call origination by Ofcom was reduced even further in comparison with the previous controls. However, as part of the 2009 review,96 given the increasing usage of LLU and the conclusion from the TSR, Ofcom set a specific obligation on BT to supply analogue wholesale line rental (WLR)97 and subsequently set a charge control until 2014 for this product.98 In 2014, Ofcom conducted a market review of the fixed access market99 and put in place new controls.100 In addition, to address concerns of a continued decline in Openreach’s performance in provisioning and repairs, Ofcom imposed mandatory minimum quality of service (QoS) obligations on BT. In particular, it applied minimum standards to the provisioning and repair of some of the wholesale products that communications providers (CPs) purchase from Openreach to offer broadband and telephony products to consumers and small businesses. In 2013, Ofcom concluded that wholesale call termination rates should be based on pure LRIC and that wholesale call origination rates should be based on LRIC+101

95   Ofcom, ‘Review of BT’s network charge controls, statement’, 2009, at . 96   Ofcom, ‘Review of the fixed narrowband services wholesale markets:  Consultation on the proposed markets, market power determinations and remedies’, 2009, at . 97   WLR stands for Wholesale Line Rental. It is a facility which allows alternative providers to rent access lines on wholesale terms from BT, and resell the lines to customers, providing a single bill that covers both your line rental and calls. 98   This charge control comprised of three baskets: WLR Rental with a cap of RPI –​7.3%; WLR transfer with a cap of RPI and WLR new connection with a cap of RPI –​10.2%. This control applied from on 1 April 2012 until 1 April 2014. 99   Ofcom, ‘Fixed access market reviews: wholesale local access, wholesale fixed analogue exchange lines, ISDN2 and ISDN30:  Consultation on the proposed markets, market power determinations and remedies’, 2013, at . 100   Ofcom, ‘Fixed access market reviews:  Approach to setting LLU and WLR Charge Controls’, 2013, at . 101   As set out in Section 2.14, pure LRIC is the cost of adding an increment of output. LRIC+, in contrast includes an EPMU mark-​up for common cost recovery.

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with effect from 1 January 2014. This meant that common costs should no longer be required from wholesale call termination and instead operators would need to recover common costs from other services (ie origination services). This followed an EU Recommendation in 2009102 that termination charges should be based on pure LRIC and also the fact that mobile call termination was based on pure LRIC. Wholesale local access (WLA) market reviews  Ahead of the publication of Ofcom’s review of the cost of laying and maintaining the copper loop,103 BT voluntarily reduced the fully unbundled rental charge on 1 August 2005 from £105.09 to £80.00. However, despite BT’s charge reduction, Ofcom still considered it appropriate to set a ceiling for this charge to ensure that BT would not be able to subsequently increase it to an excessive level. As such, using an agreed costing approach, Ofcom set the fully unbundled rental charge ceiling at £81.69, which took effect from 1 January 2006.104 In 2010, Ofcom conducted another review of the wholesale local access market.105 A number of developments had occurred since the previous market review. In particular, commercial investments in next generation access (NGA) networks had resulted in super-​fast broadband being made available to nearly half of all UK households. However, competition in the provision of super-​fast broadband services remained in its infancy. Ofcom found that BT continued to have SMP in the UK market for WLA services, and concluded that access to BT’s local access network remains critical for those companies seeking to compete in the delivery of downstream services such as broadband and traditional voice services. Ofcom recognized though that to support the future development of the market, the regulatory framework needed both to promote competition at the access level and to support continued investment and innovation. Accordingly, it imposed a number of regulatory obligations on BT, designed to support investment and competition in super-​fast broadband, as well as in current generation services. The new regulatory model relied on the following core elements:

102  Commission Recommendation (2009/​ 396/​ EC) on the Regulatory Treatment of Fixed and Mobile Termination Rates in the EU, OJ L 124/​67, 25 May 2009. 103  Ofcom, ‘Valuing copper access:  Final statement’, 2005, at . 104   Ofcom, ‘Local loop unbundling: setting the fully unbundled rental charge ceiling and minor amendment to SMP conditions FA6 and FB6’, 2005, at . 105   Ofcom, ‘Review of the wholesale local access market:  Statement on market definition, market power determinations and remedies’, 2010, at .

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• Virtual Unbundled Local Access (VULA):  This allows competitors to deliver services over BT’s new NGA network, with a degree of control that is similar to that achieved when taking over the physical line to the customer; • Physical Infrastructure Access (PIA):  This allows competitors to deploy their own NGA infrastructure between the customer and the local exchange, using BT’s duct and pole infrastructure, to provide broadband and telephony; and • LLU which continued to provide a basis for competition in current generation services, allowing competitors to physically take over (or share) BT’s copper lines between the customer and the local exchange. This regulatory framework set out that VULA would likely be attractive for communications providers where BT had already upgraded its local access network; PIA would be attractive to companies wishing to address market opportunities in advance of BT and may also be of interest to companies wishing to provide service in locations which may be in receipt of public funding support. The remedies were complemented by other measures such as Sub-​loop Unbundling (SLU),106 charge controls for LLU107 but greater freedom for BT in the pricing of VULA services.108 This greater freedom for BT was to account for the risk in investment and the initial small scale of adoption of NGA services. These remedies were therefore designed to promote access competition, protect customers, and balance the incentives for companies facing what remained risky investments. In 2014, Ofcom carried out a further review of the WLA market and concluded that the core elements (set out above) continued to be important.109 However, VULA was increasingly becoming an important input for CPs to provide NGA services in competition with BT and so Ofcom placed a requirement on BT to supply a VULA product to competitors who wanted it. Ofcom considered that, in the absence of such a requirement, BT would have an incentive and ability to refuse access at the wholesale level and so favour its own retail operations with the effect of hindering sustainable competition in the downstream market, ultimately against the interests of end-​u sers. Ofcom did not however implement

106   SLU allows originating communications providers (OCPs) to physically take over (or share) the part of BT’s existing copper lines between a street cabinet and the customer premises. This remedy will allow OCPs to deploy fibre to the cabinet technology where they consider this to be economic. 107   Ofcom, ‘Charge control review for LLU and WLR services’, 2012, at . 108   Ofcom believed that by just controlling the prices of the copper remedies, this would act as a constraint on BT’s pricing of VULA. 109   Ofcom, ‘Fixed access market reviews: wholesale local access, wholesale fixed analogue exchange lines, ISDN2 and ISDN30 Volume 1: Statement on the markets, market power determinations and remedies’, 2014, at .

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cost-​based charges because controls on current generation broadband continued to exert a constraint on VULA prices. This meant that consumers were protected but additionally pricing flexibility on VULA also provided BT with incentives to invest in NGA capacity. Ofcom noted however that there was a risk that with pricing flexibility, BT could manipulate the VULA price relative to its own retail offering in a way that allowed it to distort competition to the detriment of consumers. Therefore, in March 2015, Ofcom required BT to maintain a minimum VULA margin to enable an operator that has slightly higher costs than BT (or some other slight commercial drawback relative to BT) to profitably match BT’s retail superfast broadband offers.110 While Ofcom recognized that setting a minimum margin of this nature may mean that there is a short-​term negative impact on efficiency (by allowing CPs with slightly higher costs than BT to compete) and with some risk that retail prices could be slightly higher than they ought to be, they considered that these potential impacts, even if they did arise, would likely be outweighed by the long term dynamic benefits of future competition. Wholesale broadband access market reviews  Competition in retail broadband services depends on service providers having access to wholesale broadband services or LLU to build their own services. Whilst Ofcom’s approach to LLU was a key enabler of competition amongst LLU networks and meant that many consumers had a choice of provider, LLU is not economically viable on a national basis.111 This meant that in some geographic areas there was no direct competition between broadband networks. In these areas Ofcom put in place regulation at the wholesale level to ensure that consumers can choose between differing retail offers. Conversely, in areas which benefitted from competition between networks, Ofcom sought to remove unnecessary regulation. Geographically varied LLU competition meant that for wholesale broadband access, there were four distinct geographic markets in which competitive conditions within each were broadly similar: • those geographic areas covered by exchanges where KCOM is the only operator (‘the Hull area’); • those geographic areas covered by exchanges where BT is the only operator (‘Market 1’);

110   Ofcom, ‘Fixed access market reviews: Approach to the VULA margin’, 2015, at . 111  Ofcom, ‘Review of the wholesale broadband access markets 2006/​07’, 2007, at .

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• those geographic areas covered by exchanges where there are two or three principal operators AND exchanges where there are four or more principal operators but where the exchange serves fewer than 10,000 premises (‘Market 2’); and • those geographic areas covered by exchanges where there are four or more principal operators and where the exchange serves 10,000 or more premises (‘Market 3’). Ofcom found KCOM had SMP in the Hull area112 and that BT had SMP in Market 1 and, separately, in Market 2. However, because of the rapidly changing competitive conditions Ofcom found that no operator had SMP in Market 3 on a forward-​ looking basis. In light of its SMP assessment, Ofcom directed BT to provide access on non-​d iscriminatory terms and to publish a reference offer. Separate to this review, BT also made certain pricing commitments to the industry and Ofcom. In particular, it committed to reducing the price of its wholesale broadband services, in all parts of the UK, year-​on-​year until the end of 2010. BT also committed to supply wholesale broadband services and to not unduly discriminate, in all parts of the UK, until the end of 2008 and it committed to provide a period of stability for LLU by not introducing geographically targeted reductions, below a certain level, to its wholesale broadband prices. In 2010, Ofcom completed another review of the wholesale broadband access market.113 Ofcom found that there was effective competition in almost 80 per cent of the UK. However, in just over one-​fifth of the UK—​covered by what it called Market 1 and Market 2—​it concluded that there was not sufficient competition. Market 1 was made up of exchange areas in which BT was the only provider of wholesale broadband services, whereas Market 2 comprised of exchange areas with two significant providers or with three significant providers where BT’s market share was 50 per cent or more. For Market 1, Ofcom decided that BT should be subject to a charge control.114 The charge control was imposed on the main product used by competitors and so Ofcom believed that charge controlling this product directly protected most consumers in Market 1 and constrained BT from excessive charging on the other products available in Market 1.  The charge control took the form of RPI –​12.00 per cent with a duration until 31 March 2014. In addition, Ofcom set a number of RPI –​0 per cent sub-​caps for a number of services within the basket, to

112   Hull is an area in the UK, which is not served by BT but instead is served by KCOM Group (formerly known as Kingston Communications). 113   Ofcom, ‘Review of the wholesale broadband access markets:  Statement on market definition, market power determinations and remedies’, 2010, at . 114   Ofcom, ‘WBA charge control:  Charge control framework for WBA Market 1 services’, 2011, at .

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ensure that charges for these services did not increase in real terms over the charge control period. In 2014, Ofcom completed the next review of the wholesale broadband access market.115 Taking account of market and competitive developments, it defined three distinct markets: Market A—​where no more than two operators are present or forecast to be present, which accounts for 9.5 per cent of UK premises; Market B—​i n which there is effective competition, accounting for 89.8 per cent of premises; and the Hull Area—​0.7 per cent of UK premises, where KCOM is the only significant provider. According to Ofcom, Market A tends to be in the most rural and remote parts of the country. As Ofcom found effective competition in Market B, it did not impose regulation in that market and removed regulation in those parts of Market B where there was currently regulation—​approximately 12 per cent of UK premises. In Market A, where it found BT to have SMP, it implemented a charge control at a level of CPI-​10.7 per cent until 31 March 2017.116 Business connectivity market reviews (BCMR)  In 2008, Ofcom conducted a review of the leased lines markets. It concluded that additional bandwidth categories should be defined for very high bandwidth traditional interface (TI) and high bandwidth alternative interface (AI) circuits, over and above those identified in 2004. On a geographic basis, it concluded that separate geographic markets for wholesale leased lines exist in the Hull area. In the rest of the UK, it found the markets to be national in scope, with two exceptions. The exceptions related to the markets for high bandwidth and very high bandwidth traditional interface symmetric broadband origination117 (TISBO). In these cases, it found that separate geographic markets existed in a newly defined Central and East London Area (CELA), and the rest of the UK (excluding Hull). Having defined the relevant product and geographic markets, it then found that in the UK (excluding Hull), BT had SMP in all markets except in the markets in CELA. Accordingly, it decided that the previous charge controls should be extended to cover low bandwidth alternative interface symmetric broadband origination (AISBO) and TI trunk services, in addition to low and high bandwidth TISBOs.118 Ofcom was intending to set the new charge controls to start when the old

115   Ofcom, ‘Review of the wholesale broadband access markets:  Statement on market definition, market power determinations and remedies’, 2014, at . 116   In January 2013, the Office of National Statistics (ONS) announced the outcome of its October 2012 consultation on RPI. The ONS concluded that the RPI ‘does not meet international standards . . .’. In light of this, Ofcom has decided to use CPI as the standard measure of inflation in its charge controls. 117   Transmission of voice and of data and data transmission is symmetrical when upload speeds are the same as download speeds. 118   Ofcom, ‘Leased lines charge control—​Statement’, 2009, at .

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ones expired. However, due to some accounting amendments that BT made to its regulatory accounts, which required detailed independent scrutiny ahead of setting the new charge controls, it had to delay the start of the charge controls. As such, whilst the review of BT’s accounts was taking place, it sought a commitment from BT that it would not increase prices in nominal terms and that the charge control would be backdated to 1 October 2008. In 2009, Ofcom set a charge control comprising of six baskets with a number of sub-​caps and other safeguards to reduce the likelihood of undue price discrimination. These charge controls ran until 2012 at which point, Ofcom conducted another BCMR.119 The main difference between the 2013 review and that carried out in 2008 was: • There were separate markets identified for regional and national TI trunk connectivity. In the previous review of the market Ofcom defined a single TI trunk market; • Ofcom defined a wholesale multiple interface (MI) market which included any service faster than 1Gbit/​s and any service delivered with wavelength-​d ivision multiplex (WDM)120 equipment at the customers’ premises, irrespective of bandwidth and interface; and • Ofcom determined that separate geographic markets existed (i) in the Hull area for all wholesale leased lines, and (ii) in a defined area of London and including Slough (the Western, Eastern, and Central London Area, or WECLA) for all the defined wholesale symmetric broadband origination product markets other than the low bandwidth (up to and including 8Mbit/​s) and very high bandwidth (622Mbit/​s) TISBO markets. Based on these revised market definitions, Ofcom found that BT had SMP in the AI, TI, and MI markets. It found though that the WECLA and very high bandwidth TISBOs were competitive. Ofcom also found BT to have SMP in regional trunk TI segments. In response to these SMP findings, Ofcom put in place a charge control with a duration of three years until 2016 with several sub-​c aps and safeguard caps comprising of two separate service baskets for wholesale services: • TI at RPI + 2.25 per cent—​covering low, medium, and high bandwidth services outside the WECLA, low bandwidth services within the WECLA, and regional trunk services at all bandwidths; and

119  Ofcom, ‘Business Connectivity Market Review’, 2013, at . 120   This technology can multiply by several times the bandwidth transmissible in an optical fibre. WDM equipment allows providers to aggregate traffic from different services and to use optical fibres efficiently in the core of their networks as demand for bandwidth continues to increase.

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• Ethernet at RPI –​11.50 per cent—​covering and including Ethernet services up to and including 1Gbit/​s outside the WECLA and Ethernet services above 1Gbit/​s outside the WECLA; • AISBO at RPI –​RPI on each relevant service—​covering AISBO services up to and including 1Gbit/​s in the WECLA. 2.15.1.7  Strategic review of digital communications and the future of economic regulation As set out above, ten years after the TSR, Ofcom launched a Strategic Review of Digital Communications (DCR). A key strand pertinent to fixed access regulation was however that given the increasing importance of digital communications services, there needed to be a strategic shift in the UK to large-​scale investment in more fibre, a step change in quality of service, and a continued focus on removing unnecessary regulation. To achieve this strategic shift to fibre, Ofcom set out that while competition (since the TSR) had focused on the provision of active121 access products designed to give other communications providers the ability to compete effectively downstream with BT, it would now consciously consider the appetite for investment in fibre via either pole or duct access.122 And to achieve the step change in quality, Ofcom said that it would set tough minimum quality requirements on Openreach with penalties when it fails to meet these standards. The normal market review process would be the vehicle to deliver these proposals. Below we consider the market reviews since the DCR and how the conclusions from it have filtered into the different market reviews. Wholesale narrowband market review  Following the DCR, in 2016, Ofcom carried out a review of the markets comprising of wholesale fixed telephone lines, call origination, ISDN30, ISDN2, and call termination.123 This review suggested that competition has delivered new services and increased choice to retail consumers. Therefore, Ofcom put forward proposals to significantly reduce the wholesale regulation that it applies to BT in these wholesale markets. These

121   Active products include the physical elements of the network (ie duct, access to poles, copper, fibre) and the electronic equipment to provide service. 122   ie Ofcom would now consider whether regulation should be based on passive products (just the physical elements of the network: duct, poles, copper, fibre) because in doing so, it may encourage competitors to invest in building competing networks to BT. 123   Ofcom, ‘Narrowband Market Review: Consultation on the proposed markets, market power determinations and remedies for wholesale call termination, wholesale call origination and wholesale narrowband access markets’, 2016, at .

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proposals were the subject of a consultation with a final statement published in November 2017.124 The review did however find that there was a need for protection for fixed voice-​ only consumers (those who do not take broadband or other bundled services). As such, Ofcom commenced a separate review of retail fixed voice-​only services (see Section 2.10). Wholesale local access (WLA) market review  Ofcom carried out a market review of WLA between March 2017 and March 2018. As in the previous review, Ofcom found BT to have SMP and so required BT to continue to provide access to LLU and VULA (amongst other services).125 It additionally decided to include a direction-​ making power enabling Ofcom to set appropriate quality of service standards on BT. It imposed a cost-​based charge control on the main form of LLU126 (MPF) and the supporting services used by BT’s competitors (referred to as ancillary services) but it removed the specific network access obligation and charge control on SMPF. In setting a cost-​based control, it said that it would seek to allow BT the opportunity to recover the costs of network deployment, to the extent such costs are efficiently incurred. In other words, if there were costs incurred in network expansion that provide customers with an improved quality of broadband service, then these should be considered in setting those controls. Ofcom recognized in the review that the PIA remedy it had imposed in 2010 suffered from some limitations. This meant that there had been limited take-​up of PIA to date in the UK. To make it easier and more cost effective for telecoms providers to invest in advanced, competing infrastructure (in line with the conclusion of the DCR), in December 2016 and April 2017 Ofcom published proposals to develop an effective remedy for access to BT’s ducts and telegraph poles, which were finalized in February 2018.127, 128, 129 These proposals are aimed to address concerns from BT’s 124   Ofcom, ‘Narrowband Market Review’, 30 November 2017, at . 125   Ofcom, ‘Wholesale Local Access Market Review—​Statement—​Volume 1—​Markets, market power determinations and remedies’, 2018, at . 126   There are two forms of LLU—​Metallic Path Facility (MPF) and Shared Metallic Path Facility (SMPF). MPF allows providers to offer both voice and broadband services. SMPF allows providers to offer only broadband services over the copper network. This means that one provider can provide broadband services to the customer while another provider supplies voice services on the same line. 127   Ofcom, ‘Wholesale Local Access Market Review: Initial proposals to develop an effective PIA remedy’, 2016, at . 128   Ofcom, ‘Wholesale Local Access Market Review: Consultation on duct and pole access remedies’, 2017, at . 129   Ofcom, ‘Wholesale Local Access Market Review: Statement—​Volume 3: Physical infrastructure access remedy’, 2018, at < https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_​fi le/​0 023/​112469/​w la-​statement-​vol-​3.pdf>.

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competitors about the absolute costs and time required to build ultrafast broadband networks at scale. Following consultation of the proposals, a final decision was published in March 2018. As regards VULA, while in previous reviews, there had been no explicit pricing controls (to encourage investment), this time around, Ofcom said that the controls of standard broadband services were unlikely to sufficiently constrain BT’s superfast broadband prices over the period of this market review.130 Consequently, it said that there was a significant risk that retail competition would be weaker and consumers would face considerably higher prices if there was no control on VULA pricing. In striking a balance between protecting consumers and competition in the short term while encouraging network investment, it concluded therefore that for the lower bandwidth VULA product, BT’s prices should be subject to a charge control rather than the VULA margin test (it set in 2015—​see WLA discussion in Section 2.15.1.6). However, it stated that BT would continue to have pricing flexibility on other higher bandwidth variants of VULA but because there are controls on the lower bandwidth service, it should provide sufficient protection to superfast broadband customers from the risk of higher prices, while allowing other telecoms providers to compete with BT for those customers as well as preserving BT’s incentives to invest. Wholesale broadband access market review  As set out above, the wholesale broadband access market sits between the retail broadband market and the WLA market. Given that remedies in the WLA market are still under consultation, it became clear that given the linkages between the two markets, there would be delays in implementing new controls in WBA from April 2017 (when the controls expire). As such, Ofcom asked BT to make a voluntary price commitment to cover the period between the expiry of the current controls and the commencement of the new controls. In August 2016, BT committed to keep prices in Market A to a level of CPI-​CPI to 31 December 2017. In June 2017, Ofcom issued provisional conclusions.131 As in the previous review, it identified two markets: Market A where no more than two operators are present and Market B in which there is effective competition. Ofcom said that the size of Market A, where BT has SMP should reduce to 2 per cent of UK premises from the previous 9.5 per cent. Given these findings, Ofcom proposed not to put a charge control in place on any WBA services as it

130   Ofcom, ‘Wholesale Local Access Market Review: Statement—​Volume 3: Physical infrastructure access remedy’, 2018, at . 131   Ofcom, ‘Wholesale Broadband Access Market Review: Consultation on market definition, market power determinations and remedies’, 2017, at .

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considers that BT’s retail national pricing and the level of competition in the rest of the country acts as a constraint to prevent consumers facing excessive retail prices in Market A. Business connectivity market review (BCMR)  In 2016, Ofcom again reviewed the BCMR.132 Ofcom concluded that there were two relevant product markets: • A  single product market for Ethernet and wavelength-​ d ivision multiplex (WDM)133 services because there was evidence that a chain of substitution links all such services and they could all be provided using the same physical access infrastructure. They referred to this product market as contemporary interface (or CI) services. They found however that there were differences in competitive conditions between geographic areas and so defined distinct geographic markets in wholesale CI services in each of the Central London Area (CLA), London Periphery (LP), Hull, and the rest of the UK. Based on differences in competitive conditions, Ofcom concluded that BT has SMP in the LP and the rest of the UK and KCOM has SMP in Hull. In relation to the CLA, Ofcom determined that there would be a sufficient choice of alternative infrastructure to ensure that end-​to-​end users will be protected by effective and sustainable competition and that BT did not have SMP in the region; and • a separate product market for TI services below 8 Mbits, because there is little prospect of competitive entry in the provision of these legacy products, whose volume is declining. Two geographic markets for TI services were found: one in the whole of UK except Hull where BT has SMP, and the other in Hull where KCOM has SMP. Based on these SMP findings, unlike in previous reviews, Ofcom decided that they would put in place two remedies to operate concurrently to promote competition in the provision of leased lines: • An active remedy:  A requirement for the SMP operator to offer functioning electronic services (based on the product definitions above) on regulated terms, including both the physical elements of the network and the electronic equipment; and • A passive remedy: A requirement for the SMP operator to offer its competitors access to unlit strands of its optical fibre, allowing CPs to provide the electronic equipment needed to light the fibre—​(‘dark fibre’). 132   Ofcom, ‘Business Connectivity Market Review: Final Statement’, 2016, at . 133   WDM allows a single fibre to carry several leased line services simultaneously.

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In previous reviews and following the conclusion from the TSR, reliance was predominantly based on active remedies but the view was taken in the 2016 BCMR that there should be a transition to passive remedies to provide incentives for efficient investment for BT and for rival infrastructure operators (in line with the conclusion from the DCR). In implementing these two remedies, Ofcom recognized that a dark fibre remedy would carry some risks relative to an actives-​only remedies package. These include the potential for inefficient entry incentivized by regulatory arbitrage opportunities, which could result from any inconsistencies between the pricing of active and dark fibre products. Given this, Ofcom determined that BT should provide dark fibre at a price consistent with its 1Gbit/​s wholesale Ethernet leased line services. More specifically, Ofcom specified that BT, from 1 October 2017, will be required to provide dark fibre at the same price as the 1Gbit/​s active service, minus the long run incremental costs of the active elements of that 1Gbit/​s service—​called the ‘active-​m inus’ pricing approach. Ofcom considered that this approach results in a charge consistent with the design of the active controls which it was imposing on BT (described below) and so would provide incentives for efficient investment for BT and for rival infrastructure operators. They argued that it should incentivize use of dark fibre where it provides benefits relative to active remedies and it should ensure that BT will continue to have a fair opportunity to recover its efficiently incurred costs. For the active remedy, as in previous reviews, Ofcom put in place a charge control with a duration of three years until 2019 with several sub-​caps and safeguard caps comprising of two separate service baskets for wholesale services comprising of a TI service basket (based on the product definition above) at CPI-​3.50 per cent and an Ethernet service basket (based on the product definition above) at CPI-​ 13.50 per cent. In addition, Ofcom proposed significant one-​off charge reductions to both BT’s Ethernet and TI charges to reflect that BT’s returns in these markets were significantly more than its cost of capital. In response, BT appealed Ofcom’s decision and alleged errors concerning market definition and alleged errors concerning the remedies imposed. In July 2017, the Competition Appeals Tribunal (CAT) issued a short statement quashing Ofcom’s decision in relation to its definition of the market.134 It has since provided its reasoning and has remitted matters back to Ofcom for reconsideration.135 2.15.1.8  Key considerations for fixed telephony access and interconnection As can be observed from the discussion above, the approach to fixed communications interconnection and access regulation has gone through a number of stages.

  British Telecommunications plc v Office of Communications (Market definition Ruling) [2017] CAT 17.   British Telecommunications plc v Office of Communications (Judgment Market Definition) [2017] CAT 25.

134 135

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Prominent features have however been the pattern of ‘rolling back’ regulation as competition takes hold and targeting regulatory controls where competition is ineffective. Since the TSR, many operators and in particular BT (in 2009) have started to adopt and invest in communications networks with the capability to provide superfast broadband. This has been driven by consumer demand for bandwidth. Investment in superfast broadband technologies is risky because of cost and demand uncertainty. Given the riskiness of this investment, regulators have had to strike an appropriate balance in ensuring investment incentives, promoting competition, and protecting consumers where competition is not effective or sustainable. The approach taken in the UK to ensuring investment incentives has involved what is termed ‘a fair bet’ approach. Under this approach, if, at the time of investment, the expected return is equal to the cost of capital, the firm should be allowed to enjoy some of the upside risk when demand turns out to be higher than expected (ie it allows returns higher than the cost of capital) to balance the fact that the firm will earn returns below the cost of capital if demand turns out to be low. In theory, the ‘fair bet’ approach should not undermine investment incentives and should provide the firm with a fair opportunity to recover its investment. Essentially this provides regulatory certainty to firms and means that investors can commit funds for investment with confidence that the regulator will not act in a way which would lead to the investor not having the opportunity to recover its costs. To encourage competition, the UK (since the TSR) has placed considerable focus on the provision of active access products136 designed to give other communications providers the ability to compete effectively downstream with BT. Further, Ofcom has continued to focus on ensuring equivalence of input and functional separation to ensure that competitors are treated in a non-​discriminatory manner. To further encourage investment, Ofcom has also given BT some pricing freedom in setting the wholesale price for VULA to account for the risk in investment and the initial small scale of adoption. However, it has done so because there is an ongoing constraint from current generation copper-​based broadband services (which are price regulated). By continuing to have price controls on current generation copper-​based broadband services, it reduces the risk of consumer detriment by constraining BT’s ability to charge excessive prices on superfast broadband. It also protects consumers during the change to superfast broadband and means that consumers of existing 136   The focus on ‘active’ wholesale products reflects Ofcom’s assessment in the TSR that investment in infrastructure by other network providers was unlikely. However, to safeguard the opportunity for further competition based on physical infrastructure access it implemented passive remedies (poles and duct access) and mandated sub-​loop unbundling (a type of unbundled access whereby a sub-​section of the local loop is unbundled. In practice this often means the competitor placing a small street cabinet with a DSLAM, next to a telco local copper aggregation cabinet using a ‘tie cable’ to connect to the last part of the local loop into customers’ homes).

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services are not made worse off by the adoption of new technology, and the price of these basic services provides a competitive constraint to the pricing of new services which are not price controlled. Whilst Ofcom’s overarching strategy has focused on active access products to promote competition in superfast broadband, following the DCR, it is now consciously testing the market to see if there is further appetite for investment in fibre through passive infrastructure access (PIA). In residential markets, Ofcom already requires BT Openreach to allow operators to deploy NGA networks in the physical infrastructure of its access network (ie via ducts and poles). This allows other operators to deploy their own fibre to serve customers on their own networks—​a n alternative to VULA to deliver superfast broadband. However, to date there has been no interest in using PIA by other communications providers unless PIA is also extended to the business market. The 2016 BCMR did consider whether the PIA remedy should be extended to the business market but the conclusion was to impose dark fibre and not duct access. The main reason was because most of the benefits of passive remedies could be achieved via dark fibre and a dark fibre remedy would allow Ofcom to manage the implementation risks during a transitional period whilst active remedies and passive remedies coexist. In contrast, with a PIA remedy, it would be more difficult to manage prices at different levels in the value chain to avoid creating incentives for inefficient entry while active remedies are an important part of the remedy package. Ofcom did however say that once competition based on dark fibre proves effective and, active remedies can be removed, the pricing of dark fibre and duct access could be made more compatible. It appears therefore that the intention following the DCR is that much more emphasis will be placed in the future on passive remedies (comprising of dark fibre and duct access) but the UK will need to go through a transition phase to get there, which involves running active and passive remedies concurrently.

2.15.2  Mobile interconnection regulation in the UK As mentioned above in Section 2.9, the government historically sought to encourage the development of competition by licensing a number of mobile operators. As with fixed services, interconnection has been a key issue. In particular, the charges offered to fixed operators to enable their customers to call mobile networks has often been the subject of much debate. In the 1990s, residential and business consumer organizations expressed concern to Oftel about the prices for calling mobile phones. Oftel recognized that due to the Calling Party Pays arrangement in the UK, all network operators have a monopoly position over the ‘termination’ of calls on their own networks. When someone wants to make a call to a mobile, or any other phone then the calling party

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has no choice but to call the network to which the called party has subscribed. This means that mobile operators, in common with other network operators, are able to set charges for call termination, without reference to significant competitive pressures. Given this, Oftel initiated an investigation. The main preliminary finding from this work was that BT’s prices for calls to Vodafone and Cellnet customers were too high which was mainly caused by Vodafone’s and Cellnet’s high termination charges. Oftel had the option to impose price controls but it recognized that such action would have a significant impact on the whole of the mobile market. This is especially so, given that the commercial strategy of most UK mobile operators was to subsidize handsets to encourage take-​up of service. Any potential price control on termination rates would have had a knock-​on impact on the pricing structure for handsets and calls from mobile networks. Given this, in March 1998, Oftel referred the issue of prices of calls to Vodafone and Cellnet to the then Monopolies and Mergers Commission (MMC).137 In December 1998, the MMC completed its investigation and concluded that there was insufficient competitive constraint on termination charges.138 It considered that the only effective means of remedying or preventing any adverse effects would be to impose a price control on termination. It thus proposed that Cellnet and Vodafone should reduce their weighted average termination charges by RPI –​9 per cent until 2001/​02. In February 2001, Oftel carried out a review of the price controls, noting that although the market had grown rapidly and at a rate much greater than that predicted, there was still an incentive for each of the mobile network operators (MNOs) to charge termination rates above the competitive price.139 In light of this, Oftel concluded that controls on termination charges on the four main mobile networks were needed to protect consumers and proposed a charge control of RPI –​12 per cent each year for the four years until March 2006.140 The MNOs objected to this proposal, stating that it was inappropriate to view call termination as a separate

137  Prices of Calls to Mobiles Statement, March 1998, at . The MMC was first replaced by the Competition Commission (CC), which has since been replaced by the Competition and Markets Authority (CMA). 138   Reports on references under section 13 of the Telecommunications Act 1984 on the charges made by Cellnet and Vodafone for terminating calls from fixed-​l ine networks, at . 139   Review of the Price Control on Calls to Mobiles, February 2001, at . 140  Review of the Charge Control on Calls to Mobiles, 26 September 2001, at .

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market, as it was just one of a bundle of interconnected services purchased by customers; that there was a single market for the provision of all mobile services in the UK; that the market was competitive; and that none of the MNOs had the ability to earn excessive profits from call termination because the competitive pressures they all faced in respect of the totality of the services they offered competed away any such profits. Oftel referred the matter to the CC who published its findings in December 2002.141 The CC agreed with Oftel on the matter of call termination being a separate market and concluded that competitive pressures at the retail level did not constrain termination charges. Reviewing the termination charges offered by the MNOs, the CC submitted that they operated against the public interest and accordingly recommended that for each MNO there should be a price cap for fixed to mobile calls and a cap for mobile to mobile calls to prevent the MNOs loading charges disproportionately on to one or other call type. It determined that each of the MNOs should be required to reduce the level of its average termination charge by 15 per cent in real terms before 25 July 2003. And it also determined that O2 and Vodafone should be subject to further reductions in their average termination charges of RPI –​15 per cent and that Orange and T-​Mobile should also be subject to further reductions in their average termination charges of RPI –​14 per cent until March 2006. Therefore, the reference to the CC resulted in tighter charge controls on the MNOs in comparison with what Oftel had proposed. The New Regulatory Framework for Telecommunications regulation in 2003 meant however that Ofcom had to carry out an early review of the situation.142 In June 2004, it published its market review of wholesale voice calls terminated on individual mobile networks.143 This covered not only the four MNOs discussed above but also calls terminated on Hutchison 3G UK (H3G) -​a 3G MNO. Ofcom’s view was that each MNO in the UK had significant market power in a separate market for voice call termination on its network. As such it proposed that in respect of Vodafone, O2, T-​Mobile, and Orange for their 2G call termination

141   Reports on references under section 13 of the Telecommunications Act 1984 on the charges made by Vodafone, O2, Orange, and T-​Mobile for terminating calls from fixed and mobile networks, at . 142   See further Section 2.15 and Chapter 4. 143   Review of mobile wholesale voice call termination markets—​E U Market Review, at and Wholesale Mobile Voice Call Termination: Proposals for the identification and analysis of markets, determination of market power and setting of SMP Explanatory Statement and Notification, 19 December 2003, conditions available at .

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services, that they should (a) provide network access for the purposes of 2G call termination; (b) not unduly discriminate in the provision of such access; (c) publish a Reference Offer; (d) give prior notification of price changes; and (e) reduce termination charges in line with the proposed charge controls by the CC. In respect of 3G voice call termination services, it recommended that there should be no ex- ​ante regulation although H3G was required to give advance notification of price changes and provide Ofcom with details of call volumes. Given that Ofcom effectively designated all five MNOs as having significant market power, H3G subsequently appealed its SMP designation to the Competition Appeals Tribunal (CAT) on the grounds, among others, that Ofcom did not carry out sufficient analysis of prices to entitle it to come to a decision that H3G had significant market power and, failed to take account or sufficient account, of the ability of BT to restrain pricing, in reaching its conclusions.144 The CAT, in November 2005, found that Ofcom erred in its SMP determination since it did not conduct a full assessment of the extent to which BT had countervailing buyer power. As such the CAT remitted the decision back to Ofcom to reconsider. In March 2007, Ofcom published its assessment and concluded that there are separate markets for the provision of wholesale mobile voice call termination in the UK to other communications providers and that each of the five MNOs has SMP in the market for termination of voice calls on its network.145 On this basis, Ofcom determined that charge controls (applying for four years from 1 April 2007146) should be imposed on the supply of mobile call termination by each of the five MNOs, and those controls should apply without distinction to voice call termination whether on 2G or 3G networks. Both BT and H3G appealed Ofcom’s MCT Statement. H3G appealed Ofcom’s determination that H3G has SMP and the price control; while BT appealed the level of the price control only. In May 2008, the CAT upheld Ofcom’s finding of SMP for H3G, dismissing the non-​price control matters arising in H3G’s appeal.147 That judgment was appealed to the Court of Appeal, which found in favour of Ofcom

 See Hutchison 3G (UK) Limited v Ofcom [2005] CAT 39, at para 35.   Mobile Call Termination Statement (MCT), March 2007, at and Assessment of whether 3G holds a position of SMP in the market for wholesale mobile voice call termination on its network, March 2007, at . 146   Given that the then existing charge controls were due to expire less than one week after publication of the Ofcom statement, Ofcom decided to impose new controls from 1 April 2007 but to adjust the level of the year-​one (1 April 2007 to 31 March 2008) controls by weighting them as though they applied for only 10 of the 12 months of the year one control and as though for two of the 12 months the present average charges applied. 147  See Hutchison 3G (UK) Limited v Office of Communications (Mobile Call Termination) [2008] CAT 11. 144 145

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and the interveners, BT and T-​Mobile, and upheld the CAT’s decision rejecting H3G’s challenge.148 On 18 March 2008, the CAT referred various ‘price control matters’ to the CC. In January 2009, the CC issued its determination on mobile call termination charges. This resulted in the charges being reduced even further than Ofcom’s original 2007 statement. Table 2.5 shows the CC’s determination of charges in real 2006/​07 prices (with the original charges set in the 2007 MCT Statement shown in brackets).

Table 2.5  CC Determination of charges (pence per minute charges) Operator

2007/​08

2008/​09

2009/​10

2010/​11

Vodafone & O2

5.2 (5.5)

4.7 (5.4)

4.4 (5.2)

4.0 (5.1)

T-​Mobile & Orange

5.7 (6.0)

5.0 (5.7)

4.5 (5.4)

4.0 (5.1)

H3G

8.9 (8.9)

6.8 (7.5)

5.5 (6.7)

4.3 (5.9)

The European Commission also began a public consultation on the regulatory treatment of fixed and mobile termination rates in the EU. The responses of the 2G/​3G MNOs had a number of factors in common. In particular they argued for symmetric MTRs in the same national market, although they argued that there is not a ‘one size fits all’ approach across the EU. They argued that MTRs and fixed termination rates (FTRs) should be separate, as there are legitimate cost differences between the two sectors. They suggested that MTRs should include some provision for the recovery of fixed and common costs because not doing so would lead to fixed or common costs being recovered in other less efficient ways, potentially to the detriment of consumers. In contrast, H3G proposed that symmetric zero termination rates (Bill and Keep) were the best option for the future termination regime. It argued though that until this is introduced, small or later market entrants should be allowed a higher termination rate. This is because H3G believed that incumbent networks had an incentive to engineer an on-​net/​off-​net retail price differential at the retail level, to deter calls to competing networks.149 To compete and attract mobile subscribers, it argued that smaller networks need to set their off-​net prices at the same level as the larger networks on-​net price. However this can be unprofitable if the on-​net prices are below the level of the regulated MTR. It further argued that because smaller operators are ‘forced’ to offer low off-​net call prices this leads to a

 See Hutchison 3G (UK) Limited v Office of Communications [2009] EWCA Civ 683.   ‘On-​net’ refers to traffic within the same mobile network ie between customers on the H3G network. ‘Off-​net’ is when traffic crosses to another network eg a call from the H3G network to a Vodafone customer. 148 149

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large amount of off-​net traffic and therefore a net outflow of traffic from the smaller network. Thus if MTRs are symmetric, this disadvantages the smaller operator. H3G therefore argued that a move to Bill and Keep would level the playing field, but suggested that in the transition to Bill and Keep smaller operators should receive higher MTRs to counter the impact of the outflows. The final Commission Recommendation on termination suggested a pure LRIC cost methodology.150 In essence, the Commission suggested recovering elements of common costs not from termination, but from the competitive retail side of the mobile market. This approach would reduce the headline rate of termination charges, particularly MTRs, then currently in place across the EU, potentially by a significant amount. It was recognized however that such a shift could affect mobile retail prices, as MNOs would seek to recover costs from their retail customers that were no longer recoverable from call termination charges. In the context of all this debate and in anticipation of the mobile call termination charges expiring in March 2011, Ofcom published a consultation document in May 2009,151 which considered the different approaches that may be taken towards setting MTRs. It acknowledged that in arriving at a decision on the best approach, it required to take utmost account of the EC Recommendation but it must do so in the context of considering the effects on all market participants. For this reason, it considered a much broader set of options than that set out by the Commission. Based on the responses to the May 2009 consultation and a second consultation in April 2010,152 Ofcom, in April 2011153 proposed the use of the pure LRIC method to set regulated rates. It proposed that after a single-​year transitional period, a symmetric rate would apply across the four mobile networks. In 2014, Ofcom launched its consultation for MTRs for 2015/​18.154 Based on responses to this consultation, in March 2015155 Ofcom concluded that it would set

150   Commission Recommendation on regulatory treatment of fixed and mobile termination rates in the EU C(2009) 3359 final, at . 151   Ofcom, ‘Wholesale mobile voice call termination: Preliminary consultation on future regulation’, 2009, at . 152   Ofcom, ‘Wholesale mobile call termination review (second consultation)’, 2010, at . 153   Ofcom, ‘Mobile termination review statement’, 2011, at . 154   Ofcom, ‘Mobile call termination market review 2015–​18’, 2014, at . 155   Ofcom, ‘Mobile call termination market review 2015–​18: Statement on the markets, market power determinations and remedies’, 2015, at .

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a single MTR cap for all mobile networks with SMP and to set the MTRs with reference to the LRIC in each and every year of the cap. This represented a change from the previous market review where the charge control only applied to the four largest mobile networks and smaller mobile networks were subject to an obligation to provide network access on fair and reasonable (F&R) terms and conditions, including charges. Ofcom’s reasoning for this change was that imposing a charge control on all mobile networks with SMP will be more effective than the F&R approach in remedying the harm caused by MTRs set above the efficient cost benchmark. In March 2018, Ofcom set out its decision on the regulation of the wholesale MCT market for the period 2018 to 2021.156 As in the previous review, Ofcom imposed a single maximum cap on MTRs based on LRIC for all mobile providers with SMP.

2.15.3  Key issues—​interconnect and access charges The effectiveness in the development of a competitive telecommunications environment is heavily reliant on the agreed terms of interconnection and access. Establishing a sustainable interconnect and access regime is hence probably one of the most important tasks in developing a regulatory framework for telecommunications. The role of the NRA in setting these charges, is critical in ensuring that the industry has confidence in the interconnect and access charge levels. To prevent the dominant operator from abusing its position, the NRA must have the appropriate powers and penalty mechanisms to control for this. Economic theory states that prices should be set in relation to costs. The traditional use of fully allocated costs, although simple to implement means however that interconnecting operators could receive the wrong price signals. The general shift towards the use of incremental costs represents an improvement on the status quo although it can be argued that it is difficult to implement and to monitor. The UK access and interconnection regime has gone through several stages of development and the liberalization and technological developments of the market have necessitated the need for fresh approaches. These could be considered to better serve the industry as they maximize the degree to which markets decide charges and so reduce as far as possible the inevitable distortionary intervention by the regulator.

156  Ofcom, ‘Mobile call termination market review 2018–​21:  Final Statement’, March 2018, at .

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However, in relation to termination charges on mobile networks, there has been considerable debate and resistance from the mobile operators to accept charge controls on termination. In the past few years, they have been more willing to accept controls but developments in this sector (such as the 2016 merger between BT and EE, the debate on 5G, and the increasing usage of Over-​ the-​top services157) means that the debate will likely continue for some time to come and could be further complicated by the emergence of fixed-​mobile convergence.

2 .16  CONC LUDING R EM A R K S This chapter has provided an overview of the economics of telecoms regulation encompassing the economic theory of regulation as well as the application of this theory to the UK communications industry. The 1980s and 1990s were a landmark era in the history of communications. This is not just because of the important technological changes that occurred or the growing number of services and applications available to consumers, noteworthy though these are, but because of the steps taken along the road to liberalization. Where once communications was seen as the monopoly preserve of state-​owned enterprises, it is now recognized as an industry where competition can and should be allowed. The communications sector as a whole is fast-​moving in terms of both technological and strategic development. As the market develops and convergence takes hold there will be a multitude of pricing packages on the market offering consumers more choice than ever before. Competitors will enter and exit and the fight for market share will continue. This will inevitably raise a number of challenges for regulatory policy. In particular, the emergence of fixed mobile convergence and quad play offerings may mean that new innovative economic regulatory policies will be required to protect consumers and encourage competition and investment. As more and more consumers take up multi-​play bundles that include voice-​over-​broadband, the costs per customer of the public switched telephone network (PSTN) will increase rapidly. One of the options for dealing with this is to switch the network off, which would alter the cost basis for the delivery of fixed line services and could fundamentally change the competitive landscape.158 The migration of consumers from LLU to NGA (and potentially to fibre-​to-​t he-​home (FTTH) products) may require a different approach to promoting competition. For

  Such as WhatsApp, Viber, Skype.   

157

  BT has announced its intention to do this by 2025.

158

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example, passive remedies such as access to ducts or dark fibre may become more important. In addition, as the UK Government prepares to leave the European Union, a key consideration will be whether the European legal frameworks governing communications in the UK will need replicated or replaced in UK legislation. All these issues will play out over the next few years. The forces of competition and technological developments, alongside the emergence of new innovative economic regulatory policies mean that the future of communications continues to be very exciting!

9

Part II REGUL ATORY REGIMES

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3 THE TELECOMMUNIC ATIONS R EGIME IN THE UNITED KINGDOM Ian Walden, Helen Kemmitt, and John Angel

3.1 Early History of the Development and Regulation of the Telecommunications Industry  3.2 Development of the Industry  3.3 Development of Regulation  3.4 Key Issues  3.5 Concluding Remarks 

101 108 111 133 145

3.1  E A R LY HIS TORY OF THE DE V ELOPMENT A ND R E GUL ATION OF THE TEL E COMMUNIC ATIONS INDUS TRY 3.1.1  The telegraph In a sense the early history of telecommunications begins with the telegraph.1 Telegraph messages are conveyed over distances but for most of the way they take a non-​material form. Early telegraphs relied on flashes of light from heliographs, or on the movement of flags or signalling arms on telegraph towers. Messages were conveyed over distances in code and then converted back into written format at the far end. Initially the economic and regulatory effects of the early telegraphs were not significant. However, from 1825 the development of the railways had a significant effect:  the railways were large organizations with a need for communications. Their signalling systems were a specialized form of telegraph.

  See generally Standage, T, The Victorian Internet (London: Phoenix, 1999).

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Between 1835 and 1844 the electric telegraph was introduced,2 and electric telegraphs made it possible to send letter-​like objects in non-​material form and this technology made it possible to send ‘telegrams’ on a commercial and affordable basis. The railways had a continuing demand for telegraphs and their expanding national networks gave them the physical wayleaves over which to convey messages for others, as well as obligations to allow others to enter onto their land and build telegraph lines.3 Private parties that build such systems were also required to provide access to their telegraph services to ‘all persons alike, without Favour or Preference’, an early version of net neutrality.4 The years of telecommunications had begun.

3.1.2  Regulation of telegraphs Postal services had been within the control of the government since the mid 1600s. The general Post Office (GPO)5 was a government organ and had a monopoly of the sending of letters. The development of the electric telegraph threatened to move control away from the government and into commercial hands. The Telegraph Act 1863 was therefore introduced as a means of controlling the activities of these privately owned companies. Subsequently, the Telegraph Acts of 1868 and 1869, respectively gave government the power to acquire private telegraph services and then the exclusive privilege to provide such services. The former was justified on the basis of the public interest in a ‘cheaper, more widely extended, and more expeditious’ telegraphy system (preamble), while the latter on the need to reduce the cost of such nationalization. The Telegraph Act of 1869, although introduced before the invention of the telephone, played a significant part in the history of the setting up of telephone systems in the UK. The 1869 Act conferred a monopoly on the Postmaster General (PMG) of all telegraph business (s. 4). From that time no other body could operate such a business without a licence from the PMG. The key points which arise from the early Telegraph Acts were: • The Acts were founded on the principle that telegrams were letters over which the GPO had a monopoly.

2   Wheatstone and Cooke patented their invention in 1837 based on electromagnetic impulses travelling over wires. 3 4   The Railway Regulation Act 1844, s XII.   Ibid, at s XIII. See further Chapter 15. 5   As an institution, the ‘General Post Office’ was established by Oliver Cromwell in 1657.

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• Companies and individuals were allowed to run their own telegraph systems on their own land for their own internal purposes but not to provide services to others. • There were arrangements for licensing companies and individuals to run their own telegraph systems. • There were rules about the conduct of telegraphs including, for example, the confidentiality of what was conveyed, interference with telegraphs. • There were provisions about the construction and installation of telegraphs (especially telegraph poles), compulsory acquisition of land, arrangement for digging up streets, provision for running wires over private land, rights to cross railways and canals, etc. In the infancy of any telecommunications technology, for example when networks are being installed, there are powerful arguments for monopoly. There are advantages in allowing the concentration of resources in one organization which can use its revenues to develop the business extensively. The infant telegraph business shared facilities with the postal business and each benefited from the economies this generated by using common investment and personnel. Also, the concept of a ‘public service’ took a powerful hold in the minds of those who thought about telecommunications. Not surprisingly, the GPO took a monopoly of telegraphs and set up its own telegraph network. A few organizations, such as Lloyds and the railways, ran their own telegraphs under strict GPO supervision.

3.1.3  The beginnings of the telephone industry In 1876 the telephone was invented by Alexander Graham Bell. The first telephone company to be formed in the UK, later known as the United Telephone Company, opened a privately owned telephone exchange in London in 1879.6 Initially the GPO did not regard the telephone as a threat to their national telegraph network and allowed telephone systems to develop in local areas. However, in 1880, it was held that a telephone conversation was a form of telegraph and therefore all telephone companies were required to have licences under the Telegraph Act.7 Faced with a choice of either operating the telephone systems itself or licensing firms to do so the PMG decided to issue licences to existing telephone companies, such as the National Telephone Company (NTC). These companies were allowed

6   See generally BT Archives, available at . 7   AG v Edison Telephone Company of London (1880) 6 QBD 244.

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to operate telephone systems under certain conditions, for example they were restricted to the areas in which they were already operating. The licences required the payment of a royalty to the PMG and gave the PMG an option to purchase the telephone undertaking at the end of a specified term. This policy was further relaxed in 1882 when the PMG decided to grant licences to operate telephone systems to all responsible persons who applied for them, even where a Post Office system was already established. This was a reversal of the previous policy on the ground that ‘it would not be in the interest of the public to create a monopoly in relation to the supply of telephonic communication’.8 There was a further change in the position of the PMG when he realized that the developing telephone systems were seriously affecting the revenue of the telegraph service. There were also complaints about the quality of the NTC’s service and the accumulation of its overhead wires in towns. In 1892, the government decided that the trunk line system should be owned by the State and in 1896 the PMG took over the trunk lines of the NTC. The NTC was restricted to providing service in local exchange areas and it was decided that no further national licences would be issued. Intercommunications were established between exchange customers of the Post Office in one area and those of the NTC in another. In 1905, the PMG and the NTC agreed conditions for the transfer of the NTC’s undertakings to the Post Office. From this time the Post Office and the NTC began to work towards the unification of their two systems. Intercommunication was possible between subscribers to both systems in the same local area throughout most of the country. On 1 January 1912, the PMG took over the system of the NTC and from this date the Post Office became the monopoly supplier of telephone services throughout most of Britain, with a few exceptions. The first statutory recognition of telephones as a distinct business from the telegraph was the Telephone Act 1951, which granted the PMG the power to make regulations governing ‘the terms and conditions on which the use of means of telephonic communication provided by him (whether through the medium of the public telephone system under his control or otherwise) will be permitted and for the general conduct of telephonic business carried on under his control’.

3.1.4  The situation in Hull The telecommunications market in Hull has developed in a different way from the rest of the United Kingdom. The reason for this can be, in part, traced back to the Telegraph Act 1899. This Act conferred powers on municipalities to borrow

  Henry Fawcett, Postmaster-​G eneral, HC Deb 17 July 1882 vol 272 cc711-​2 .

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money for the establishment of local telephone systems under licence from the PMG. The PMG maintained the right to purchase any local authority system after a period of years. Thirteen authorities took out licences but only six set up telephone systems. One of these authorities was Hull Corporation (the forerunner of Hull City Council), which was granted its licence on 8 August 1902. This licence was conditional upon it embracing the same exchange area as that covered by the NTC. For a number of reasons, 9 all of these licences with the exception of the one granted to the Hull Corporation lapsed within a few years. Hull Corporation’s licence was due to expire in 1911 together with that granted to the NTC. By this time the Post Office network was so small within the Hull area that the Post Office had limited local commercial interest within the area and was content to grant a new licence to Hull Corporation on the condition that it acquired the plant and equipment used in the NTC network. This occurred and a new licence was finally issued in 1917 expiring on 31 December 1932. A  succession of licences followed. The only substantial change was the replacement of Hull Corporation by Hull City Council in 1974. In 1984, the City Council was granted a licence under the 1984 Act. The licence was transferred to Kingston Communications (Hull) PLC10 in 1987, a company wholly owned by the City Council.11 This rather unique situation in Hull has been very important to telecommunications regulation in a number of ways, including: • it showed that a small operation that did not enjoy economies of scale could provide an efficient and cost-​effective service; and • Kingston Communications had a working interconnect which enabled messages sent via one operator’s system (ie Hull’s) to be conveyed by another operator’s system (ie BT’s) and this provided the critical precedent for the Mercury/​BT interconnect.12 KCOM no longer has a monopoly, although Ofcom has designated it as having ‘significant market power’ in respect of certain services, but the company has remained popular locally and is in some senses a symbol of local pride.

9  eg some local telephone users discovered that competition sometimes meant having to rent two telephones. 10   The name changed to KCOM Group PLC in 2007. 11   The Group was partially floated in 1999 with the City Council retaining a 44.9% stake. The City Council sold its remaining shares in 2007 and the company changed its name to KCOM. 12   See further Chapter 8.

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3.1.5  Evolution of the GPO The first half of the twentieth century saw the development of the GPO Public Switch Telephone Network (the PSTN) and the steady atrophy of the original GPO’s telegraph business. Technology advanced significantly with automatic switching, ie mechanical telephone exchanges in place of people with earphones putting plugs in holes, long-​d istance conveyance, undersea cables, and the application of radio. In the 1950s, it became apparent that the position of the GPO as a government department headed by a political PMG was unsatisfactory. Decisions were being taken for political reasons and money was controlled by the Treasury as public expenditure, not on a commercial basis. There were no proper accounts, only records on what public money had been collected as call charges and when that money had been spent. Under the Post Office Act 1961, the GPO as a whole was converted into a government ‘trading fund’, which meant that it produced rudimentary commercial accounts, a balance sheet, etc. This produced a radical change within the organization but there was no legislation as such to implement the change. In March 1965, the PMG, Anthony Wedgewood Benn, wrote to the Prime Minister proposing that studies be undertaken to look at converting the Post Office into a nationalized industry. It was decided that there should be one corporation split into two divisions: Post and Telecommunications. Under the Post Office Act 1969, the Post Office ceased to be a government department and became established as a statutory corporation headed by a chairman appointed by the government. The position of Postmaster General was abolished. This could be viewed as the start of the long process of liberalization. The Act formalized the telecommunications monopoly by giving the new Post Office ‘exclusive privilege’ to run telecommunication systems. It described the exclusive privilege in terms of ‘running systems for the conveyance through the agency of electric, magnetic, electromagnetic, electrochemical or electro-​mechanical energy of—​ (a) speech, music or other sounds; (b) visual images; (c) signals serving for the impartation (whether as between persons and persons, things and things or persons and things) or any matter otherwise than in the form of sounds or visual images; or (d) signals serving for the actuation or control of machinery or apparatus.’ (s 24) The 1969 Act was innovative in attempting to define what was meant by the running of a telecommunication system. This definition was replicated in section

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4(1) of the Telecommunications Act 1984, while the concept of running a telecommunication system remained the foundation of the regulatory system until the Communications Act 2003. The next logical step would have been for the government to take over the licensing function. However the government did not do this; instead it surrendered all licensing powers to the new Post Office. The Post Office was given powers to license other telecommunication systems. The labour-​intensive, low-​tech, and traditional postal business had little in common with the high-​tech, capital-​intensive, and dynamically expanding telecoms business. The common ground was a shared history, common pool of employees, and vested interests in protecting its position. In 1977, the Carter Committee report recommended a further separation of the postal and telecommunications services of the Post Office and their relocation under two individual corporations.13 This led to the renaming of the Post Office Telecommunications as British Telecom in 1980 and to the introduction of the British Telecommunications Act 1981. While postal and telecommunications services remain separate, the Post Office now offers its own range of communication services,14 while the regulator for both is Ofcom, having assumed responsibility for the postal sector in 2011.15

3.1.6  Radio and mobile communications In the UK, the use of radio waves to communicate is referred to as ‘wireless telegraphy’. To the GPO, radio was just another form of telegraphy. It therefore fell inside the GPO monopoly, and, apart from specialized regulatory requirements, such as frequency allocation, the GPO treated radio like any other form of telecommunications. The legislation regulating radio was first consolidated under the Wireless Telegraphy Act 1949, while subsequent amendments were repealed and replaced by the Wireless Telegraphy Act 2006. The 1949 Act conferred licensing powers on the GPO which then licensed the use of radio for entertainment and allocated frequencies for national purposes, for example the police and the armed forces. The GPO retained for itself a monopoly over the uses of radio frequencies for third-​party communications. Various transport operators, in particular the large nationalized industries and also smaller firms like taxi operators, were licensed to run radio links. Some of these developed into ‘closed user groups’ where one operator handled communications on behalf of several different people and took messages

  Report of the Post Office Review Committee (Cmnd 6850), 1977. 15  .   Postal Services Act 2011, s 28(1).

13 14

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on their behalf. Paging was also authorized. All the licensed operators were on a small scale and the GPO ran the main national radio and telephone networks. Some of these radio licences permitted connections into the public switched telephone network, but these were normally indirect connections through human operators to private ‘call handling’ services. By 1979, the GPO woke up to the fact that these small operators were threatening its own operations and started to develop its own telephone systems. The GPO systems began to enjoy the economies of scale by using facilities installed for ‘telegraphs’ and as a result the competition struggled.

3. 2  DE V ELOPMENT OF THE INDUS TRY During the last two decades of the twentieth century, the global telecommunications market experienced a period of unprecedented growth and the telecommunications industry changed almost beyond recognition. Some of the main developments during this period are highlighted below.

3.2.1  Developments in the fixed market 3.2.1.1  The Duopoly Period (1984–​1991) In 1979, a Conservative government led by Margaret Thatcher came to power with a commitment to reduce waste and bureaucracy. It was in this political climate that the British Telecommunications Act 1981 came into force. The 1981 Act allowed the licence of the second fixed network and in July 1981 an application to provide a business transmission system was made by Cable & Wireless,16 Barclays Bank, and British Petroleum. This new venture was called Mercury Communications Limited and it was granted a licence in February 1982. Mercury was intended to provide a complete fixed network in direct competition to BT. The government recognized that the creation of a new network required a very large investment and there would be a long period before the investment would yield a return. It felt that Mercury needed time to install and consolidate its national network; and it also felt that BT needed time to adjust to competition. The government therefore gave an assurance that for the foreseeable future it would not licence any more additional national public telecommunication networks. The government hoped that Mercury would become sufficiently strong to provide competition to BT at all levels. Mercury’s first competitive telecommunications services were provided in 1983. However, it quickly adopted a strategy of

  The government sold all of its shares in Cable & Wireless in three stages between 1981 and 1999.

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connecting directly only a limited number of large business users and attracting smaller users to its network for long-​d istance and international calls only. It showed little motivation to invest in a national network and by 1991 Mercury had secured only three per cent of the market. 3.2.1.2  The early 1990s and beyond This situation changed dramatically over the next decade with the Duopoly Review and the decision to issue licences to other operators. As from the early 1990s a number of new national public telecommunications operators (PTOs) were licensed. From the end of the Duopoly Period to the end of September 2000, the government received 823 applications for licences to run new telecommunications systems. It had granted 632 licences and 102 were under consideration.17 There were 140 PTOs providing domestic and international services. A number of ISPs, in addition to BT, had also entered the market and were providing internet access including AOL and Freeserve. 3.2.1.3  Cable TV networks Nationwide roll-​out of the cable network first began in the early 1980s with the licensing of cable TV networks. The country was divided into geographical franchises and licences were awarded on the basis of tenders. Initially the operators of these licences were not allowed to provide telecommunications services such as voice telephony; this changed with the Duopoly Review. Progressive consolidation between individual franchisees (which were licensed by the Cable Authority and then the Independent Television Commission) culminated in the market being served by two major operators, ntl and Telewest.18 These two operators merged in March 2006. Shortly after this, in July 2006, the merged entity ntl:Telewest announced its acquisition of Virgin Mobile and its re-​launch as Virgin Media. Virgin Media started offering super-​fast broadband services at the end of 2008.

3.2.2  The development of mobile The development of cellular technology opened the way to the expansion of mobile telephony in the 1980s. The first national cellular radio network licences were granted to Cellnet19 and Racal Vodafone20 in May 1983, although they did   Communications Liberalisation in the UK, March 2001, Department of Trade and Industry.   A small number of franchises remained independent—​i ncluding Wight Cable covering the Isle of Wight and Small World in Scotland. 19   Securicor sold its stake in Cellnet to BT in 1999. BT Cellnet was demerged from BT and floated in 2002, when it changed its name to mmO2, and was purchased by Telefónica in 2006. 20   Vodafone began as a division of Racal Electronics plc in the early 1980s. 20% of its shares were floated in 1988 and the remaining shares in 1991. 17

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not launch their analogue services until 1985, creating another duopoly. The first mobile telephone call in the UK was made on 1 January 1985. Towards the end of 2006, mobile was the most prevalent telecoms technology with the proportion of households with access to a mobile phone overtaking the proportion of households with a fixed line. 21 There were initially restrictions on the retailing of mobile airtime by the mobile operators directly to the public. This led to a growth in the importance of High Street retailers, including Dixons, Currys, and the Carphone Warehouse. These dealers were primarily sellers of mobile hardware and did not themselves offer airtime contracts to their customers. However, because of the expectations of customers buying a mobile phone to complete all the necessary contractual arrangements at the same time, it became the dealer who ‘arranged’ the airtime contract. Mobile operators became increasingly reliant on the High Street chains to market their services. In 1993, two further licences were granted to Orange and Mercury One-​2-​One22 allowing these companies to operate 2nd Generation (2G) or GSM (global system for mobile communications) networks. To allow the mobile operators to compete on an equal basis Vodafone and Cellnet were granted reissued licences which were modified in order that they could provide their services via 2G networks. In 2000, the government held an auction for licences to operate 3rd Generation (3G) spectrum. 3G networks supported higher speed call services and mobile data services. The auction process resulted in five 3G licences being granted in 2000, with one to a new entrant TIW UMTS (UK) Ltd (now operating as 3). The other licences were issued to Vodafone, One2One, Orange, and BT. The process raised over £22 billion. Those who bid successfully were required to provide a 3G network that would cover at least 80 per cent of the UK population by 2007. In addition to the mobile network operators a number of established retail brands, such as Tesco and Virgin Media, entered the market as MVNOs (mobile virtual network operators). There are currently over seventy such MVNOs in the UK. The next generation of 4G broadband cellular network services were first launched in the UK in October 2012 by Everything Everywhere, but are now enabled on two-​t hirds of mobile subscriptions.23 The next iteration, 5G services are expected to be launched by 2020.

  Ofcom consultation, ‘Mostly mobile’, 8 July 2009, at 2.12.   One-​2-​One was purchased by Deutsche Telekom in 1999 and became T-​Mobile, which merged with the Orange UK business in 2010, to form Everything Everywhere, which was sold to BT in 2016. 23   Ofcom, ‘Communications Market Report 2017’, 3 August 2017. 21

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3.2.3  The broadband market One of the key issues for the first quarter of the twenty-​first century is widening access to broadband networks, ie high capacity data links, whether fixed or wireless. Broadband is seen as a key driver of economic growth and competitiveness. However, while ‘broadband’ is a term that is much used there has been some disagreement over what it actually means. Ofcom defines it as a service that provides ‘an always on capability, allows both voice and data services to be used simultaneously and provides data at speeds greater than a dial up connection’.24 While broadband can be accessed by a variety of means, the fixed networks, particularly BT’s infrastructure and Virgin Media’s cable network, whether using DSL or optical fibre, are the major UK providers.25 While these networks are constantly being upgraded to be capable of offering ever higher speeds, there continues to be controversy over what consumers actually experience, which has attracted the attention of regulators.26

3.3  DE V ELOPMENT OF R E GUL ATION 3.3.1  The start of competition—​The British Telecommunications Act 1981 The government started the liberalization of the telecommunications sector in 1980 in a rather cautious manner. One of the first steps was to relax the Post Office monopoly over value added services and terminal equipment.27 This gave customers choice over the apparatus which they could connect to the network. This ranged from simple telephones to more sophisticated equipment such as private branch exchanges. The British Approvals Board for Telecommunications (BABT) was established to provide independent evaluation and approval of such privately provided equipment and the British Standards Institute (BSI) was given a new role in respect of setting independent standards. The Post Office was required to allow connection to its network of any equipment approved by BABT after testing and approval against defined standards.

  Ofcom Statement, ‘Review of the Wholesale Broadband Access Markets’, 26 June 2014, at 1.20.   The cable operator Virgin Media is not deemed to be nationally dominant and so the regulator cannot force them to open up their network to other service providers in the same way that BT has had to offer wholesale products to players such as TalkTalk and Sky. 26   See further Chapter 9, at Section 9.2.1. 27   Terminal equipment is customer premises apparatus. For regulatory purposes the boundary has been drawn at the socket, or test jack frame, where a connection can be made between the chain of apparatus on a customer’s premises and the chain of apparatus back to the telephone exchange and beyond the telephone networks. 24 25

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The British Telecommunications Act 1981 separated the Post Office’s functions of telecommunications and postal carrier and BT was created.28 The 1981 Act granted BT an exclusive privilege of ‘running telecommunication systems’ (s 12), but also recognized certain classes of act that did not infringe the privilege, such as internal business systems (s 13). The government became the licensing authority for telecommunications operators (s 15), but unfortunately the Act did not include a power to limit BT’s exclusive privilege. Mercury was granted a licence as the first competitor to BT. This licence gave Mercury the right to provide every form of digital telecommunications service, including leased circuits, switched services to business and domestic premises, and the full range of international services. Mercury was not, however, allowed to lease elements of BT’s infrastructure (except for interconnection for call termination). This was in line with the government’s policy to encourage infrastructure-​based competition. In its 1983 Duopoly Statement29 the government made it clear that they did not intend to license operators other than BT or Mercury to provide the basic telecommunications service of converting messages over fixed links, whether cable, radio, or satellite, both domestically or internationally, for seven years. In return for its protection, Mercury undertook some mild obligations to expand its network. It soon became clear that the 1981 Act was not a suitable vehicle to promote competition. It did not give Mercury powers to dig up the streets or to erect telegraph poles. It included licensing provisions which were seriously flawed, for example BT had to be consulted about all licences and could therefore find out about competitors’ plans. It had no provisions to force BT to connect Mercury’s network and BT initially refused to agree to do this, proposing that Mercury should build an overlay network with every customer having two phone points and phone lines, one BT and one Mercury. When an agreement to interconnect was finally reached, in November 1982, the Post Office Engineering Union then ordered its members not carry out any such works, in order to preserve jobs and oppose BT’s privatization.30 Overall the issues had not been thought through from the perspective of a competitor.

3.3.2  The Duopoly Period (1984–​1991) 3.3.2.1 Privatization On 19 July 1982, the government announced that it intended to privatize BT. BT needed to modernize the public telecommunications network and required

  The formal separation occurred on 1 October 1981.   Government Statement of 17 November 1983 by Kenneth Baker MP, Minister for Information Technology to the Standing Committee on the Telecommunications Bill. 30  See Mercury Communications Ltd v Scott-​Garner & ors [1983] 3 WLR 914. 28 29

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massive finance to do this. Government policy was against a nationalized industry borrowing from the government. In its 1983 election manifesto, the Conservative Party provided a list of enterprises which it intended to return to private ownership, including British Telecom. The Conservatives won the 1983 election with an increased majority and a bill to privatize British Telecom was introduced. 3.3.2.2  Telecommunications Act 1984 The Telecommunications Act 1984 was granted Royal Assent on 12 April 1984. The main focus of the Act was to transfer BT into private ownership. This sale by the government of 50.2 per cent of its shares was revolutionary in its scale. The concept of privatization had become an election issue and so it was crucial for the government that the sale of its shares in BT was a success and it embarked on a huge marketing campaign. In this respect the policy was successful with full share subscription.31 The government made clear at this time that it would dispose of the remainder of its shareholding in BT when the circumstances of the company and market conditions permitted.32 The main provisions of the 1984 Act included: • Establishing the Director General of Telecommunications (DGT) as the independent regulatory authority. The Director General was head of and supported by the Office of Telecommunications (Oftel). • Establishing regulatory arrangements based on the concept carried forward from the Post Office Act 1969 and the British Telecommunications Act 1981 of licensing operators to run telecommunications systems. • Abolishing the exclusive right of BT to provide services. This meant that BT finally lost its monopoly in running telecommunication systems. It now needed a licence in the same way as any other telecommunications operator. The 1984 Act also aimed to: • complete liberalization of customer apparatus to crack BT’s dominance and to remove BT’s control over the connection, running, and maintenance of customer premises apparatus; • give Mercury a better licence than was possible under the 1981 Act;

31   The November 1984 share offer was oversubscribed by 3.2 times with shares being issued to applicants on a pro rata basis. 32   A second share issue took place on 21 November 1991, reducing the government’s stake to 21.8%. A further issue followed in July 1993, with the government selling off virtually all of its remaining shares. In July 1997 the government relinquished its ‘golden share’, which allowed it to block a take-​over of the company and to appoint two non-​executive directors to the Board.

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• improve the licences for cellular and local cable networks; • empower Mercury and cable operators to dig up streets, etc. which meant modernizing and extending code powers to entities other than BT; • authorize private branch systems and remove them from BT’s control; • control BT’s charges33 to prevent monopoly profits; and • introduce controls on anti-​competitive practices by BT, particularly BT’s ability to prevent interconnect. The 1981 Act had not granted the rights that operators required to construct infrastructure and therefore prevented effective competition in this respect. The Telecommunications Code (generally referred to as ‘Code Powers’) contained in the Telecommunications Act 1984, section 10 and Schedule 2, allowed operators to install apparatus under or over the street, dig up the street, and open sewers34 among other works. Where apparatus was constructed to the height of three metres or more a landowner could object to the installation where it affected their enjoyment of the land. This matter could be dealt with in a number of ways: compensation could be paid to the landowner, the apparatus could be required to be modified, or a court could declare that the landowner’s agreement be dispensed with. It was imperative for cable companies, as well as public telecommunications operators (PTOs), to be granted Code Powers so that they could operate and compete in the marketplace. The 1984 Act also introduced an independent regulator known as the DGT. The DGT was appointed by the Secretary of State for Trade and Industry and was an unelected, independent position. He was appointed for a fixed but renewable term of office and could be removed from office only as provided for in his contract. The DGT was head of a non-​m inisterial government department, known as the Office of Telecommunications (Oftel). Oftel was subject to treasury control so far as expenditure was concerned and accountable to Parliament like any other government department. The 1984 Act split regulatory competence between the Secretary of State and the DGT. It imposed primary duties on the Secretary of State and the DGT to exercise their functions with a view to ensuring: • that so far as reasonably practicable, there are provided throughout the UK such telecommunication services as satisfy all reasonable demands for them including, in particular, emergency services, public call box services, directory information services, maritime services, and services in rural areas; and

  See further Chapter 2.   Schedule 2 para 9. Schedule 2 of the 1984 Act has been incorporated into the Communications Act 2003, under s 106, and renamed the ‘electronic communications code’. See further Chapter 6. 33

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• that the persons responsible for providing telecommunications services are able to finance the provision of those services.35 Subject to these overriding duties, the Secretary of State and the DGT were required to exercise their functions in the manner they considered best calculated: • to promote the interest of consumers, purchasers, and others users in respect of the prices charged for, and the quality and variety of, telecommunication services provided and telecommunications apparatus supplied; • to maintain and promote effective competition between persons engaged in commercial activities connected with telecommunications in the United Kingdom; • to promote efficiency and economy on the part of such persons; • to promote research into and the development and use of new techniques by such persons.36 There were also other duties designed to encourage investment, promote international transit services, and enable providers of telecommunication services and producers of the telecommunication apparatus to compete overseas.37 In addition to these functions the DGT also had a duty to consider complaints under section 49 and had the power to make competition references to the MMC. 38 The Secretary of State was responsible for issuing licences.39 In practical terms this meant the licensing process was handled by an executive agency of the Department of Trade and Industry,40 the Radiocommunications Agency. The DGT was responsible for enforcement of the licences. The DGT was also obliged to enforce the observance of conditions included in licences granted to telecommunications operators, by making orders under sections 16 to 18 of the 1984 Act. Where the DGT was satisfied that a licence holder was, had or was likely to contravene the conditions of their licence, he was obliged to make such provision as was requisite to secure compliance with the condition. In the early days, these sections were rarely used as the threat of enforcement seemed to have the desired effect. More orders were made in the 1990s. Any person who suffered a loss or damage as a result of a breach of a final or confirmed provisional order could

36 37   Telecommunications Act 1984, s 3(1).   Ibid, s 3(2).  Ibid.   Monopolies and Mergers Commission, which then became the Competition Commission, and is now the Competition and Markets Authority. 39   Telecommunications Act 1984, s 7. 40   Now the Department for Business, Energy and Industrial Strategy. 35

38

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bring an action for damages against the licensee.41 Failure to comply with a final order could also result in the revocation of a licence.42 The DGT also had the power to modify the conditions included in a telecommunication licence. The Act set out two mechanisms for implementing changes:  neither of which was particularly efficient. The first was through a voluntary agreement of licensees under section 12. This meant that in the case of a class licence, all licensees had to agree to a proposed modification.43 The second mechanism was through a compulsory modification against the wishes of the licensee under section 15 following an MMC investigation. The role of the MMC was therefore to act as an appeal body. For example mobile termination rates were investigated by the MMC in 1998.44 The difficulties in pursuing licence modifications under either of these mechanisms led to a revision of section 12.45 Another important function was to give directions and determinations in relation to matters reserved for the DGT’s decision under licences granted to telecommunication operators. This power, derived under subsections 7(5) and (6) of the 1984 Act, was used extensively in relation to interconnect. The DGT was given a large amount of discretion in making decisions and had a high level of autonomy, although his decisions were open to judicial review by the High Court. Judicial review does not however allow the court to carry out a review of the merits of the decision itself. In practice it was very difficult to challenge any decision where the DGT could argue that he had exercised a judgment under section 3 ‘in a manner which he considers is best calculated’ to undertake his duties. There were some challenges to his decisions but the courts generally allowed the DGT wide discretion, and so successful claims against him were rare.46 There was a general feeling that the courts in any event would be unwilling to interfere with the decision of a sector specific regulator.47 The 1984 Act continued in force for almost 20 years until it was replaced by the Communications Act 2003. Significant changes did occur in the intervening period, primarily reflecting evolving European Union law.48 Successive governments

42   Section 18(5).   Section 18(6).   The cumbersome nature of this process meant that in practice class licences were rarely if ever modified. Instead they tended to be revoked and reissued in a modified form by the Secretary of State. 44   See . 45   Electronic Communications Act 2000, ss 11–​12. 46   R v Director General of Telecommunications, ex p Cellcom Ltd and others [1999] ECC 314. 47   Graham, G, Regulating Public Utilities; A constitutional approach (Oxford: Hart, 2000). 48   See further Chapter 4. 41

43

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chose to transpose the various EU Directives into UK law through statutory instruments made under the European Communities Act 1972, section 2(2), rather than through amendments to the 1984 Act. This secondary regulation imposed a broad range of new functions and duties upon the Secretary of State and DGT in areas such as interconnection, licensing, and voice telephony.49

3.3.3  The end of the Duopoly Period The results from direct competition were disappointing. The underlying rationale for the Duopoly Policy was the belief that if there were a number of new entrants to the market they would compete against each other and not the incumbent; whereas it was hoped that a single competitor to the incumbent would be able to build up its market share more rapidly. However, Mercury did not manage to introduce a significant degree of competition into the market and in late 1990 the government’s commitment not to licence any other operators expired. The Duopoly Policy has been criticized by industry observers on the grounds that it effectively delayed the introduction of effective competition.50 At the time that the policy was introduced in the UK there were no precedents to guide the government and indeed at that time only the USA had managed to introduce competition into its telecommunications sector.51

3.3.4  The Duopoly Review The first major policy change since the introduction of the Telecommunications Act 1984 was the Duopoly Review. The government issued a Green Paper in November 199052 leading up to the White Paper ‘Competition and Choice; Telecommunications Policy for the 1990s’53. The main conclusions of the White Paper were: • to end the duopoly policy. This meant that anyone who could show a need for a licence and who had the necessary financial resources could become a public telecommunications operator; • to introduce equal access as soon as possible; • to strengthen the arrangements for interconnection in operators’ licences including provisions to extend the DGT’s power of direction to cover all aspects

  eg Telecommunications (Licensing) Regulations 1997, SI 1997/​2930.   See OECD Reviews of Regulatory Reform, Regulatory Reform in the UK. 52 53  Cm1303.   Cm1461, March 1991. 49

50

51

 Ibid.

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of interconnection agreements and to enable the DGT to apportion the direct costs of interconnection fairly between operators; • to allow simple resale. Fixed operators would be required to permit people other than themselves to retail telecommunications services; • to licence international simple resale services on routes to countries whose regulatory regimes were liberalized;54 • to allow cable operators to provide voice telephony services; • that Oftel should control numbering and oversee an integrated numbering plan and have the power to introduce number portability provided it was technically feasible and justified on cost benefit analysis; • to introduce changes in the price control formula.55 The restrictions which prevented BT conveying cable programme services under its main licence continued. The government felt that even the prospect of BT entering the market might deter cable companies from investing. As referred to above, the country was divided into geographical areas for the purpose of cable licences. BT was free to apply for licences in these individual areas and was authorized, as it always had been, to convey video on demand.

3.3.5  A change in regulatory policy The end of the 1990s and the early twenty-​fi rst century saw the regulatory balance shift away from promoting infrastructure competition. The goal of promoting infrastructure competition was complicated by three major events. 56 These were: • European Union law encouraged national regulators not to discriminate between providers that were building networks and those that were not; • the collapse of investor confidence in the telecoms market which led to alternative network providers increasingly demanding access to BT’s infrastructure to enable them to offer retail products to end-​users; and • the growth of the internet. BT was the only operator able to provide an end to end service across the UK. This led to a new demand for wholesale products from BT.

54   In 1996 the government licensed an initial batch of 44 companies to provide international telecommunications services on any route they choose over their own facilities. At the same time the restrictions which limited international simple resale to certain routes were removed. 55   See further Chapter 2. 56   Ofcom, Strategic Review of Telecommunications, Phase 1 consultation document, Research Annexes, Annex G, Review of Regulatory Policy in the telecoms sector.

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3.3.6 Convergence In July 1998, the DTI published a Green Paper, Regulating communications:  approaching convergence in the Information Age.57 The Green Paper recognized that digital technologies were already changing the way that services were delivered, blurring the boundaries between types of service operation and means of delivery and eroding the technological distinctions. Broadcasting, both content and delivery, had been regulated by the ITC58 and the BBC. Spectrum was regulated by the Radiocommunications Agency. Bodies like the Broadcasting Standards Commission59 and the Radio Authority 60 also had regulatory powers and obligations. Following a consultation period, in 1999 the government published its report suggesting a number of options including the possibility of creating a radically new regulatory structure to avoid barriers to competitiveness. However, the government decided to take the evolutionary approach and let the existing structures stay for the present but required them to work closer together. It was following EU moves for reform, which eventually resulted in the Framework Directive (2002/​21/​EC), and an appreciation that convergence was gathering pace, that the government introduced a White Paper, A New Future for Communications61 (the Communications White Paper) to create a new regulatory structure. The proposal was that a new regulator, the Office of Communications (Ofcom), would be created.62

57  Cm 4022. The Green Paper was a response to the EC’s own Green Paper on Convergence of the Telecommunications, Media and Information Technology Sectors, and the implications for regulation towards an information society approach (EC COM (97) 623, 3 December 1997.) 58   The Independent Television Commission (ITC) was the statutory body which licensed and regulated independent television services in the UK. Under the Broadcasting Acts 1990 and 1996, their responsibilities included setting and maintaining the standards for programmes, economic regulation, public service obligations, research, TV advertising regulation, and technical quality. 59   The Broadcasting Standards Commission had statutory responsibilities for standards and fairness in broadcasting. It had three main tasks: to produce codes of conduct relating to standards and fairness; to consider and adjudicate on complaints; and to monitor, research, and report on standards and fairness in broadcasting (Broadcasting Act 1996, Part V). 60   The Radio Authority was the statutory body responsible for regulating independent radio broadcasting in the UK (ie non-​BBC radio services). Their responsibilities included frequency planning, the awarding of licences, the regulation of programming and radio advertising, and the supervision of the radio ownership system. 61   Cm 5010 published on 12 December 2000. 62   Office of Communications Act 2002. The Act enabled the government to formally establish Ofcom before the Communications Act came into force and placed the existing regulators under a duty to assist Ofcom to prepare (s 4).

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3.3.7  The Communications Act 2003 3.3.7.1  Main provisions The Communications Act 2003 gave effect to the government’s proposals for the reform of the regulatory framework for the communications sector as set out in the Communications White Paper and also implemented the Directives contained in the EU’s ’New Regulatory Framework’.63 Ofcom took over the regulatory functions of the DGT. It is responsible for the regulation of electronic communication networks and services and for the licensing of broadcasting services. One of the aims of the new regime was to reduce the regulatory burden upon communications providers by using general authorizations rather than individual licences wherever possible. Under the new regime, communications providers must comply with general conditions and (as relevant) specific conditions of entitlement. General conditions, as set out in the ‘Notification under section 48(1) of the Act’ published by Ofcom,64 apply to all communication providers, whilst specific conditions apply only to certain communications providers in certain situations. Communications providers are responsible for ascertaining which of the general conditions apply to them and their operations. The obligations themselves are similar to those formerly contained in individual and class licences. The whole area of licensing and authorization is discussed in more detail in Chapters 6 and 7. 3.3.7.2  Ofcom functions Ofcom replaced the DGT, OFTEL, the ITC, the BSC, and the Radio Authority.65 Ofcom also took over responsibility for the allocation, management, and supervision of the UK radio spectrum from the Radiocommunications Agency. Ofcom consists of a chairman, chief executive, and various other members not totalling more than six.66 It vests power in the Ofcom board and not, like the DGT, in a single individual. The executive team runs the organization through a number of committees and sub-​boards. Ofcom’s principal duties when carrying out its functions are: • to further the interests of citizens in relation to communications matters, and • to further consumer interests in relevant markets, where appropriate by promoting competition.67   See further Chapter 4.   A consolidated version of the general conditions, as at 28 May 2015, is available at . 65   And subsequently the Postal Services Commission and the BBC Trust. 66 67   The Office of Communications Act 2002, s 1.   Section 3(1). 63

64

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There is a clear distinction between the consumer and the citizen. In addition, the Communications Act sets out a list of objectives which Ofcom is required to secure, including: • the optimal use of the radio spectrum; • the availability throughout the UK of a wide range of electronic communications services; • the availability in the UK of a wide range of TV and radio services, comprising high-​quality services of broad appeal; • the maintenance of a sufficient plurality of providers of different television and radio services.68 Ofcom has a duty to act in accordance with the six Community requirements set out in the Framework Directive.69 These are: • to promote competition; • to ensure that Ofcom’s activities contribute to the development of the European internal market; • to promote the interests of all persons who are citizens of the European Union; • to take account of the desirability of carrying out their functions in a manner which, so far as practicable, does not favour one form of network, service, or associated facility, or one means of providing or making available such a network, service, or facility over another; • to encourage the provision of network access and service interoperability; and • to encourage compliance with international standards to the extent necessary to facilitate service interoperability, and to secure a freedom of choice for customers. Details of the 2003 Act are discussed elsewhere in this book, but Ofcom has been given improved duties to make its processes more transparent and efficient and to encourage deregulation as the sector becomes more competitive. Since the creation of Ofcom the breadth of its responsibilities has increased, such a duty to report to the Secretary of State for Culture, Media and Sport on the state of the UK’s communications infrastructure.70 Other additional duties imposed on Ofcom include: to plan and manage spectrum for the London 2012 Olympics and Paralympic Games, to reduce the scale of illegal peer to peer file sharing, and to increase digital participation.71 The Secretary of State has the power to give Ofcom 69   Section 3(2).   Section 4.   Sections 134A–​134B, inserted by the Digital Economy Act 2010, s 1, and amended by the Digital Economy Act 2017, s 82. For the Ofcom reports, see . 71   National Audit Office, ‘The effectiveness of converged regulation’, November 2010. 68 70

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general and specific directions;72 and can also set out ‘strategic priorities’, which Ofcom has a duty to have regard to.73 3.3.7.3  Complaints and disputes For purposes of regulation there is a distinction between a complaint and a dispute. A dispute is between communications providers in respect of the provision of network access or any other regulatory conditions imposed by Ofcom.74 A complaint is an allegation that  the Competition Act (and/​or Articles 101 and 102 of the TFEU) or a specific ex ante condition has been breached.75 There are differences between the process for resolving disputes and the process for investigating complaints. In the case of a dispute, EU law requires that Ofcom makes a determination within four months,76 which limits its ability to engage in the sort of in-​depth analysis that occurs in respect of complaints. As a consequence, Ofcom expects the parties to a dispute to have effectively exhausted commercial negotiations and have tried to resolve the issue through alternative dispute resolution (ADR) mechanisms, such as arbitration.77 One such ADR mechanism is the Office of the Telecommunications Adjudicator, which was established by Ofcom in 2004 to help accelerate the implementation and delivery of products and processes by BT’s Openreach in connection with local loop unbundling.78 3.3.7.4  Right of appeal Under the Communications Act, a person affected by a decision of Ofcom or, in limited cases, the Secretary of State and the Competition and Markets Authority (CMA), has the right to appeal to the Competition Appeals Tribunal (CAT), the appellate body for communications sector matters in general (s 192). This includes decisions taken pursuant to the exercise of powers to set, modify, revoke, and enforce the general and specific conditions, including access related conditions. However, on ‘price control matters’, where any form of price control has been imposed under an SMP condition, the decision must be referred by the CAT to the CMA for determination. The CAT must then follow the determination of the CMA79 unless it decides that, applying judicial review principles, the determination of the CMA would fall to be set aside. 72   Communications Act, s 5(2). For example, the Wireless Telegraphy Act 2006 (Direction to Ofcom) Order 2010, SI 2010/​3024. 73   Communications Act 2003, s 2B, inserted by the Digital Economy Act 2017. 74   Communications Act, s 185. 75   Ofcom, ‘Enforcement guidelines for Competition Act investigations’, 28 June 2017. See further Chapter 10. 76   Communications Act, s 188(5), except in exceptional circumstances. 77 78   Ofcom, ‘Dispute resolution guidelines’, 7 June 2011.  . 79   Communications Act, s 193.

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The 2003 Act provides that an appeal to the CAT can be on the grounds that the decision was based on an error of fact, was wrong in law, or both, or against the exercise of discretion by Ofcom, the government, the CMA or another person (s 192(6)). Appeals from decisions of the CAT are on points of law only and are to the Court of Appeal (s 196(2)). Such appeals are only allowed with the permission of the CAT or Court of Appeal.80 A widely held criticism of the previous appeals system was that the courts were less well equipped than a specialist regulatory body to understand complex technical and economic issues and consequently were often reluctant to overturn the decision of an industry-​specific regulator. Under the old appeals system no decision taken by the DGT was ever successfully challenged in the UK courts. In contrast the CAT is generally seen to be a more effective appeals tribunal than the courts. The first case appealed to the CAT in the telecommunications sector (the Freeserve 81 case) resulted in part of the DGT’s decision being struck down. Since then there have been numerous cases referred to the CAT.82 Until 2017, the CAT was required to decide such appeals ‘on the merits’, which was considered to be in compliance with EU requirements.83 However, a merits-​ based review is a complex and time-​consuming process, as well as encouraging operators to appeal against Ofcom decisions as a means of delaying regulatory decision-​making. To try and reduce the burden for the CAT, as well as strengthen the position of Ofcom, the Communications Act was amended to alter the review standard to that of judicial review.84 Whether this change will have a significant impact may depend on the attitude of the CAT to how ‘flexible’ the judicial review standard should be viewed, since a broad interpretation could end up being not so dissimilar from that of a ‘merits’ review.

3.3.8  Ofcom’s strategic review of the telecommunications industry One of the first things Ofcom did when it took over from the DGT at the end of December 2003 was to announce a major strategic review of the telecommunications market. This was the first wide ranging analysis of the telecommunications sector for 13 years. Ofcom set out five fundamental questions:

81   Ibid, s 196(4).   [2003] CAT 5.   For copies of the judgments see . 83   See the Explanatory Notes to the Digital Economy Act 2017, at paras 45–​49. The CAT had previously distinguished a ‘merits’ review from a de novo hearing, since only pleaded errors of fact or law are examined (BT v Ofcom [2010] CAT 17, at para 76). 84   Communications Act, s 194A. 80 82

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• In relation to the interests of citizen-​consumers, what are the key attributes of a well functioning telecoms market? • Where can effective and sustainable competition be achieved in the UK telecoms market? • Is there scope for a reduction in regulation or is the market power of the incumbents too entrenched? • How can Ofcom incentivize timely and efficient investment in next generation networks? • At varying times since 1984, the case has been made for the structural or operational separation of BT or the delivery of full functional equivalence. Are these still relevant questions?85 Some of the key issues from the results of Phase 186 of the review were: • A frustration with the continued dominance of BT in the fixed line market. • A recognition of the failure of past regulatory interventions to secure fair access at the wholesale level to BT’s networks and services. • From the late 1990s, telecoms regulation had aimed to promote service based and infrastructure based competition but both had proved slow to take root: infrastructure operators had failed to achieve scale; whereas service providers were frustrated by delays and inadequacies in wholesale access products. Ofcom concluded that regulation had failed to overcome the problems of enduring bottlenecks combined with lack of access to those parts of the network. It acknowledged that those who relied on BT to provide access have experienced 20 years of slow product development; inferior quality wholesale products; poor transactional processes; and a general lack of transparency. Ofcom’s proposal was that it should focus regulation to deliver equality of access beyond the levels of infrastructure where competition will be effective and sustainable. Ofcom’s preferred approach to deliver this was what they referred to as ‘equality of access’. There were two elements to this: • Equivalence at the product level. This meant that in parts of the network where BT had SMP and which are enduring bottlenecks, BT must offer the same or similar wholesale products to wholesale customers as it offers to itself, at the same prices and using the same or similar transactional processes; and

85  See for the strategic review consultation documents and statements. 86   The review did cover mobile but the results of Phase 1 showed that in terms of competitive market structures mobile was strong with five competitive operators and more virtual network operators. Ofcom felt that in all respects the mobile sector displayed the features of a competitive market.

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• Supporting organizational changes within BT. This would involve changes in BT’s management structures, incentives, business processes, and information flows necessary to support equivalence at the product level. Ofcom wanted a new regulatory contract with BT: by which it meant a settlement with the industry to try to obtain real equality of access. It wanted the rules setting out such an approach to be legally enforceable. It found the means to achieve this under the Enterprise Act 2002. The Enterprise Act gives regulators, including Ofcom, the power to make a referral of a market to the CMA where there are reasonable grounds for suspecting, that any feature, or combination of features of a market in the UK for goods or services prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the UK . . . .87

Any such investigation would be wide ranging and the CMA would have the power to order structural separation of BT’s wholesale network operations and its retail service provision. The Enterprise Act also provides that instead of making a market investigation reference to the CMA, a regulator may accept undertakings to take such action as it considers appropriate.88 These undertakings must be for the purpose of remedying, mitigating, or preventing any adverse effect on the competition concerned. 3.3.8.1  The BT undertakings On 21 June 2005 BT’s board agreed in principle to offer to the Ofcom Board legally binding89 undertakings in relation to the operational separation of its undertakings. On 22 September 2005 Ofcom accepted, with some modifications, the BT undertakings in lieu of making a reference to the then Competition Commission.90 The incentives on BT to agree to the undertakings were not only to avoid an investigation which could have led to a potential break up, but also to achieve the reduction in regulation at the retail level offered by Ofcom. Ofcom set out its proposals and a timetable for a staged withdrawal of regulation. This started with the withdrawal of much of the regulation from fixed retail voice markets.91 In terms of BT’s organization, the undertakings required BT to establish an operationally separate access service division, Openreach,92 and to operate this

88   Enterprise Act 2002, s 131(1).   Ibid, s 154.   A breach of the undertakings is ultimately enforced through normal courts. 90   Numerous amendments and exemptions to the undertakings have been granted since 2005. See . 91   As from 31 July 2006, all retail price controls on line rental and call charges were removed: Ofcom, Retail Price Controls—​explanatory statement, 19 July 2006. 92   Section 5 of the Undertakings. 87

89

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division in accordance with the undertakings. The role of Openreach is to deliver certain access products on an open and even handed basis to all external wholesale customers including BT’s own downstream divisions, that is BT Wholesale, BT Retail, and BT Global Services. The undertakings provide that Openreach will not supply any product to any other part of BT unless it also offers that product to other communications providers on an Equivalence of Inputs basis.93 Equivalence of Input (EOI) is defined in the undertakings as meaning: that BT provides, in respect of a particular product or service to all communications providers (including BT) on the same timescales, terms and conditions including price and service levels by means of the same systems and processes, and includes the provision to all Communications Providers (including BT) of the same commercial information about such products, services systems and processes. In particular, it includes the use by BT of such systems and processes in the same way as other communications providers and with the same degree of reliability and performance as experienced by other communications providers.94

Under the concept of EOI, BT’s wholesale customers should be able to use exactly the same set of regulated products, at the same prices and using the same systems and transactional processes as BT’s own retail activities. The Undertakings also subjected BT Wholesale to a number of obligations. For example, it was required to establish two separate internal divisions for the product management of SMP products not supplied by Openreach and non-​SMP products of significance to competing providers (such as wholesale calls and IPStream). BT was required to implement organizational separation between its downstream and upstream (other than Openreach) divisions. In particular, it had to maintain a strong organizational separation of people, commercial information, and sales functions. The Oftel approach had been to try to ensure that wholesale products specifically designed by BT under regulatory pressure were as close to being fit for purpose as possible. Differences in product and processes were tolerated as long as no material difference in overall outcome. There were however a number of problems with this approach, including the fact that BT had little incentive to produce products for its competitors which it had no interest in using itself. In theory the advantage of the Ofcom approach is that it provides an immediate incentive on BT to remedy any deficiencies, as it is required to offer exactly the same products to its wholesale customers as to its own retail division.

93

  Undertakings, section 5.46. There are some exceptions to this section.   Undertakings, section 2.1.

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3.3.8.2  Equality of Access Board Both Openreach and BT Wholesale are subject to monitoring by the Equality of Access Board (the EAB).95 The EAB consists of five people: three independent members, one BT senior manager, and one BT group non-​executive director. The EAB is supported by the Equality of Access office. The role of the EAB is one of monitoring, reporting, and advising BT on compliance with the undertakings. The EAB is obliged to report any breaches of the undertakings to Ofcom. The EAB is also required to report regularly to the BT board on BT’s compliance with the undertakings and can escalate matters of concern directly to the BT board. There were calls from some in the industry for the EAB to be wholly independent of BT or include an industry member. Ofcom felt that it was important that the EAB was internal to BT. It felt that this way it would be able to effectively monitor, and have a free rein to look at issues which are highly confidential to BT. If it were external it was felt that there would be a risk that it would be able to do nothing more than Ofcom. In terms of assessing the success of the undertakings in achieving increased competition, by 2009 the EAB concluded that it was widely considered by the EAB, Ofcom, and the industry that many of the benefits anticipated when the undertakings were first agreed were now being delivered; in particular, increased competition in the access market, higher broadband penetration, and lower pricing for some products.96 However, ten years after its first review, Ofcom embarked on a second strategic review of the sector. 3.3.8.3  Digital Communications Review Ofcom’s second strategic review, which commenced in March 2015, focused on five key areas: • Guaranteeing universal broadband availability; • Support for investment and innovation in ultrafast broadband networks by improving access to BT’s infrastructure for its competitors; • Improvements in quality of service across the industry; • Increased independence of Openreach from BT; and • Consumer empowerment to better understand the available choices and be able to switch to the best deals easily.97 In terms of BT, Ofcom concluded that despite the EAB and related processes, it continued to have both the incentive and ability to favour its own business to the 95   Undertakings, section 10. See . 96   EAB Annual Report, 2009. 97   Ofcom, ‘Making communications work for everyone:  Initial conclusions from the Strategic Review of Digital Communications’, 25 February 2016.

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detriment of its competitors. As a consequence, Ofcom proposed the legal separation of Openreach, one stage short of a full functional separation.98 By November 2016, ongoing negotiations with BT had proved unsuccessful, leading Ofcom to announce its intention to notify the European Commission of its intention to seek the legal separation of Openreach from BT, in accordance with its obligations under Article 8(3) of the Access Directive. However, by March 2017, BT proposed further reform of Openreach, establishing it as ‘a distinct company with its own staff, management, purpose and strategy’, which Ofcom has accepted as meeting its competition concerns.99

3.3.9  Radio and mobile communications 3.3.9.1  Expansion of mobile telephony As noted above, there were initially only two mobile licensees:  Vodafone and Cellnet. The government decided, for competition reasons, that the retailing of mobile airtime should not be conducted by the operators themselves but by a separate tier of airtime retailers or resellers. The two mobile operators were not allowed to sell services or apparatus direct to end users, but were required to provide it wholesale on request to any service provider who was willing to enter into a standard form contract.100 Consumers wanting to use a mobile phone would buy it from and have a contract with a service provider and not the network operator. The intention behind this decision was to encourage the emergence of competing airtime retailers fully independent of the network operators and, indeed, many such businesses were established. However, network operators were not prevented from owning parallel service provision businesses as long as these businesses were run as separate companies and at arm’s length from the network licensees. Cellnet and Vodafone were prohibited from showing undue preference or discrimination and so were not allowed to treat businesses which were associated with them more favourably than competing service providers.101

  Ofcom, ‘Strengthening Openreach’s strategic and operational independence’, 26 July 2016.   Ofcom, ‘Delivering a more independent Openreach’, 17 March 2017. 100   From 2000–​02, both Cellnet and Vodafone were designated as having ‘market influence’, which was defined in Condition 56 of the standard mobile PTO licence as ‘the ability to raise prices above the competitive level for a non-​t ransitory period without losing sales to such a degree as to make this unprofitable.’ Designation triggered obligations to provide airtime to qualifying service providers and not to show undue preference or discrimination in the provision of services. Cellnet and Vodafone were also designated as having ‘SMP’ for the purposes of the Interconnection Directive. 101   The relationship between the networks and their service providers came increasingly under strain from the beginning of the 1990s for mainly commercial reasons. The difficulties came to a head in 1992 when an independent service provider, Talkland International, made a complaint alleging unfair cross subsidy of the service providers owned by or closely linked to operators of the mobile networks. On 17 May 17 1994 the DGT 98 99

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As already mentioned, in 1993, two further licences were granted to Orange and Mercury One-​2-​One. These licences did not include this prohibition on the direct retailing of airtime to the public, although they were obliged to sell wholesale to service providers on request.102 The same freedom was extended to Vodafone and Cellnet when they received new licences in December 1993 and March 1994 respectively. 3.3.9.2  Competition in the mobile market The mobile market has been subject to regulatory review on numerous occasions over the years. A  particular competition concern stems from the fact that spectrum is a finite resource, resulting in a ‘ring-​fenced’ market that affords considerable opportunity for abnormally high profits, as well as a temptation to engage in collusive behaviour to restrict competition. In its 1998–​99 review of the mobile market103 the DGT concluded that although the mobile market was not fully competitive, competition was developing, and despite the entry barrier of obtaining spectrum, the mobile market had the potential to become effectively competitive. However, the DGT defined a separate market for mobile voice call termination. He considered that all of the mobile operators have SMP in the market for mobile voice termination on their network. The reasoning for this is linked to the calling party pays (CPP) arrangement, which is the retail norm throughout Europe and most other countries. Under CPP, the caller pays the entire price for a mobile voice call. When choosing a service provider, a caller should therefore exercise demand-​side competitive pressure on originating operators in respect of the price of such calls. The originating operator then has to complete any ‘off-​net’ calls (ie calls made to customers of other networks) made by its customer through the terminating operator of the person being called. As the terminating operator effectively has a monopoly over access to this called party, it is not subject to competition pressures and can levy charges from the originating operator that are not cost-​orientated and make excess profits. In 1999 the MMC (now the CMA) concluded that the mobile call termination charges of Vodafone and Cellnet might be expected to operate against the public interest and recommended the imposition of price controls.104 The issue of SMP in the market for call termination and subsequent charge controls is a controversial

produced a statement, ‘Fair Competition in Mobile Service Provision’, setting out his conclusions and the measures to remedy the situation. 102   This condition was removed from the licences of One-​2-​One and Orange in April 1997:  Oftel, ‘Fair Trading in the Mobile Telephony Market’. 103   Oftel, ‘Review of the mobile market: Statement’, July 1999. 104   MMC, ‘Cellnet and Vodafone: Reports on references under section 13 of the Telecommunications Act 1984 on the charges made by Cellnet and Vodafone for terminating calls from fixed line networks’ January 1999.

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one and has been subject to a high degree of scrutiny by Ofcom, the CAT, and the CMA. In 2004 charge controls were imposed in respect of mobile voice call termination charges in respect of Vodafone, O2, Orange, and T-​Mobile.105 At this time, the price control was imposed on termination charges using the 2G spectrum. There was no price control on termination using 3G spectrum and although Ofcom considered that all of the mobile operators including 3 had SMP106 in the market for call termination, the regulatory obligations on 3 did not include charge controls either for termination on its 3G spectrum or via its roaming arrangements on 2G spectrum. In 2007 Ofcom decided to extend these charge controls to 3. It said that the controls should apply to each of the five network operators without distinction to voice call termination on 2G or 3G networks.107 This decision was subject to a number of appeals, although the decision to apply charge controls to 3 was ultimately upheld. The latest charge controls imposed by Ofcom apply from 1 April 2018 until 31 March 2021. Ofcom has decided to: • define sixty-​seven separate markets linked to the termination of calls to UK mobile number ranges held by mobile communications providers (MCP) and not by reference to the large national MCPs; • designate each of those sixty-​seven MCPs as having SMP for the wholesale market for terminating calls to numbers on that network; • impose a network access obligation and a charge control on all sixty-​seven MCPs; and • impose a single maximum cap on mobile termination rates for all sixty-​seven MCPs, including for calls originated outside the European Economic Area.108 3.3.9.3  National roaming As already mentioned, the government decided that for the 3G mobile networks the most efficient allocation of spectrum would be to sell licences through an auction system. These licences were awarded to the existing four mobile networks and a new entrant, 3.

  Ofcom statement, ‘Wholesale Mobile Voice Call Termination’, June 2004.   3 appealed against the decision that it has SMP. The CAT found that Ofcom had erred in its decision making process and remitted the case back to Ofcom (Hutchison 3G(UK) Ltd v Ofcom [2005] CAT 39). On 27 March 2007 Ofcom published a reassessment and confirmed its earlier conclusion that 3 has SMP. See Ofcom mobile call termination statement, March 2007. 107   See March 2007 Ofcom statement. 108   Ofcom, ‘Mobile Call Termination Market Review 2018–​2021’, 28 March 2018. In the previous market review, Ofcom identified seventy-​t wo MCPs (March 2015) and before that thirty-​t wo MCPs (April 2011). 105

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The new network operator, 3, faced disadvantages. The 2G operators had the ability to use their second generation networks to provide their 3G services pending the build-​out of their 3G networks. The new entrant, however, would be forced to offer only a limited service while it developed its network, thus producing a competitive disparity. For this reason the 2G operators who succeeded in obtaining 3G spectrum were to be required to accept a condition109 obliging them to offer roaming services to the new entrant.110 Due to various reasons, the condition was only ever applicable to O2 and Vodafone, who voluntarily accepted it.111 Roaming is the term used when the customer of one mobile operator uses another operator’s network. In this context it allowed the customers of 3, the new entrant, to use the 2G networks of the existing operators for voice, facsimile, and short message services, where the customer is outside the range of their mobile operator’s base station. 3.3.9.4  Spectrum licensing and management Prior to the establishment of Ofcom, the Radiocommunications Agency had the responsibility of managing the civil radio spectrum. The Agency granted licences on behalf of the Secretary of State under the Wireless Telegraphy Act 1949 and allocated specific frequencies. Providers of mobile telecommunication services therefore required two licences: one under the Wireless Telegraphy Act 1949 and one under the Telecommunications Act 1984. Historically, spectrum was managed in the UK through an approach commonly referred to as ‘command and control’. This meant that the Radiocommunications Agency decided on both the use of a particular band and the users who were allowed to transmit in the band. This system was suitable when the supply and demand for spectrum were in balance and the dominant users of spectrum were public sector. When there are few users and uses, the spectrum manager can have a reasonably good understanding of the best use of spectrum and can make decisions on spectrum allocation. However, the environment has dramatically changed. Economic and technological developments have led to an increasing variety of applications using spectrum and an imbalance between supply and demand. The Wireless Telegraphy Act 1998 allowed for the first time licence fees to reflect the market value of the spectrum rather than it being associated with the administrative costs of spectrum management by the Radiocommunications Agency. This meant that spectrum pricing could potentially reflect market demand and

  Wireless Telegraphy Act 1998, s 3. See further Chapter 7. 111   See further Chapter 8, at Section 8.5.4.   See further Chapter 8, at Section 8.5.4.2.

109 110

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even out areas of disproportion as those companies possessing smaller amounts of spectrum would pay less than those with more. However, despite this change, much of the spectrum was badly managed and there existed little incentive for users to relinquish their unused spectrum or to develop technology to ensure that all spectrum was used to its full potential. In 2001, the government commissioned an independent review of radio spectrum management issues to advise on the principles that should govern spectrum management and the changes required to ensure that all users are focused on using spectrum in the most efficient way possible. The review made many recommendations but, in summary, concluded that the UK needed to radically change the way in which spectrum was allocated.112 Generally the recommended approach was the need to make more use of economic mechanisms in order to secure optimal use of the spectrum. Following the independent report, Ofcom carried out its own review of spectrum management and set out its intentions for the management of spectrum in its Spectrum Framework Review.113 Ofcom also set out its vision for spectrum. This is: • Spectrum should be free of technology and usage constraints as far as possible; • It should be simple and straight forward for licence holders to change the ownership and use of spectrum; and • Rights of spectrum users should be clearly defined and users should feel comfortable that they will not be charged without good cause.114 Ofcom has introduced a series of measures with the aim of de-​regulating spectrum. This includes reducing the number of restrictions both in terms of who can use spectrum and what it can be used for. This new approach is being implemented primarily through: • spectrum trading,115 • spectrum liberalization, and • prompt release of unused spectrum into the market allowing maximum flexibility as to subsequent use.116

112   Professor Martin Cave, ‘Review of Radio Spectrum Management: An independent review for Department of Trade and Industry and HM Treasury’, March 2002. 113   Ofcom, ‘A Statement on Spectrum Trading—​I mplementation in 2004 and beyond’, 6 August 2004. 114   Ofcom, ‘Progress on key spectrum initiatives’, April 2008. 115   See the Wireless Telegraphy (Spectrum Trading) Regulations 2012, SI 2012/​2187. See further Chapter 7. 116   See generally .

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3.4  K E Y ISSUE S In this section, attention is given to a number of key regulatory issues that have arisen over recent decades, some of which are still proving challenges for Ofcom and the industry, such as number portability and universal service. We have also included some of the important regulatory interventions, such as local loop unbundling, the introduction of wholesale line rental, as well as how Ofcom is addressing the challenges of new technologies in terms of internet telephony and Next Generation Networks. Finally, we examine the potential implications of the UK’s departure from the European Union.

3.4.1  Number portability Number portability is the facility which allows customers to keep their telephone number when they change network provider. There is clear evidence that customers are reluctant to change network provider if this means that they will have to change their telephone number and therefore number portability is seen as a key issue in the development of demand-​led network competition. An MMC enquiry117 on portability held that the DGT had the power to determine the charges for providing portability. The referral was made by the DGT when BT refused to accept a modification to its licence, which had the effect of granting the power of determining the cost of portability to the DGT. The MMC found that the DGT did have the power to alter BT’s licence and stipulate what BT was entitled to charge. BT argued that the cost of providing number portability should be borne by the operator requesting the service while other operators, and at that specific time Videotron, argued that operators should bear their own costs. The MMC determined that the costs should be allocated between the parties with BT bearing the greater proportion. The regulation of portability in the fixed and mobile markets developed in different stages. Fixed operators in the UK began offering numbering portability for geographic services (ordinary telephone numbers of customers located at specific geographic locations) in 1996 and for other fixed services in 1997. However, it was only available where operators chose to provide it. The implementation of the Numbering Directive118 extended these requirements and for the first time gave customers 117   Inquiry by the Monopolies and Mergers Commission into Telephone Number Portability: Explanatory Statement from the Director General of Telecommunications, 27 April 1995. 118   The Numbering Directive 98/​61/​EC, OJ L 268/​37, 3 October 1998, amended the Interconnection Directive 97/​33/​EC.

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the right to require the operator to provide number portability. The Numbering Directive required that subscribers or customers should be able, if they wish, to keep their telephone numbers when they change the operator providing their fixed telecommunications services ie telephone services using geographic numbers. Services using non-​geographic numbers, eg mobile, freephone numbers (080), local and national rate numbers (0845 and 0870), and premium rate numbers (090) were not covered by the Directive. Where telephone companies had chosen to market or offer their services they were required to provide number portability within the normal timescale of providing a basic service to customers. In such circumstances operators and service providers would need to provide number portability within five to eight working days. Number portability for mobile services became available in January 1999119 by conditions inserted into the mobile operators’ licences requiring them to provide portability to other operators. By 31 March 2008 lead times for porting mobile numbers were required to have been reduced to two working days.120 In November 2007, Ofcom, still concerned that the current porting practices were discouraging consumers from switching, issued proposals to reduce the time taken to port mobile numbers from two days to two hours. This decision was appealed to the CAT by Vodafone and others and was remitted back to Ofcom.121 In its reconsidered decision Ofcom set out rules requiring providers to give a Porting Authorization Code (PAC) to consumers who ask for it either immediately over the phone or within two hours by SMS.122 For fixed numbers, port activation must take place within one working day from when a subscriber’s new provider requests activation from the subscriber’s existing provider. This is after the necessary consumer protection measures and any physical line provisioning have been completed.123 The amended Universal Service Directive also provided that communications providers must provide compensation to subscribers in the event of delay or fault with the porting process (Art 30(4)). Communications providers must put in place schemes which give reasonable compensation to subscribers following any porting delay or abuse.124 Communications providers are able to design the details of the schemes themselves, following guidance produced by Ofcom on the operation of such schemes.   Oftel, ‘Number portability in the Mobile Market’, July 1997.  Ofcom, ‘Arrangements for porting phone numbers when consumers switch supplier—​a review of General Condition 18’, 17 July 2007. 121   Vodafone Limited v Office of Communications [2008] CAT 22. 122   Ofcom, ‘Changes to the mobile number porting process: Final statement’, 8 July 2010. 123 124   See further Chapter 9, at Section 9.2.5.   General Conditions of Entitlement, at 18.9. 119

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Since the introduction of number portability in the UK, both fixed and mobile networks have used a system referred to as onward routing to route calls to ported numbers. With onward routing, calls are first routed to the network to which the customer originally subscribed, known as the donor network. The donor is responsible for routing the call onward to the network to which the consumer now subscribes. There are a number of weaknesses in onward routing. For example, the dependence on the donor network leaves consumers exposed in the event of network failure by the donor network.125 There are also issues of inefficiency associated with the additional capacity required for the onward routing of calls. In November 2007, Ofcom set out its decision that industry should co-​operate to establish a common database (CDB) to allow direct routing of calls to fixed and mobile ported numbers. As mentioned, that decision was set aside by the CAT following an appeal by Vodafone and was remitted back to Ofcom. Ofcom reconsidered its decision and in particular assessed the costs and benefits of implementing direct routing and its conclusion was that regulatory intervention would not be appropriate.126

3.4.2  Universal service As well as trying to open up the market to competition, regulation has also aimed to ensure that everyone has access to telecommunications services. With a monopoly, service is provided by a single operator and lower charges for connection, line rentals, and local calls can be subsidized out of higher revenues generated by long-distance call charges. With liberalization, questions were raised about the willingness and ability of existing and new operators to guarantee this safety net of services. The rationale behind universal service is to provide a safety net, ‘to ensure that those telecommunications services which are used by the majority and which are essential to full social and economic inclusion are made available to everybody upon reasonable request in an appropriate fashion and at an affordable price’.127 The universal services obligation (USO) aims to ensure that in a liberalized environment the safety net is maintained. In the UK, the USO is detailed in conditions imposed on BT (and KCOM for the Hull area).128 They are obliged to provide

125   In 2001 the insolvency of Atlantic Telecom resulted in Atlantic customers and customers of other communications providers who had ported numbers from Atlantic losing service on those numbers. 126   Ofcom, ‘Statement on Routing Calls to Ported Numbers’, 1 April 2010. 127   Oftel, ‘Universal telecommunication services’, July 1999. In respect of EU policy and law on universal service, see further Chapter 4, at Section 4.8. 128   Oftel, ‘Designation of BT and Kingston as universal service providers, and the specific universal service conditions’, 22 July 2003.

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a basic level of service at geographically averaged prices (referred to as ‘uniform prices’). In addition they have to provide schemes for consumers with special social needs (condition 2)  and a network of public telephone boxes (condition 3). These obligations are not required of other operators. The initial focus of universal service was on bringing benefits to those with low incomes, those with disabilities who need particular services, and customers in rural areas for whom the actual cost for the provision of services might otherwise be prohibitively expensive. Longer term questions surrounding universal service include whether the USO should be extended to include the provision of mobile services to fulfil universal service obligations. In 1999, Oftel concluded that although the concept of universal service should not be extended, the matter should remain under review. It was Oftel’s opinion that when the majority of the population were taking advantage of higher broadband services and they were ‘essential for full economic and social inclusion’ then the universal service obligation might be extended.129 With the abolition of licences in 2003, the basis for imposing the universal service requirements changed. Under the Communications Act 2003, it is the government, and not Ofcom, that determines the specific universal service requirements.130 This power was amended in 2017 to make clear that government had the power to include broadband within any future ‘universal service order’, which is specified as meaning a download speed of at least 10 Mbps.131 Ofcom decides how these requirements should be implemented. The services which must be available include: • A connection to the public telephone network, able to support voice telephony, fax, and data at rates sufficient to support functional internet access.132 • The provision of at least one comprehensive directory and directory enquiry facility, which must be updated once a year. • The provision of public pay phones to meet the reasonable needs of end users including the ability to use the emergency call number free of charge. • Billing and payment options to enable subscribers to monitor and control their expenditure and appropriate tariff options for those on low incomes or with special social needs. • Special measures for end users with disabilities.   See Oftel, n 127 above, at para 18.   Section 65. See also the Electronic Communications (Universal Service) Order 2003, SI 2003/​1904 as amended. 131   Communications Act 2003, s 65(2B), as amended by the Digital Economy Act 2017. Ofcom can be asked to review and report on the implementation of any requirement concerning broadband connections and services (s 72A) and must be directed to carry out such a review where the minimum speed is less than 30 Mbps (s 72B). 132   As specified in the Universal Services Directive, Art 4(2). 129 130

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The scope and delivery of the USO has changed only slightly since 1984. The current USO still falls on BT and KCOM and is implemented by a number of specific conditions on these two organizations. In addition, a number of General Conditions impose obligations on all publicly available telephone service providers. For example, General Condition 8 requires the provision of directory information and General Condition 18 requires the provision of certain facilities for end users with disabilities.133 Ofcom looked at questions surrounding universal service as part of its Strategic Review and it carried out a further review of the USO in 2006134 to ensure that it continues to meet the needs of customers. In particular it looked at the question of whether the USO should be extended to include broadband and mobile. It concluded that neither was currently appropriate. It considered that exclusion from broadband services did not currently result in social exclusion sufficient to warrant universal service measures being introduced and that in addition imposing a USO for broadband would be inappropriate whilst the market for broadband is still developing. It did feel that it would not be appropriate to rule out the possibility of imposing a USO for broadband at a future date. It also concluded that increased fixed mobile convergence means that at some stage mobile may replace fixed as the primary means of connection and that a universal service obligation defined in terms of access to voice services could be delivered via a mobile connection, rather than the imposition of a separate mobile USO. Another recurring issue relating to universal service relates to funding. BT and KCOM bears the cost of the USO because Ofcom has determined that the net cost of provision does not constitute an ‘unfair burden’,135 taking into account factors such as the positive brand value from being considered the USO provider and the likelihood that uneconomic customers would remain with BT when they became ‘economic customers’. Were Ofcom to decide that the USO had become an ‘unfair burden’ it has the power to put in place alternative methods of provision or funding.136 This fund could be implemented by a number of means including: • a direct levy on all consumers of certain communications services (eg a fixed amount that appears directly on the bill); • an indirect levy on consumers via a levy on communications providers and services (this model is used in the USA and France); or • direct government funding.137

134   See further Chapter 7.   Ofcom, ‘Review of Universal Service Obligation’, 14 March 2006.   The concept of ‘unfair burden’ originates from the Universal Services Directive, at Art 12(1). 136   Communications Act 2003, s 71. 137   ’Strategic Review of Telecommunications—​Phase 2’ consultation document. 133 135

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As part of its 2006 review, Ofcom set out indicative estimates for 2003/​04 costs to BT at £56–​74 million and £59–​64 million for benefits. It felt that these estimates did not warrant a full scale review and suggested that currently there was not an unfair burden on BT.

3.4.3  Local loop bundling138 In March 1998, David Edmonds was appointed as the new DGT. His appointment seemed to signal a change in policy direction away from the goal of infrastructure competition. In December 1998, he issued a consultation paper putting forward alternatives for promoting competition in the provision of higher bandwidth services and in December 1999139 he concluded that BT should make its local loops and co-​location available to other operators to allow them to compete directly with BT in providing higher bandwidth internet access, through a form of local loop unbundling (LLU).140 Oftel set out clearly the requirements on BT through a new condition in BT’s licence with a timetable for implementation of July 2001. This was a key decision for the development of telecoms in the UK. It set a framework for the competitive delivery of information age services to consumers. When LLU was first raised by Oftel in 1998 there was considerable enthusiasm for it, with many companies expressing an interest. However, it is generally accepted that the initial process of LLU was not a success. The actual implementation date of July 2001 was not met. Initial forecasts predicted a huge demand for space in the local exchanges from different operators and so a process for allocation was devised; this became known as the ‘Bow Wave’ process. Ultimately many of the operators withdrew from the process. Oftel placed the blame for this on the financial climate. A  Parliamentary Select Committee was more damning of the whole process and said it was in danger of becoming farcical and referred to BT dragging their feet, and was critical of Oftel for not intervening earlier.141 In 2004 there were two key developments: • the appointment of an independent Telecoms Adjudicator to work with industry to accelerate the implementation and delivery of fit for purpose LLU products and processes;142 and • the introduction of price ceilings for a number of LLU products. 139   See also Chapter 8.   This decision was taken in advance of EU Regulation EC 2887/​2000.   LLU is the process where the incumbent operator makes its local network (the copper cables that run from customers’ premises to the nearest telephone exchange) available to other companies, who are then able to upgrade individual lines using DSL technology to offer competing services, such as always-​on high speed internet access. See further Chapter 8. 141   Select Committee on Trade and Industry, Sixth Report, ‘Local Loop Unbundling’, HC 90, 20 March 2001. 142   See also Chapter 8, at Section 8.3.4.4. 138 140

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After a notoriously shaky start the process of LLU is generally seen as having been a success. Between 2005 and October 2011 the number of unbundled lines increased from 123,000 to 7.77 million and by the end of December 2017 had reached 9.87 million.143

3.4.4  Internet telephony Internet telephony or VoIP (voice over internet protocol) services are generic terms for the conveyance of voice services, partially or wholly over packet switched, IP based networks. Internet telephony services have increased competition as they have a number of advantages over traditional PSTN telephony services, including lower infrastructure deployment costs and more efficient network utilization. An Ofcom study suggests that 44 per cent of internet users make calls using a VoIP service, such as Skype, while call volumes over traditional fixed voice services are falling substantially year on year, which indicates that the former are increasingly being used as a substitute for the latter.144 The regulatory challenge for Ofcom and indeed other regulators around the world is to find a balance between the often competing objectives of promoting competition, encouraging investment and promoting the interests of the consumer. Most consumers in the UK expect to get a certain level of service from both their traditional home phone line and their mobile.145 The vast majority of these traditional voice services (both fixed and mobile) fall within the definition of PATS (publicly available telephone services) and therefore these facilities are provided as a result of regulatory intervention, in particular the ability to make calls to the emergency services free of charge. This access to emergency services is seen as being extremely important from a social responsibility and consumer protection perspective. Although some VoIP services have the potential to look and feel like traditional telephone services they may not fall within the definition of a PATS service, or even an ‘electronic communication service’, and so are not regulated as such and are not able to deliver features such as access to emergency services. This has the potential to cause confusion amongst consumers. In interim advice,146 Ofcom set out its initial view that it was better to offer less reliable access to emergency services than no access at all and it set out its forbearance policy ie that it would forbear from enforcing PATS obligations against new services entering the market even if they offered access to 999 services. Voice providers were, however, expected to provide sufficient information at the point of

144   See .   Ofcom, ‘Communications market report’, 3 August 2017.   The main obligations which apply to PATS are discussed further in Chapter 6. 146   Ofcom, ‘New voice services—​A consultation and interim guidance’, 6 September 2004. 143 145

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sale and at the point of use so that both consumers and users are fully aware of any limitations of the service. This view was made pending clarification from the European Commission on its position. At that time, Ofcom’s understanding of the Commission’s position was that providers should be able to choose whether or not they were providing PATS even if they offered the four core elements of PATS, including access to emergency services. This would mean that a service provider could offer access to emergency services, without being subject to the full rigour of the PATS obligations. It was not until March 2007 and following a period of heavy lobbying by some parts of the industry that Ofcom issued its final statement.147 The main decisions in the March statement were: • to discontinue Ofcom’s interim forbearance policy; • to establish guidelines on how Ofcom will investigate potential contraventions of obligations in relation to network integrity and emergency calls; • to mandate a code in respect of certain providers which specifies the information that providers must offer to certain customers to ensure they are well informed about the capability of VoIP services. When Ofcom set out its forbearance policy it was partly on the basis that this reflected the view of the Commission. The Commission did however clarify its view and stated that where a service meets all the gating criteria it automatically becomes and must be regulated as a PATS.148 Ofcom issued a consultation over the summer and in December 2007149 announced that as from 8 September 2008: • VoIP Out services which allow customers to make calls over the internet to the PSTN but not receive calls from the PSTN; and • VOIP In and Out services which allow customers to make calls over the internet to the PSTN and receive calls from the internet over the PSTN are required to provide access to emergency services at no charge and to meet requirements on providing caller location information to the emergency organizations handling the calls. Currently, some VoIP services are considered to fall within the regulated sphere and some outside.150 Those that fall within are required, under the General

147   ’Regulation of VoIP Services—​Statement and publication of statutory notifications under section 48(1) of the Communications Act 2003 modifying General Conditions 14 and 18’. 148  Expert Group on Emergency Access working document, ‘Regulatory clarification of ECS/​PATS and Fixed/​Non-​Fixed’, 23 May 2006. 149   ’Regulation of VOIP services: Access to Emergency Services’, December 2007. 150   See further Chapter 4, at Section 4.2, for a discussion of ongoing reforms around this issue.

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Conditions of Entitlement, to make clear to consumers and small business customers where a service does not provide access to an emergency call service, both when signing up to the service and to users through on-​screen or network announcements. Similarly, subscribers and users must be notified where an emergency service may be unreliable to a failure of power or a broadband connection.151

3.4.5  Next Generation Networks Next Generation Networks (NGNs) pose significant opportunities and challenges for regulators and the industry as a whole. As mentioned above the government recognizes the crucial importance of broadband to maintaining the position of UK within the global economy and therefore the government is keen to avoid a situation that may impact adversely on the UK’s ability to match international competitors’ performance in delivery of services and applications over broadband. NGNs can be used to upgrade the capabilities of fixed line telephony networks. Plans to develop these networks are in response to the fact that consumers are changing the way that they use their broadband connections. The take up of services, such as streaming high definition video, require faster connections and place increasing demands on current networks.152 There are two types of next generation network upgrade: • Next generation core networks (NGNs)—​t hese are internet protocol based core or backbone networks which can support a variety of existing and new services. Typically they replace multiple legacy core networks with a single IP based network for the provision of all services. For example, BT has announced that it intends to switch off its legacy PSTN core network by 2025; and • Next generation access networks—​t hese are broadband access networks which connect the user to a core network capable of a bandwidth quantity and quality significantly in excess of current levels. For example, the provision of ‘fibre to the curb’ and ‘fibre to the home’. This enables new services such as HDTV over broadband to be delivered to end users. It is the provisioning of the latter that has raised the more significant policy and regulatory issues. There are a number of issues associated with these new networks and in particular with the access networks.153 For current access network owners, next   Condition 14, Annex 3, paras 8–​12.   Video-​on-​demand services, such as Netflix and BBC’s iPlayer, have increased the strain on existing networks. 153   Broadband Stakeholder Group, ‘Pipe Dreams? Prospects for next generation broadband deployment in the UK’, 16 April 2007. 151

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generation access deployments offer the prospect of very high end customer bandwidths, but they require significant investment in infrastructure. For market competitors and new entrants, these new networks may result in changes to the wholesale products and services that they can purchase. Ofcom has recognized that the development of the new networks presents it with the opportunity to influence the competitive landscape in years to come.154 The challenge for governments and regulators is to encourage investment in these new networks and at the same time maintain the benefits of competition avoiding the issues of regulatory bottlenecks which have plagued the industry over the last 30 years. The current regulatory framework was designed to open up access to a legacy infrastructure (essentially paid for by the tax payer and inherited by BT). This may not be appropriate to regulate one designed to enable investment in a whole new infrastructure and at the same time to maintain the benefits of competition. The government views broadband investment as a key policy issue, due to its perceived economic and social benefits for the UK. There has also been concern that the UK lags behind some of its competitors in the deployment of fibre access networks, for example Japan and South Korea. A  number of reasons have been put forward for this, including the higher cost of deployment in the UK and the continuing capabilities of the legacy copper access network infrastructure.155 The government has established a dedicated unit, Broadband Delivery UK, within the Department of Culture Media and Sport, to oversee a range of different programmes, such as the ‘Superfast Broadband Programme’, which involves substantial public investment.156 The current target is to ensure that 95 per cent of UK premises have access to a minimum line speed of 24 Mbps, with the remaining 5 per cent having at least 2Mbps.157 In addition, there are various other schemes designed to support local authority investment, take-​up by SMEs and improving mobile infrastructure.158 There has been criticism that the vast majority of the state aid to date has gone to BT, the ex-​i ncumbent, although it is required to pay back some of the funding it receives if customer take-​up reaches a certain threshold, as well as share its profits for seven years after the network becomes operational.159

  See Ofcom, ‘Future Broadband, Policy approach to next generation access’, 29 September 2007.   BT’s G.fast technology enables speeds up to 330 Mbps over copper. 156   eg the Superfast programme involves three phrases, with some £800m of central government funding, which should be matched by private investment. 157   DCMS, ‘UK Next Generation Network Infrastructure Deployment Plan’, March 2015. 158   See generally . 159   The Telegraph, ‘BT defends £1.7bn rural broadband scheme as rivals question whether taxpayer cash was needed’, 16 June 2016. 154 155

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3.4.6 Brexit At the time of writing, the UK is scheduled to leave the EU in 2019, subject to any transitional period. Our departure is clearly going to have significant implications for most, if not all, sectors of industry, telecommunications included. This section considers some of the implications of Brexit for UK telecommunications law, although the reality will likely vary depending on whether the Brexit is ‘hard’ or ‘soft’ and emerging government policy.160 As noted above, Part 2 of the Communications Act 2003 transposes four of the key EU Directives that comprise the New Regulatory Framework. These measures are to be recast into the European Electronic Communications Code (EECC), although the transposition date will fall after the UK’s scheduled departure. As such, the UK will not be obliged to implement into domestic law. Since much of the EECC is a recasting of existing rules, whether the government decides to follow or refrain may not result in a substantially different regime. One key issue, however, is the scope of application of the new rules, with the EECC adopting a functional approach that will embrace OTT services that currently lie outside the regulatory sphere.161 While there are strong consumer protection arguments in favour of the UK doing the same, the government may consider a divergent approach to have net benefits for the UK economy. One reason why taking a divergent approach from the EU may confer only incremental advantages for the UK, however, is another factor that may reduce the overall impact of Brexit on operators, ie the fact that the provision of telecommunications networks and services are not subject to a ‘country of origin’ approach to EU harmonization. Operators have to conduct themselves on a distinctly national basis, ensuring compliance in every state in which they provide services, and subject to oversight and intervention by national regulatory authorities, such as Ofcom, who have significant freedom to govern the market. As a consequence, an operator may gain little regulatory advantage from locating in the UK, but providing services into the other Member States. Another reason for expecting less change post-​Brexit is because responsibility for key areas of the telecommunications sector have been retained under national control, rather than handed over to the EU. With respect to wireless communication services (eg mobile and satellite), control and management of spectrum has remained the near exclusive (and valuable) property of the state. While spectrum usage requires co-​ordination and co-​operation, this occurs at an international

160   As at January 2018, the DCMS was in the process of recruiting a policy adviser on ‘Telecoms EU Exit Policy and Legislation’ (advertised on Civil Service Jobs). 161   See further Chapter 4, at Section 4.2.

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level, within the International Telecommunication Union,162 as much as at a European level.163 The UK’s membership and participation in the work of the ITU will presumably continue post-​Brexit. With regard to the construction of telecommunication networks, laying cables and installing masts, rights and obligations concerning building invokes issues of property and planning law, which operate at both a local and national level.164 The Digital Economy Act 2017 has reformed the ‘electronic communications code’ that governs network operators to facilitate more rapid network roll-​out.165 Again, however, such initiatives reside primarily at a national rather than European level. Having considered some reasons why Brexit is likely to have a less significant impact on the UK telecommunications market than other sectors, there are also areas where it may have a negative outcome and some key areas of telecommunications regulation that will, or may, differ following the UK’s departure. First, the European Commission will no longer have exclusive competence to decide on competition matters that have a ‘Community dimension’,166 which led to their recent decision to prohibit the merger between Three and O2 in the UK.167 Whether this change has any real effect will depend on the commercial reach of the relevant parties, since competition law has a well-​established extraterritorial reach over businesses headquartered outside of the jurisdiction.168 In addition, Ofcom and the CMA will want, and need, to establish an effective working relationship with the Competition Commission to ensure that transnational matters are dealt with in a co-​ordinated manner, as it would were any transaction to involve the US competition authorities, the FCC and the DoJ. Second, the progressive reduction of ‘roaming’ charges for consumers within the EU, and their eventual abolition and adoption of the ‘roam-​l ike-​at-​home’ principle since June 2017169 could be disapplied to UK users, leading to higher prices when we roam into Europe. Given that operators have complained that the abolition of roaming charges will have a significant impact on their revenue streams, with claims that it will have an adverse impact on investment capacity,170 they

163   See Chapter 16, at Section 16.3.   See Chapter 7, at Section 7.5.   eg Town and Country Planning (General Permitted Development) (England) Order 2015/​596, Schedule 1, Part 16 Communications. 165   See further Chapter 6, at Section 6.4. 166  Council Regulation 139/​2004 on the control of concentrations between undertaking, OJ L 24/​1, 29 January 2004, at Art 1. See further Chapter 10. 167   Case M.7612, Hutchison 3G UK/​Telefónica UK, Commission decision declaring a concentration incompatible with the internal market, OJ C 357/​15, 29 September 2016. 168   eg Case COMP/​M.1946, Bellsouth/​SBC/​J V, OJ C 202/​5, 15 July 2000. 169   Regulation 531/​2012 on roaming on public mobile communications networks within the Union, OJ L 172/​10, 30 June 2012. 170   eg . 162

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may view UK consumers as an opportunity to claw back some of this revenue. Conversely, current market trends and consumer behaviour (eg turning data services off or buying local SIMs) may convince operators that the opportunities for raising tariffs are limited.171 Finally, policy issues such as ‘net neutrality’ may offer potential advantages to OTT providers within the EU market, which the UK may choose to follow, to the detriment of traditional operators, or may choose to abandon, as the FCC in the US has recently done,172 which could benefit existing market participants.

3.5  CONC LUDING R EM A R K S As with all developed nations, the UK’s telecommunications market has changed dramatically over the past 30 or more years. While the liberalization process has not always been smooth, the UK can rightly lay claim to having been a leader in embracing a competitive market. Although BT remains a dominant player in many markets, full privatization has exposed it to a fiercer competitive environment than many of its fellow ex-​i ncumbents in continental Europe.

171   Rosas, M, ‘Is the abolition of EU roaming charges an opportunity or threat for operators’, 26 August 2016, at . 172  FCC, In the matter of Restoring Internet Freedom, Declaratory Ruling, Report and Order, 14 December 2017 (FCC 17-​166).

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4 EUROPE AN UNION COMMUNIC ATIONS  L AW Ian Walden

4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9

Introduction  Evolving Policy and the Regulated Sphere  Sources of Law  Liberalization of the EU Telecommunications Market  Harmonization of the EU Telecommunications Market  ’Significant Market Power’  Regulatory Authorities  Universal Service  Future Directions 

147 148 155 160 170 173 178 186 193

4.1 INTRODUC TION The past thirty years and more has seen an extraordinary level of policy, legal, and regulatory activity in the telecommunications sector within the European Union (EU); with well over 100 different directives, decisions, regulations, recommendations, and resolutions, relating to every aspect of the industry, having been adopted since 1984.1 Such activity is a clear illustration that market liberalization should not be confused with concepts of market deregulation. While from a UK perspective, initial EU regulatory intervention in the telecommunications sector seldom impinged on the wider public consciousness, largely due to developments already commenced domestically,2 some Member States experienced significant political fall-​out from Commission initiatives in the area, such as public sector industrial action.

1   Council Recommendation (84/​5 49/​E EC) concerning the implementation of harmonization in the field of telecommunications, OJ L 298/​49, 16 November 1984. 2   See further Chapter 3.

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The chapter is broadly divided in two:  the first part reviews the historical development and key components of the EU regulatory framework; the second part examines particular elements addressed by the framework. It is not the objective of this chapter to provide a detailed analysis of every legal instrument in the field, in part because such a treatment would require a complete book on its own; but also because many aspects are examined in depth in other chapters of the book. Rather this chapter is designed to place the mass of EU laws, decisions, and regulations into a comprehensible contextual framework.

4. 2  E VOLV ING P OL IC Y A ND THE R E GUL ATED SPHER E The development of EU policy and legislation in the telecommunications sector can be broadly distinguished into three phases. In the first phase, between 1987 and 1993, the objective was the liberalization of telecommunications equipment and certain service sectors, whilst preserving for the incumbent the provision of network infrastructure, seen by many as a natural monopoly. In order to protect the network, it was believed that it was necessary to safeguard the revenues of the incumbent. As the provision of voice telephony services constituted the incumbent’s main source of income, such services were categorized as a ‘reserved service’, not subject to the process of liberalization. The Commission outlined its initial position on the role of telecommunications in the creation of the Single Market in a Green Paper of 1987.3 This paper set out three basic principles upon which the regulatory framework would be established: • Liberalization of areas currently under a monopoly provider; • Opening access to telecommunication networks and services, through harmonization and the development of minimum standards; • Full application of the competition rules. In the second phase, from 1993 to 2002, full market liberalization became politically acceptable as concerns about the impact of liberalization failed to materialize. The key commitment to liberalization came on 22 December 1994, when the Council of Ministers committed themselves to the target date of 1 January 1998 for full liberalization of the voice telephony monopoly and telecommunications infrastructure in the majority of Member States.4 The fact that such a fundamental 3  Commission, ‘On the Development of the Common Market for Telecommunications Services and Equipment’, COM(87) 290 final of 30 June 1987. See also Commission, ‘On the Way to a Competitive Community-​W ide Telecommunications Market in the Year 1992’, COM(88) 48 final of 9 February 1988. 4   Council Resolution of 22 December 1994 on the principles and timetable for the liberalization of telecommunications infrastructures, OJ C 379/​4, 31 December 1994.

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change in the legal framework governing a market was undertaken and substantially achieved in a relatively short period of time illustrates the considerable degree of consensus between Member States, the Community institutions, and industry itself. However, the reality of a fully competitive market, as well as the establishment of a single European market, is taking considerably longer, as the divergent interests involved emerge and are fully expressed during the process of implementation. A third phase of EU telecommunications policy commenced on 25 July 2003, when the new ‘Framework Directive’5 and the specific measures came into force, the ‘New Regulatory Framework’ (NRF): • • • •

The ‘Authorisation Directive’;6 The ‘Access and Interconnection Directive’;7 The ‘Universal Services and User’s Rights Directive;’8 The ‘Communications Privacy’ Directive.9

This new regulatory regime emerged from the Commission’s 1999 Communication Review,10 which was itself designed to respond to a range of pressures for reform. First, from a legal perspective, the adoption in 1997 of the World Trade Organization (WTO) agreement on ‘basic telecommunications’ and associated Reference Paper11 required certain transposition into European law, even though it represented in large part existing EU regulatory principles. Second, from a regulatory perspective, the flexibility within the existing regime had resulted in considerable divergences in practice between the Member States, inhibiting the development of a single market in the telecommunications sector.12 Third, competition had been introduced or existed in all areas of the telecommunications market and there was a recognized desire to simplify the regulatory framework by 5   Directive 2002/​21/​EC on a common regulatory framework for electronic communications networks and services, OJ L 108/​33, 24 April 2002. 6   Directive 2002/​20/​EC on the authorization of electronic communications networks and services, OJ L 108/​21, 24 April 2002. See further Chapter 6. 7   Directive 2002/​19/​EC on access to, and interconnection of, electronic communications networks and associated facilities, OJ L 108/​7, 24 April 2002. See further Chapter 8. 8   Directive 2002/​22/​EC on universal service and users’ rights relating to electronic communications networks and services, OJ L 108/​7, 24 April 2002. See further Chapter 9. 9   Directive 2002/​58/​EC concerning the processing of personal data and the protection of privacy in the electronic communications sector, OJ L 201/​37, 31 July 2002. See further Chapter 13. 10   See Commission Communication, ‘Towards a new framework for Electronic Communications infrastructure and associated services:  The 1999 Communications Review’, COM(1999)539, 10 November 1999; at p vi. 11   See further Chapter 16, at Section 16.4. 12   The Commission has produced reports on the implementation of the regulatory framework since 1998; the most recent was published in 2015; available at .

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moving towards greater reliance on the application of ex post European competition rules, and away from the array of ex ante measures.13 Fourth, at a technical and market level, the phenomenon of convergence between previously distinct industries has blurred and undermined existing regulatory schemes, as noted in the Framework Directive: The convergence of the telecommunications, media and information technology sectors means all transmission networks and services should be covered by a single regulatory framework. (Recital 5)

The NRF is designed therefore to embrace all forms of communication or transmission technology, whether used to carry voice calls, Internet traffic, or television programmes; while the concept of telecommunications has been replaced by the concepts of ‘electronic communications networks’ and ‘electronic communications services’, defined in the following terms: ‘electronic communications network’ means transmission systems and, where applicable, switching or routing equipment and other resources which permit the conveyance of signals by wire, by radio, by optical or by other electromagnetic means, including satellite networks, fixed (circuit-​and packet-​switched, including Internet) and mobile terrestrial networks, electricity cable systems, to the extent that they are used for the purpose of transmitting signals, networks used for radio and television broadcasting, and cable television networks, irrespective of the type of information conveyed. ‘electronic communications service’ means a service normally provided for remuneration which consists wholly or mainly in the conveyance of signals on electronic communications networks, including telecommunications services and transmission services in networks used for broadcasting, but exclude services providing, or exercising editorial control over, content transmitted using electronic communications networks and services; it does not include information society services, as defined in Article 1 of Directive 98/​34/​EC14, which do not consist wholly or mainly in the conveyance of signals on electronic communications networks. (Framework Directive, at Articles 2(a) and (c))

As with any regulatory regime, definitions constitute the boundaries that determine what falls within and outside the regulated sphere. Such definitions attempt to reflect, not describe, the marketplace to which they apply, since an undertaking’s

13   For the purpose of this Chapter, the phrase ex ante (‘before the fact’) is used in respect of regulatory measures that proactively control the manner in which entities operate going forward; while ex post (‘after the fact’) refers to measures that arise in reaction to the decisions and activities of entities. 14   This measure has now been codified in Directive 2015/​1535/​E U laying down a procedure for the provision of information in the field of technical regulations and of rules on Information Society services, OJ L 241/​1, 17 September 2017.

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activities may result in concurrent application of different regimes. However, clear and comprehensive definitions contribute towards legal certainty, which in turn reduces potential barriers to market entry. While the NRF establishes a single regime for the provision of conveyance or conduit services, the provision of content services over such networks and services is governed under EU law by at least two, currently, distinct regimes for the provision of ‘audiovisual media services’ and ‘information society services’. The former involves ‘providing, or exercising editorial content’ and falls under the ‘Audiovisual Media Services’ (AVMS) Directive;15 while the latter consists of services that are more than ‘wholly or mainly in the conveyance of signals’, and are primarily regulated under the ‘Electronic Commerce’ Directive.16 The boundary between this latter activity and the provision of electronic communication services is particularly blurred, given the potential variety of approaches that could be adopted for interpreting the phrase ‘mainly in the conveyance of signals’; from quantitative to qualitative measures, including the imputed intention or effect of suppliers in the market and the perception of consumers.17 As well as uncertainty concerning how the phrase should be interpreted, a secondary issue concerns who interprets? A prospective service provider could approach the regulator for an opinion on whether a proposed service falls within the regulated sphere, or it may prefer to take legal advice on its regulatory position and act accordingly. Conversely, a regulator may be reluctant to make determinations of status, preferring to place the onus on the regulatee to determine in the first instance, intervening only when considered necessary. Blurred regulatory boundaries therefore create uncertainties for market participants and new entrants. The most obvious example of the current lack of clarity is the emergence of Over-​t he-​Top (OTT) communication services such as Apple’s FaceTime, Facebook Messenger, Telegram, and Snapchat (to list but a few!), which are applications that enable various forms of communication. On a strict technical interpretation of EU concepts, they would not appear to be ‘electronic communication services’ as their services do not consist ‘mainly’ in the ‘conveyance of signals’, since they are a device-​based software application and their usage requires the user to have access

15   Directive 2010/​13/​E U ‘on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services’, OJ L 95/​1, 14 April 2010. Note that a proposal to reform the current regime was agreed by the EU institutions on 6 June 2018. See Commission Proposal COM(2016) 287 final of 25 May 2016. See further Chapter 14, at Section 14.2.5. 16   Directive 2000/​31/​EC on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market, OJ L 178/​1, 17 July 2000. 17  The Audiovisual Media Services Directive employs this criterion for determining whether an ‘on-​ demand’ audiovisual media service is ‘television-​l ike’; see Recital 24.

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to an underlying transmission service, such as a Wifi link.18 From a consumer perspective, however, the service is likely to ‘feel’ like a communication service, despite the distinct technical layers involved. A technical approach to interpretation obviously narrows the scope of regulatees, while a functional approach widens the scope. Until recently, EU national regulatory authorities (NRAs) have tended to adopt a technical approach, considering most OTT communication services to fall outside the regulated regime. However, pressure has been building up to shift towards a more functional approach. Traditional operators have complained that they are placed at a substantial regulatory disadvantage vis-​à-​v is providers of OTT communication services.19 While national courts and the Court of Justice of the European Union (CJEU) have been called upon to make determinations of status.20 As a consequence of these pressures, the Commission has proposed to redefine an ‘electronic communication service’ to encompass three distinct categories of service: • Services consisting wholly or mainly in the conveyance of signals; • ‘internet access services’, which are defined as ‘a publicly available electronic communications service that provides access to the internet, and thereby connectivity to virtually all end points of the internet, irrespective of the network technology and terminal equipment used’;21 and • ‘interpersonal communications service’, defined as ‘a service normally provided for remuneration that enables direct interpersonal and interactive exchange of information via electronic communications networks between a finite number of persons, whereby the persons initiating or participating in the communication determine its recipient(s); it does not include services which enable interpersonal and interactive communication merely as a minor ancillary feature that is intrinsically linked to another service’.22

18   See Commission Staff Working Document on The Treatment of Voice over Internet Protocol (VoIP) under the EU Regulatory Framework, 14 June 2004, at 3. 19   eg ETNO response to the public consultation on the evaluation and review of the regulatory framework for electronic communication networks and services available at . 20   See in Germany, Ruling of 11 November 2015, Administrative Court of Cologne, Ref 21 K 450/​15, Google v BNetzA. See also Case C-​518/​11, UPC Nederland v Gemeente Hilversum, 7 November 2013, at paras  35–​47. 21   As defined at Art 2(2) of Regulation 2015/​2120 laying down measures concerning open internet access, OJ L 310/​1, 26 November 2015 (Open Internet Access Regulation). 22   Proposal for a Directive establishing the European Electronic Communications Code, COM(2016) 590 final of 14 September 2016 (‘2016 Proposal’), at Art 2(5).

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This latter term is intended to capture ‘functionally equivalent services’, such as OTT messaging services.23 The interactive nature of an ‘interpersonal communication service’ must enable the recipient of the information to respond (recital 18), which means a two-​way functionality. The examples given of services that are not considered to fall within the definition are ‘linear broadcasting, video on demand, websites, social networks, blogs, or exchange of information between machines’ (recital 18). Social networks and blogs are presumably excluded to the extent that they do not enable ‘direct’ communication, although they do generally involve interactivity. With Facebook, for example, a person’s ‘wall’ would fall outside the definition, while Facebook Messenger would be within. The ‘ancillary’ exclusion is intended to be interpreted narrowly, under ‘exceptional circumstances’, where the service cannot be used without the principal service and ‘its integration is not a means to circumvent the applicability of the rules’ (recital 18). The example given is a communication channel within an online game. In addition, the Commission’s proposal to replace the Communications Privacy Directive would include such ‘minor ancillary features’ within the regime.24 Although the NRF creates a single tier of regulation for the provision of transmission services, rather than the content being transmitted over such services, this distinction is not a clear-​cut one, and the 2009 Reforms contain a number of content-​related provisions not previously addressed under the NRF, including contractual limitations placed on the ability of users to access or distribute lawful content or operate lawful applications; provisions designed to facilitate the enforcement of owners’ intellectual property rights, and measures designed to ensure that a minimum quality of service is provided over public communications networks, in order ‘to prevent degradation of service and the hindering or slowing of traffic over networks’.25 These provisions implicitly recognize that content impacts on conduit, as the economics of the former can impact directly on the market conditions of the latter.26 As well as excluding content services, the NRF does not generally govern the provision and use of ‘telecommunications terminal equipment’ or ‘radio equipment’, the physical kit, or other components that are connected to an electronic communications network or service by end-​users, which are subject to a separate ‘type approval’ regime.27 The regulatory boundary between a network and equipment was

23   See Proposal for a Regulation concerning the respect for private life and the protection of personal data in electronic communications, COM(2017) 10 final of 10 January 2107, at Recita1 11. 24   Proposal for a Regulation concerning the respect for private life and the protection of personal data in electronic communications, COM(2017) 10 final of 10 January 2017, at Art 4(2). See further Chapter 13, at Section 13.2. 25 26   Universal Services Directive, Article 22(3).   See further Chapter 15. 27   Framework Directive, Art (1)4. See further Section 4.4.3.

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referred to as the ‘interface’, which meant either the ‘network termination point’ for fixed network access or the ‘air interface’ for wireless access,28 although this concept has since been removed. Certain end-​user equipment may also contain components that are categorized as an ‘associated service’ under the NRF: those services associated with an electronic communications network and/​or an electronic communications service which enable and/​or support the provision of services via that network and/​or service or have the potential to do so and include, inter alia, number translation or systems offering equivalent functionality, conditional access systems and electronic programme guides, as well as other services such as identity, location and presence service. (Framework Directive, Article 2(ea))

‘Conditional access systems’ control access to encrypted radio or television broadcast signals,29 a content service, and are generally contained with a set-​top box or ‘enhanced digital television equipment’.30 We therefore have another blurred regulatory boundary, whereby an item of consumer equipment, the set-​top box, contains components that fall within the NRF, while other equipment and systems for accessing content services would lie outside the regulated sphere. A final distinction made in the NRF is between ‘public’ electronic communication networks and services and non-​public, the former being subject to the bulk of the regulatory obligations and attention. Despite the importance of this regulatory boundary, the NRF does not further define what distinguishes public from private, except to state that the former is ‘available to the public’.31 It is therefore left to national implementing legislation or national regulators to offer further clarity. In the UK, for example, Ofcom has stated that a service is ‘publicly available’ if it is ‘available to anyone who is both willing to pay for it and to abide by the applicable terms and conditions’; as distinct from a bespoke service provided to a restricted group of customers.32 However, this is another area where regulatory ambiguity and legal uncertainty may arise. While the current regime was intended to be future-​proofed, the NRF Directives also contain a review procedure obliging the Commission to report to Council and Parliament about the ‘functioning’ of the Directives.33 The first such review took place in 2006 (the ‘2006 Review’). Overall, the conclusions were that the NRF

  Directive 99/​5/​EC, at Art 2(e).   Framework Directive, Art 2(f). See further Chapter 8, at Section 8.3.4.5 and Chapter 14, at Section 14.3.3.2. 30 31   Ibid, at Art 2(o).   Ibid, at Art 2(d). 32   Oftel, Guidelines for the interconnection of public electronic communications networks, 23 May 2003, at para 6.1 et seq; as endorsed in Ofcom’s Guidelines on the General Conditions of Entitlement, see . 33   eg Framework Directive, at Art 25. 28 29

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was operating successfully, with only relatively minor amendments and improvements being proposed.34 In November 2007, the Commission published a series of legislative proposals to amend the NRF, key areas for reform being in respect of spectrum management and the procedural burden in respect of the market reviews and the resultant ex ante remedies.35 Adoption of the final texts occurred in November 2009 (the ‘2009 Reforms’): The ‘Citizens’ Rights’ Directive36 and the ‘Better Regulation’ Directive.37 Member States were required to transpose these amendments into national law by May 2011. A second review was commenced in 2015 and led to the publication, in September 2016, of the Commission’s proposal to establish the ‘Electronic Communications Code’ (‘Code’).38 The Code is part of the REFIT programme to simplify EU laws, which in this case involves recasting four of the five NRF measures into a single code. It does not radically depart from the NRF, so cannot be considered to represent a new generation of EU telecommunications law, but is intended to consolidate the existing instruments.39 On 5 June 2018, political agreement on the new Code was reached between the Commission, Parliament, and Council.

4.3  S OURC E S OF L AW The basis for Community involvement in the telecommunications market has primarily been founded on two different strands of European Treaty law: competition law (Articles 101–​109) and the establishment of the ‘Internal Market’ (Article 114).40 The former articles have been primarily used to open up national markets to

34   Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions on the Review of the EU Regulatory Framework for electronic communications networks and services, COM(2006) 334 final (28 June 2006); and accompanying Commission Staff Working Document, SEC(2006) 816. 35   See Commission Communication, Report on the outcome of the Review of the EU regulatory framework for electronic communications networks and services in accordance with Directive 2002/​21/​EC and Summary of the 2007 Reform Proposals, COM(2007)696 rev 1 (‘2007 Reform Proposals’). 36   Directive 2009/​136/​EC amending Directive 2002/​22/​EC on universal service and users’ rights relating to electronic communications networks and services, Directive 2002/​58/​EC concerning the processing of personal data and the protection of privacy in the electronic communications sector, and Regulation (EC) No 2006/​2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws, OJ L 337/​11, 18 December 2009. 37   Directive 2009/​140/​EC amending Directives 2002/​21/​EC on a common regulatory framework for electronic communications networks and services, 2002/​19/​EC on access to, and interconnection of, electronic communications networks and associated facilities, and 2002/​20/​EC on the authorisation of electronic communications networks and services, OJ L 337/​37, 18 December 2009. 38 39   2016 Proposal.   See further below and Chapters 6, 7, 8, and 9. 40   Treaty on the Functioning of the European Union (‘TFEU’), OJ C 83/​47, 30 March 2010.

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competition, whilst the latter has primarily addressed competition issues between national markets, through harmonization measures. Surprisingly, however, the telecommunications market has not been subject to harmonization measures under the freedom to provide services provisions of the Treaty (Articles 56–​62). As a consequence, the provision of ‘electronic communication services’ is not subject to the ‘country of origin’ principle, whereby businesses established in one Member State are free to supply services into the other twenty-​seven Member States without further authorization or regulatory control from the recipient state (except in limited and procedurally controlled circumstances).41 This is in stark contrast to the provision of other closely related services, specifically ‘information society services’ and ‘audiovisual media services’. The Commission has repeatedly sought to address this apparent anomaly, with the adoption of a ‘one-​stop shopping procedure’,42 a proposal to establish a European Communications Markets Authority,43 and a 2013 proposal for a single authorization regime;44 each of which has either been disregarded or rejected by the Member States. While the current approach was initially seen as reflecting perceptions that communication services were intimately tied to the physical networks over which they operated; the continued intransigence of the Member States must be viewed as being deeply rooted in a range of political imperatives and the ‘public interest’ nature of telecommunications. Initiatives within each area have been the responsibility of different departments of the European Commission; harmonization measures originating within DG Connect and liberalization issues residing primarily with the DG Competition. The role of DG Competition in the development of EU policy in the telecommunications sector has been very considerable. Indeed, the manner in which EU competition law has been applied to the telecommunications sector provides a case study of the significance of competition law within the acquis communautaire. In particular, Article 106(3) of the Treaty of the Functioning of the European Union (TFEU) bestows a supervisory function upon the Commission, supported by special law-​making powers: 3. The Commission shall ensure the application of the provisions of this Article and shall, where necessary, address appropriate directives or decisions to Member States.

  See .   Directive 97/​13/​EC on a common framework for general authorisations and individual licences in the field of telecommunications services, OJ L 117, 7 May 1997, Art 13. 43   See further Section 4.7.2. 44   Proposal for a Regulation laying down measures concerning the European single market for electronic communications and to achieve a Connected Continent, COM(2013) 627 final of 11 September 2013. 41

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Therefore, in addition to the more traditional forms of regulatory intervention by a competition authority against undertakings engaged in anti-​competitive practices, the Commission could require Member States to fundamentally alter the terms of entry into a particular market. In 1988, the Commission took the almost unprecedented step of issuing a Directive under Article 106(3),45 on competition in the market for telecommunications terminal equipment, followed by a further Directive on telecommunication services in 1990.46 The scope of such ‘Commission’ directives was viewed by a number of Member States as an illegal exercise of the Commission’s competence. Both directives were challenged before the CJEU, but were decisively upheld as legitimate measures.47 As such, European competition law grants the Commission legislative as well as regulatory competence in the telecommunications sector. By contrast, Internal Market measures, under Article 114, are adopted through the co-​decision procedure, by the Council and Parliament. While the majority of measures have taken the form of Directives, the Commission has utilized the full range of legal instruments available under the TFEU:  Regulations, Decisions, and Recommendations.48 Regulations are obviously the most significant instrument of harmonization, since they are ‘directly applicable’ in Member States. To date, however, only four Regulations have been adopted in the sector, three addressing issues of substantive regulation, local loop unbundling (LLU),49 mobile roaming,50 and ‘open internet access’;51 while the fourth implemented an institutional reform, the establishment of BEREC.52 The LLU measure was adopted in 2000, at the height of the ‘dot.com’ boom, when it was seen as imperative that rapid progress be made in upgrading the fixed access network to exploit the potential of the internet.53 At that time, there was significant public clamour for action, which galvanized the institutions to adopt a more interventionist regulatory approach. Similarly, ‘mobile roaming’ was a high

  The relevant Treaty provision at the time was 90(3).   Directive 88/​301/​E EC, OJ L 131/​73, 27 May 1988 and Directive 90/​388/​E EC, OJ L 192/​10, 24 July 1990. 47   Case C-​202/​8 8: France v Commission [1992] 5 CMLR 552; and Case C-​271/​9 0 Spain v Commission [1992] ECR I-​5833. 48   TEC, Art 249. 49   Regulation 2887/​2000 of the European Parliament and Council of 18 December 2000 on unbundled access to the local loop, OJ L 336/​4, 30 December 2000; which was repealed by the Better Regulation Directive (Art 4). 50   See Regulation (EC) 717/​2007 on roaming on public mobile telephone networks within the Community, OJ L 171/​32, 29 June 2007; repealed by Regulation (EU) 531/​2012 on roaming on public mobile communications networks within the Union, OJ L 172/​10, 30 June 2012. 51   See n 22. 52   Regulation 1211/​2009 establishing the Body of European Regulators for Electronic Communications (BEREC) and the Office, OJ L 337/​1, 18 December 2009. See Section 4.7. 53   It was repealed by the Better Regulation Directive (n 37), at Art 4. 45

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profile issue with the general public, who experienced high roaming charges when travelling within Europe, as well as being politically symbolic of the desire to promote greater European integration. The justification for a Regulation was the ‘urgency and persistence of the problem’,54 and followed on a sectoral inquiry carried out by DG Competition in 2000,55 and investigative raids carried out against nine European mobile operators based in the UK and Germany.56 The initial 2007 Regulation was first amended in 2009, then replaced in 2012 by a measure, which was then amended again in 2015 leading to the abolition of roaming charges by 15 June 2017.57 Such direct ‘state’ intervention in the market, mandating the retail price of a service, is not just prompted by competition and consumer protection concerns, but is another indication of the ‘public interest’ nature of telecommunications,58 in this case, the desire to promote the concept of the EU as a single market. The Open Internet Access Regulation addresses the issue of ‘net neutrality’, constraining the ability of operators to discriminate certain types of content, application, or service (see further Chapter 15). Taken together, it becomes apparent that the choice of a Regulation as the legislative instrument correlates to the extent of public consciousness and debate around the applicable issue. The Commission has also made extensive use of ‘soft law’ measures, both formal Recommendations59 and informal guidelines and notices.60 Under the Framework Directive, the Commission can issue a recommendation to address divergences in the implementation by NRAs of regulated tasks under the NRF,61 to which NRAs must ‘take the utmost account of’,62 but which have no binding legal force.63 Such documents are used both to further harmonization among Member States, providing a benchmark of good practice for national regulatory authorities,

  COM(2006) 382 final, 12 July 2006, at p 8.  See . 56  Commission Press Release, ‘Statement on inquiry regarding mobile roaming’, MEMO/​ 01/​ 262, 11 July 2001. 57 58   Regulation 531/​2012, as amended, at Art 6a.   See Chapter 1, at Section 1.7. 59  eg Commission Recommendation 2005/​698/​EC ‘on accounting separation and cost accounting systems under the regulatory framework for electronic communications’, OJ L 266/​6 4, 11 October 2005 and Recommendation 2010/​572/​E U ‘on regulated access to Next Generation Access Networks’, OJ L 251/​35, 25 September 2010. 60   eg Guidelines on the Application of EEC Competition Rules in the Telecommunications Sector, OJ C 233/​ 2, 6 September 1991. 61 62   Framework Directive, Art 19(1).   Ibid, Art 19(2). 63   TFEU, Art 288. However, national courts are bound to take recommendations into consideration when deciding disputes, especially where they ‘cast light on the interpretation of national measures adopted in order to implement them or where they are designed to supplement binding EU provisions’. (Case C-​2 8/​ 15, Koninklijke KPN BV v ACM, 15 September 2016, at para 41). The Framework Directive also provides the Commission with the power to adopt a binding decision on a matter, two years after issuing a recommendation (Art 19(3)(a)). 54 55

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particularly in respect of the complex but critical areas of pricing and cost accounting, as well as providing assistance to undertakings, both market players and potential entrants, about how the Commission views particular matters, particularly in terms of competition analysis. However, while ‘soft law’ has been used by the Commission to pursue its competition agenda, it is pertinent to note that the NRF does not expressly acknowledge the use of self-​regulation as an element of the regulatory regime; while co-​regulation is only referred to once in connection with the enhancement of service quality.64 This is in contrast to the position adopted in some Member States, such as the UK,65 where industry self-​regulation is expressly referred to as a means of moving towards deregulation as competitive markets become established. The technical complexity of the telecommunications market has always meant that much of the input on certain issues, such as interconnection, primarily consisted of the convening and oversight of particular industry groups; intervening only in the event of impasse. As regulators reduce or withdraw from ex ante intervention in the market, as they are obliged to do under the NRF,66 then increasing reliance is likely to be made upon industry to regulate itself. This silence about the role of self-​regulation runs counter to general EU policy reflected in an Interinstitutional Agreement on Better Law-​making, which expressly acknowledges the potential role of self-​regulation,67 as do measures in related areas, specifically the provision of audiovisual media services.68 DG Internal Market has also been responsible for some initiatives relating directly or indirectly to the telecommunications sector. It is responsible for electronic commerce issues, including regulating the provision of ‘information society services’,69 which will generally be offered by telecommunication services providers. DG Internal Market was also responsible for data protection issues, which included sectoral measures imposing special obligations in the telecommunications sector; although the responsibility has subsequently transferred to the DG Justice.70 The CJEU has inevitably played a role in the development of European telecommunications law as the ultimate arbiter of European legal instruments. Proceedings have come before the Court based on one of four legal grounds provided for under the TFEU:71

  Universal Services Directive, Recital 48.   ie The Communications Act 2004, s 6(2), requires Ofcom to have regard to whether policy could be achieved through ‘effective self-​regulation’, which is further defined at s 6(3). 66 67   See Framework Directive, at Art 16(3).   OJ C 321/​1, 31 December 2003, at paras 22–​2 3. 68 69 70   Audiovisual Media Services Directive at Art 4(7).   See n 14.   See further Chapter 13. 71   See generally Commission, Guide to the Case Law of the Court of Justice of the European Union in the field of Telecommunications (January 2010), available at . 64 65

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• Infringement proceedings (Article 258)—​A s part of its role to ensure implementation of Community measures, the Commission has brought proceedings against certain Member States for non-​i mplementation or incorrect implementation of telecommunication measures.72 • Judicial review proceedings (Article 263)—​Member States have challenged the Commission’s right to legislate on particular matters; as discussed above in respect of Article 106(3) measures. • Annulment proceedings (Article 263)—​Persons have a right of appeal to the Court of Justice where they have been affected by a decision, such as a refusal to permit a merger;73 against the fees payable for the granting of a GSM licence,74 and against having been found to have infringed EU competition provisions.75 • Preliminary rulings (Article 267)—​The Court has been required to consider questions of interpretation in respect of telecommunications measures referred to it by national courts,76 often in the form of challenges made against decisions taken by NRAs.77 Finally, it should be noted that the WTO agreements addressing the telecommunications sector, such as the Annex of Telecommunications and the Reference Paper, comprise a potential source of EU law in terms of interpretation and application, if not a basis for initiating proceedings before the Court of Justice.78

4.4  L IBER A L IZ ATION OF THE EU TEL E COMMUNIC ATIONS M A R K E T As noted, the basis for the liberalization of Member State markets was the application of European competition law. The first indication of the potential impact of these rules arose in a Commission decision against the UK incumbent, British

72   eg Case C-​411/​02, ECJ, 16 March 2004 (Austria); Case C-​500/​01, OJ C 47/​6, 21 February 2004 (Spain); Case C-​97/​01, OJ C 184/​4, 2 August 2003 (Luxembourg); Case C-​221/​1, OJ C 274/​14, 9 November 2002 (Belgium); Case C-​146/​0 0, OJ C 84/​2 3, OJ 6 April 2002 (France); Case C-​396/​99 [2001] ECR I-​7577 (Greece); Case C-​429/​99, OJ C 369/​3, 22 December 2001 (Portugal). 73   eg Case T-​310/​0 0, MCI Inc v Commission and France [2004] 5 CMLR 26, against the Commission’s decision to prohibit the merger of MCI WorldCom/​Sprint. 74   max.mobil Telekommunikation Service GmbH v Commission [2002] 4 CMLR 32. 75  eg France Télécom SA v Commission [2007] 4 CMLR 21, and Deutsche Telekom AG v Commission, CFI Judgment, 10 April 2008. 76   eg Case C-​18/​8 8 RTT v GB-​ Inno-​ BM SA [1991] ECR I-​5941; Case C-​79/​0 0 Telefónica de España SA v Administración General del Estado [2002] 4 CMLR 22; and Case C-​369/​0 4, Hutchison 3G (UK) Ltd & ors v Commissioners of Customs and Excise, 26 June 2007 re: payment of VAT on spectrum auction transactions. 77   eg Cases C-​152/​07 and C-​154/​07, Arcor AG & Co. KG and others v Bundesrepublik Deutschland, 17 July 2008. 78   See further Chapter 16, at Section 16.4.4.

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Telecommunications (BT), for an ‘abuse of dominant position’ under what is now Article 102 of the TFEU. The decision concerned a ‘scheme’ adopted by BT prohibiting private message-​forwarding agencies in the UK from relaying telex messages received from and intended for relay to another country.79 The Commission’s decision was appealed by the Italian government to the ECJ, whilst the British government intervened in support of the Commission.80 One issue for the CJEU to decide was whether BT, as a public body, was subject to the competition rules of the Treaty of Rome. The Court found that despite its public sector status, BT was operating as an ‘undertaking’ for the purposes of Article 102. It noted that any regulatory powers that had been given to BT were strictly limited and, therefore, the particular scheme in question ‘must be regarded as forming an integral part of BT’s activities as an undertaking’ (para 20). In a subsequent decision, the Court confirmed that Article 102 was applicable to ‘undertakings’ holding a dominant position even where that position arose through law rather than the activities of the undertaking itself.81 The Italian government also argued that BT was exempt from the competition rules by virtue of being entrusted with the provision of services of ‘general economic interest’, under Article 106(2), which could be threatened by the loss of revenue resulting from the provision of private message-​forwarding services. The Court held that it was for the Commission, under Article 106(3), to ensure the application of this provision and there was no evidence that such activities would be detrimental to the tasks assigned to BT (paras 28–​33). The Court also noted that BT’s statutory monopoly only extended to the provision and operation of telecommunication networks, not the supply of services over such networks (para 22). The British Telecom case was a landmark decision in the development of EU policy in the telecommunications sector and led to further investigations by the competition authorities into the activities of Europe’s incumbent operators. The Commission has applied European competition law to the activities of telecommunications operators through behavioural and structural controls.82 The former have been imposed both in ex ante legislative instruments, as well as ex post decisions imposing behavioural undertakings as conditions for the approval of certain commercial agreements. Structural controls have been imposed primarily through ex post competition investigations and decisions relating to agreements,

  Decision 82/​861, OJ L 360/​36, 21 December 1982.   Case 41/​8 3 Re British Telecommunications: Italy v Commission [1985] 2 CMLR 368. 81   Case 311/​8 4 Centre Belge d’Etudes de Marché-​ Télé-​ Marketing v Compagnie Luxembourgeoise de Telediffusion SA and Information Publicite Benelux SA [1986] 2 CMLR 558. 82   See also Chapter 10. 79

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joint ventures, merger activities, and even state aid83 in every aspect of the sector. Such regulatory intervention has extended to alliances and mergers between national incumbents;84 in the mobile sector;85 concerning internet infrastructure;86 and with providers of content services.87 In all these cases, the Commission has been concerned to protect the interests of European consumers and industry against the inevitable commercial pressures created by the developing global economy. The Commission, as competition authority, has also fined undertakings for abusive practices in the market, including Deutsche Telekom AG,88 Wanadoo Interactive,89 and Telefónica SA.90 During the initial phases of telecommunications liberalization in Europe, the process was underpinned by two legal phrases that were key elements of the ex ante legislative measures adopted by the Commission, that of ‘special or exclusive rights’ and ‘essential requirements’.

4.4.1  ’Special or exclusive rights’ As already discussed, Article 106(1) of the EC Treaty concerns ‘public undertakings or undertakings to which Member States grant special or exclusive rights’. The primary mechanism by which the Commission decided to liberalize national telecommunications markets, under the Equipment and Services Directives, was by requiring Member States to withdraw the grant of any ‘special or exclusive rights’ in respect of such activities. Rather than simply addressing the exercise of such rights, the Commission went further and challenged the continued existence of such rights. Their existence was seen as distorting competition within the markets at Community level; whilst their abolition would not ‘obstruct, in law or in fact, the performance’ of any service of ‘general economic interest’ (Article 106(2)), such as universal service, which had been entrusted to undertakings granted such ‘special or exclusive rights’.

83  eg France Télécom [2003] OJ C 57/​5, 12 March 2003. On 20 July 2004, the Commission ordered France Télécom to repay up to £1.1bn in back taxes, estimated savings that the firm had made from the granting of exemptions from local taxes that constituted a form of state aid. Mobilcom [2003] OJ C 80/​5, 3 April 2003 and [2003] OJ C 210/​4, 5 September 2003. 84  eg France Télécom and Deutsche Telekom (Case No IV/​35.337—​Atlas; OJ L 239/​2 3, 19 September 1996); Telia and Telenor (Case IV/​M.1439; OJ L 40/​1, 9 February 2001). 85  eg Vodafone Airtouch and Mannesmann (Case No Comp/​M.1795; OJ C 141/​19, 19 May 2000). 86  eg WorldCom and MCI (Case IV/​M.1069; OJ L 116/​1, 4 May 1999). 87  eg AOL and Time Warner (Case No COMP/​M.1845; OJ L 268/​2 8, 9 October 2001). 88   OJ L 263/​9, 14 October 2003, imposing a fine of €12.6m. 89   Decision of 16 July 2004, imposing a fine of €10.35m. 90   Decision of 4 July 2007, imposing a fine of €151m.

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Member States challenged both directives before the CJEU.91 The Court found in the Commission’s favour in respect of the withdrawal of exclusive rights, but upheld the claims of the Member States in respect of the limitation imposed on the granting of special rights, on the grounds that the Directives failed to specify what ‘special rights’ were or the reasons that such rights were contrary to the provisions of the Treaty. Such provisions were therefore void. As a consequence, the Commission amended the Services Directive to clarify the distinction between ‘exclusive rights’ and ‘special rights’,92 which the CJEU subsequently endorsed.93 ‘Special rights’ would include powers of compulsory purchase and derogations from laws on town and country planning 94 that are granted to undertakings ‘otherwise than according to objective, proportional and non-​d iscriminatory criteria’.95 During the liberalization process, the procurement practices of telecommunication operators that were public undertakings and operating under special or exclusive rights were also subjected to regulatory controls.96 Such rules are now only applicable to the purchasing of telecommunication systems and services, rather than the provision of such services.97 Despite full market liberalization, Article 106(3) may continue to be relevant to the European telecommunications market. First, in a number of Member States the incumbent operator continues to be a ‘public undertaking’, through full or partial state ownership, and as such could be subject to state measures which infringe EU competition law. Second, where an operator has been granted ‘special or exclusive’ rights in a different sector of activity, such as broadcasting or water supply, the exercise or existence of such rights might be perceived as distorting the competition in the telecommunications market.98 As a consequence, ex ante controls may be imposed on such undertakings, to ensure structural separation between the activities.99

  See n 35.   See Art 2(1) of Commission Directive (94/​4 6/​EC) of 13 October 1994 amending Directive 88/​301/​E EC and Directive 90/​388/​E EC in particular with regard to satellite communications, OJ L 268/​15, 19 October 1994. 93   Case C-​302/​94, R v Secretary of State for Trade and Industry, ex parte British Telecommunications plc, ECR I-​6 417, at para 34. 94   Ibid, at Recital 11. 95   Commission Directive 2002/​77/​EC on competition in the markets for electronic communications networks and services, OJ L 249/​21, 17 September 2002. 96   Directive 93/​38/​E EC coordinating the procurement procedures of entities operating in the water, energy, transport and telecommunication sectors, OJ L 199/​8 4, 9 August 93, now repealed. 97   Directive 2014/​2 4/​E U of 26 February 2014 on public procurement and repealing Directive 2004/​18/​EC, OJ L 94/​65, 28 March 2014, Art 8. 98   For the application of Art 106 to the broadcasting sector see Case C-​260/​89, Elliniki Radiophonia Tileorassi (1991) ECR I-​2925. In the UK, Ofcom has the power to impose ‘privileged supplier’ conditions on an operator in such circumstances (Communications Act 2003, s 77). 99   Framework Directive, Art 13. 91

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4.4.2  Essential requirements A key element in the Commission’s liberalization directives was reference to the concept of ‘essential requirements’. The free movement of goods (ie telecommunications equipment) and the freedom to provide services was achieved by restricting the ability of a Member State to prohibit the supply of equipment and services except for ‘non-​economic reasons in the general public interest’, otherwise referred to as the ‘essential requirements’. Such reasons reflect the derogations expressly provided for in the TFEU, ie ‘on grounds of public policy, public security or public health’ (Article 46), and recognized in CJEU jurisprudence: . . . Member States retain . . . the power to examine whether the said equipment is fit to be connected to the network in order to satisfy the imperative requirements regarding the protection of users as consumers of services and the protection of the public network and its proper functioning.100

The ‘essential requirements’ obviously differ between telecommunications equipment and services, and have been amended over time to reflect evolving public policy concerns and market conditions: Telecommunications Equipment101

Telecommunications Services102

1. Health and safety of user and any other person 2. Electromagnetic compatibility requirements 3. Effective use of radio frequency spectrum 4. Interworking of apparatus via the network 5. Protection of the network from harm or misuse of network resources 6. Features protecting the privacy of subscribers and users 7. Features ensuring avoidance of fraud 8. Features ensuring access to emergency services 9. Features facilitating use by users with disabilities 10. Features ensuring that only software that is compliant with the essential requirements can be loaded onto the equipment

1.  Security of network operations 2. Maintenance of network integrity 3.  Interoperability of services* 4.  Data protection* 5. Effective use of radio frequency spectrum* 6. Avoidance of harmful interference* 7.  Protection of the environment* 8. Town and country planning objectives*

(* conditions imposed under such reasons are only permissible ‘in justified cases’)

Over the years public policy concerns broadened to encompass the protection of personal data and environmental issues, impacting on the building of network infrastructure, such as mobile transmitters and digging-​up streets to lay cable.   Case C-​18/​8 8, Régie des Télégraphes et des Téléphones v GB-​Inno-​BM SA [1991] ECR I-​5941.   As defined at Art 3 of Directive 2014/​53/​E U of 16 April 2014 on the harmonisation of the laws of the Member States relating to the making available on the market of radio equipment, OJ L 153/​62, 22 May 2014. 102   As defined by Art 1(1) of Directive 90/​388 (as amended by Directive 96/​19/​EC) and Art 2(6) of Directive 90/​ 387. 100 101

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In the first stages of liberalization, much concern was directed towards the impact on the ‘national’ (ie incumbent) network of new operators connecting ‘unregulated’ telecommunications equipment and generating substantial volumes of additional traffic. The network, as a strategic component of Member State economies, was viewed as being vulnerable in a competitive environment. Over time such concerns for the ‘national’ network have generally proven to be largely overstated. Incumbent operators have, however, continued to use the terminology of the ‘essential requirements’ as grounds for imposing restrictive conditions on new entrants. In the UK, for example, BT has used concerns about ‘network security’ as a justification for requiring separate co-​location rooms for operators implementing ASDL at BT’s local exchanges, which impacted on operators’ timescales and costs for the introduction of competing services. At times, new entrants have expressed concern that national regulatory authorities did not always scrutinize fully the evidence for some of these ‘essential requirement’ claims.103 While the concept of ‘essential requirements’ continues to be utilized in respect of telecommunications equipment (see Section 4.4.3), its use as a distinct regulatory concept in respect of telecommunication networks and services has disappeared; although some of the elements that comprise the concept continue to be specific EU regulatory objectives under the Framework Directive,104 and all of the elements comprise conditions that may be attached to an authorization granted by a Member State under the Authorisation Directive.105

4.4.3  Telecommunications equipment Telecommunications equipment encompasses a vast array of hardware, software, and related devices used both within the network, for the conveyance of signals, and at the edges of the network, in devices that enable end-​users to initiate and receive communications. In common with all major jurisdictions, Europe has had a distinct regulatory regime for end-​user equipment, historically referred to as ‘telecommunications terminal equipment’.106 As such equipment merged with computing, a highly regulated sector became rapidly liberalized and competitive, with

103   See Commission Communication, ‘Sixth Report on the Implementation of the Telecommunications Regulatory Package’, COM(2000) 814, 7 December 2000, at p 16 et seq. 104   eg Art 8(3)(b) ‘interoperability of services’, Art 8(4)(f) ‘ensuring that the integrity and security of public communications networks are maintained’. 105   See Annex at A. ‘Conditions which may be attached to a general authorization’ and B. ‘Conditions that may be attached to rights of use for radio frequencies’. See further Chapters 7 and 8. 106   Council Directive of 24 July 1986 on the initial stage of the mutual recognition of type approval for telecommunications terminal equipment, 86/​361/​E EC; OJ L 217/​21, 5 August 1986.

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the emergence of strong global players, such as Nokia and Ericsson, accompanied by relatively light regulatory intervention. At the outset, liberalization of the telecommunications terminal equipment market primarily focused on the application of the principle of the free movement of goods, under Articles 34–​37 of the TEC. In 1985, for example, the Commission intervened on the basis of Article 37 against Germany in respect of a proposed regulation extending the Bundespost’s monopoly over telecommunications equipment to cordless telephones.107 As with other product areas, mutual recognition was the initial vehicle for the achievement of a ‘Single Market’. The first legislative initiative was a Council Directive in 1986 that called upon Member States to implement mutual recognition in respect of conformity tests carried out on mass-​ produced terminal equipment.108 A more comprehensive, and controversial, measure was taken by the Commission in 1988 when it adopted a directive, under Article 106(3) (then Article 86), calling upon Member States to withdraw any ‘special or exclusive’ rights that may have been granted to undertakings relating to telecommunications terminal equipment.109 The Directive stated that the only grounds upon which a Member State could restrict or regulate economic operators from importing, marketing, operating, and maintaining terminal equipment was where such equipment could either be shown to have failed to satisfy the ‘essential requirements’ or the economic operator failed to possess the necessary technical qualifications in relation to the equipment.110 The mutual recognition process, first established under the 1986 Directive and extended under a series of measures addressing terminal equipment,111 comprised a number of inter-​l inked principles and procedures, which continue to be largely applicable: • The notification and publication by Member States or the Commission of technical specifications relating to the terminal equipment, commonly referred to as ‘type approval specifications’;

107   Re Cordless telephones in Germany [1985] 2 CMLR 397. See also Case C-​18/​8 8, Régie des télégraphes et des téléphones v GB-​Inno-​BM SA (1991) ECR I-​5941, where it was held that Article 30 of the Treaty precludes an undertaking from having the power to approve telephone equipment for connection to the public network without being susceptible to legal challenge. 108   See n 112. 109   Commission Directive of 16 May 1988 on competition in the markets of telecommunications terminal equipment, 88/​301/​E EC; OJ L131/​73, 27 May 1988, Art 2. 110   Ibid, at Art 3. 111   eg Council Directive 91/​263/​EC on the approximation of the laws of the Member States concerning telecommunications terminal equipment including the mutual recognition of their conformity, OJ L128/​1, 23 May 1991 (repealing 86/​361); and Directive 98/​13/​EC relating to telecommunications terminal and satellite earth station equipment, including mutual conformity recognition, OJ L 74, 12 March 1998 (repealing 91/​263).

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• Equipment meeting relevant harmonized standards (published in the Official Journal) is presumed to be compliant with the ‘essential requirements’; • The establishment of independent ‘notified bodies’ (designated by Member States112) to carry out an a priori examination and conformity assessment of a specimen of the proposed equipment with the ‘essential requirements’, and the issuance of an ‘EC type-​examination certificate’ in relation to the particular piece of equipment; • Declaration obligations imposed upon manufacturers that (a)  all equipment produced is in compliance with the certificate and (b) that such equipment was produced under a quality assured system; and • The adoption of a ‘CE conformity marking’ scheme to enable identification of terminal equipment that is suitable for connection to the public telecommunications network:113

Figure 4.1  CE conformity marking. These procedures were simplified under a consolidated regime, which came into force in April 2000, intended to better reflect the ‘pace of technology and market development’ by making it easier for manufacturers to place products on the market.114 This was achieved primarily by removing the requirement for equipment to be tested by ‘notified bodies’ prior to its manufacture. Instead, greater emphasis is placed upon manufacturers documenting their compliance with ‘Conformity Assessment Procedures’ relevant to the particular type of equipment. In June 2008, the Commission codified its rules for competition in the markets for telecommunications terminal equipment, replacing the 1988 Directive and

112   Such designation is now governed by Chapter IV of Directive 2014/​53/​E U (see n 101). In the UK, there are nine such bodies authorized in respect of ‘radio equipment’. For a complete listing, see . 113   The use of the CE marking is now primarily governed by Chapter IV of Regulation 765/​2008/​EC of 9 July 2008 setting out the requirements for accreditation and market surveillance relating to the marketing of products, OJ L 218/​30, 13 August 2008. 114   Directive 1999/​5/​EC, see n 86, at Recital 7.

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the subsequent measures amending it.115 In addition, under the 2009 Reforms ‘consumer premises terminal equipment’ was brought partially within the NRF, specifically in respect of measures designed to improve access to and use of such equipment by disabled users, such as text relay services.116 The ‘type approval’ regime was again reformed in 2014, with fixed-​line equipment being removed from the sectoral regime and placed under generic measures governing all electrical equipment.117 ‘Radio equipment’ remains subject to a sectoral regime designed primarily to ensure the efficient use of spectrum and the avoidance of harmful interference, but extending to the other ‘essential requirements’ outlined in the previous section.118 In the age of the smartphone, end-​users have greater capabilities to modify their devices through the installation of software ‘apps’. Concerns that such apps could modify the device and compromise the ‘essential requirements’ has resulted in a new requirement that users or third parties should only be capable of loading software on to the radio equipment that are demonstrably compliant with the ‘essential requirements’.119 Overall, however, the key elements of the type approval regime remain the same, with the ‘manufacturer’ being the primary actor responsible for compliance.120

4.4.4  Telecommunications services Initially, the Commission’s approach to liberalization focused on the competitive provision of services, rather than network infrastructure over which such services are carried. The Commission’s 1990 ‘Services Directive’ was limited only to liberalization of the provision of non-​voice telephony services, and did not include ‘telex, mobile radiotelephony, paging and satellites services’.121 However, the ‘Services Directive’ addressed for the first time the need for objective, transparent, and

115   Commission Directive 2008/​6 3/​EC of 20 June 2008 on competition in the markets in telecommunications terminal equipment, OJ L 162/​20, 21 June 2008. 116   Framework, Art 1(1) and the Universal Services Directive, at Art 23a(2). 117   Directive 2014/​35/​E U of 26 February 2014 on the harmonisation of the laws of Member States relating to the making available on the market of electrical equipment designed for use within certain voltage limits, OJ L 96/​357, 29 March 2014; and Directive 2014/​30/​E U of 26 February 2014 on the harmonisation of the laws of the Member States relating to electromagnetic compatibility, OJ L 96/​79, 29 March 2014. 118   See n 107 at Art 3. It came into effect on 13 June 2016, although subject to a one-​year transitional phase (Art 48). 119   Ibid, at Art 3(3)(i) and Recital 16. 120   ie ‘any natural or legal person who manufactures radio equipment or has radio equipment designed or manufactured, and markets that equipment under his name or trade mark’ (ibid, at Art 2(1)(12)). See also Art 10. 121   Commission Directive 90/​388/​E EC on competition in the markets for telecommunications services, OJ L192/​10, 24 July 1990.

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non-​d iscriminatory licensing, and declaration procedures for operators wishing to enter the market. In order to be able to enter the market for the provision of telecommunications services, new entrants need to have access to leased transmission circuits from the providers of network infrastructure, traditionally the incumbent operator.122 The ‘Services Directive’ therefore required Member States to ensure that requests for leased circuits are met within a reasonable period of time and any increase in charges are justified; partly through an obligation on Member States to inform the Commission of the factors responsible for any increase (Article 4). The use of any leased circuits could not be restricted, although prohibitions on offering simple resale to the public were permissible until 31 December 1992, in order to protect the incumbent’s rights in respect of the provision of voice telephony. Following the CJEU decision to uphold the Commission’s right to liberalize the services market, the Commission adopted a series of directives amending the ‘Services Directive’ to encompass a broader range of telecommunications services:  Satellite services;123 use of cable TV networks;124 mobile and personal communications;125 and the ‘Full Competition Directive’.126 The Full Competition directive required Member States to withdraw all ‘exclusive rights for the provision of telecommunications services, including the establishment and the provision of telecommunications networks required for the provision of such services’ (Article 1(2)). This removed the ‘reserved service’ exception that had been granted over the provision of voice telephony services because it was viewed as an integral component in the provision of network infrastructure. The Full Competition Directive committed the Member States to the 1 January 1998 deadline. This timetable corresponded with the international liberalization process achieved under the Fourth Protocol of the World Trade Organization’s (WTO) General Agreement on Trade in Services, to which the Community and Member States were party.127 Transitional periods were granted to countries

  See further Chapters 2 and 8.   Commission Directive 94/​4 6/​EC amending Directive 88/​301/​E EC and Directive 90/​388/​E EC in particular with regard to satellite communications, OJ L268/​15, 19 October 1994. 124   Commission Directive 95/​51/​EC amending Commission Directive 90/​388/​E EC with regard to the abolition of the restrictions on the use of cable television networks for the provision of already liberalized telecommunication services, OJ L256/​49, 26 October 1995. 125   Commission Directive 96/​2/​EC amending Directive 90/​388/​E EC with regard to mobile and personal communications, OJ L20/​59, 21 November 1996. 126   Commission Directive 96/​19/​EC amending Commission Directive 90/​388/​E EC regarding the implementation of full competition in telecommunications services, OJ L74/​13, 22 March 1996. 127   Council Decision (97/​8 38/​EC) of 28 November 1997 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the results of the WTO negotiations on basic telecommunications services, OJ L 347/​45, 18 December 1997. See further Chapter 16, at Section 16.4. 122

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considered as having less developed or very small networks:  Ireland, Spain, Portugal, Greece, and Luxembourg. Greece was the final EU Member State to fully liberalize its market by 1 January 2001. Full market liberalization was required of the states that have subsequently joined the Union. The Commission adopted a consolidating directive as part of the NRF, repealing all the previous Commission directives.128 Article 106 directives could continue to have a role to play in the liberalization of the European broadcasting market, which through convergence may impact on the telecommunications market.

4.5  H A R MONIZ ATION OF THE EU TEL E COMMUNIC ATIONS M A R K E T While liberalization initiatives were aimed at opening up national markets to competition, harmonization measures were required to address competition across markets in the EU. Indeed, the first specific EU measure in the telecommunications sector, in 1984, was a Council Recommendation calling for harmonization in respect of technical standards.129 The Commission has pursued harmonization across a broad range of issues, from technical standards to the applicable tax regime. The need for common standards is obviously a critical ingredient in the development of a Single Market in telecommunications. At an institutional level, the Commission encouraged the establishment of the European Telecommunications Standards Institute (ETSI), by the Conference on Postal and Telecommunications Administrations (CEPT),130 in 1988.131 The introduction of Europe-​wide numbers, within a so-​called ‘European Telephony Numbering Space’ (ETNS), was viewed as an important harmonization measure towards the achievement of a Single Internal Market132, with the ITU allocating a European country code ‘388’. However, the activities of the ETNS were suspended in 2005.133 In 1991, a common emergency call number (112) was adopted, and in the following year a common international access code (00).134 In 2007, the number range beginning with ‘116’ was reserved for

129   See n 101.   See n 2.   CEPT is a body comprising some 48 postal and telecommunications ‘administrations’ of European Countries, not limited to the European Union: . 131   eg Council Resolution of 27 April 1989 on standardization in the field of information technology and telecommunications, OJ C 117/​1, 11 May 1989. 132   Council Resolution of 19 November 1992 on the promotion of Europe-​w ide cooperation on numbering of telecommunications services, OJ C 318/​2 , 4 December 1992. 133   See . 134   Council Decision (91/​396/​E EC) of 29 July 1991 on the introduction of a single European emergency call number, OJ L 217/​31, 6 August 1991; Council Decision (92/​264/​E EC) of 11 May 1992 on the introduction of a standard international telephone access code in the Community, OJ L 137/​21, 20 May 1992. Both measures 128 130

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the provision of services of social value, such as hotlines and helplines.135 It was envisaged that further Europe-​wide numbers would enable companies to utilize non-​ geographic European codes for the provision of pan-​European services, such as the provision of mobile services. To date, such schemes have failed to materialize, and the Commission proposed its removal from the NRF.136 This proposal was rejected, however, and the ETNS was retained in the Universal Services Directive, at Article 27(2), and the Commission was tasked with establishing a legal entity to manage and promote the ETNS, similar to that adopted for the ‘.eu’ domain.137 However, due to lack of demand, the Commission has proposed its removal from the proposed Code.138 In the mobile sector, the development of European-​w ide services has been pursued through the adoption of a series of legislative measures reserving common frequency bands within Member States, most importantly in respect of 2G, 3G, and 4G spectrum.139 The initiative on 3G can be seen as a particular success story for the EU, facilitating the take-​up of GSM as the de facto worldwide standard and placing European telecommunications companies at the forefront of the global mobile industry. The GSM measure has since been amended to enable UMTS services to also use the 900MHz band reserved for GSM, as well as future generations of mobile telephony.140 In parallel with the Commission’s ‘Services Directive’ in 1990, the Council adopted a directive, under Article 95 of the TEC, establishing the concept of ‘Open Network Provision’ (ONP). The so-​called ‘ONP framework’ programme was conceived to provide the regulatory basis for imposing harmonization:

have been repealed under Framework Directive, at Art 26, and are consolidated under the Universal Services Directive at Art 26 and Art 27 respectively. 135   Commission Decision 2007/​116/​EC on reserving the national numbering range beginning with ‘116’ for harmonized numbers for harmonized services of social value, OJ L 49/​30, 17 February 2007; subsequently amended by Decision 2007/​698/​EC, OJ L 284/​31, 30 October 2007. 136   Staff Document, see n 28, at 8.2. 137   See Directive 2009/​136/​EC, at Recital 42. See also Regulation 733/​2002/​EC on the implementation of the .eu Top Level Domain, OJ L 113/​1, 30 April 2002. 138   See n 23 at p 19. 139   eg Council Directive 87/​372/​E EC on the frequency bands to be reserved for the coordinated introduction of public pan-​European cellular digital land-​based mobile communications in the Community, OJ L 196/​ 85, 17 July 1987; Council Decision 128/​1999/​EC on the coordinated introduction of a third-​generation mobile and wireless communications system (UMTS) in the Community, OJ L 17/​1, 22 January 1999, and Commission Implementing Decision 2012/​6 88/​E U on the harmonisation of the frequency bands 1 920-​1 980 MHz and 2 110-​2 170 MHz for terrestrial systems capable of providing electronic communications services in the Union, OJ L 307/​8 4, 7 November 2012. 140   Directive 2009/​114/​EC of the European Parliament and of the Council of 16 September 2009 amending Council Directive 87/​372/​E EC on the frequency bands to be reserved for the coordinated introduction of public pan-​European cellular digital land-​based mobile communications in the Community; OJ L 274/​25, 20 October 2009.

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This Directive concerns the harmonisation of conditions for open and efficient access to and use of public telecommunications networks and, where applicable, public telecommunications services.141

Reflecting the liberalization process, the scope of the ONP programme was initially limited to issues of access to the network infrastructure and ‘reserved services’ provided by the incumbent operator. As such, the harmonization framework envisaged the drafting of proposals on ONP conditions across a range of issues of concern to providers of non-​reserved services: • The development of technical interfaces between open network termination points; • The identification of additional service features; • Harmonized supply and usage conditions, such as maximum periods for provision and conditions on the resale of capacity; and • Tariff principles, such as the unbundling of individual service elements. Such conditions were subject to basic principles concerning the use of objective criteria, transparency, and non-​d iscrimination, whilst any restrictions placed on access would be limited to reasons based on the ‘essential requirements’. Subsequent ONP measures were adopted in a number of areas, including the provision of leased lines; packet-​switched data services;142 Integrated Services Digital Networks (ISDN);143 voice telephony, and interconnection;144 and universal service. In 1995, the ONP framework was applied to voice telephony.145 Under this measure, the national regulatory authorities were given a broad range of obligations to ensure that the provision of ‘fixed’ voice telephony to users, which included residential customers as well as competing service providers, was under harmonized conditions. Such conditions included the connection of terminal equipment; targets for supply time and quality of service; service termination; user contracts; and the provision of advanced facilities, such as calling-​line identification (CLI).

141   Directive 90/​387/​E EC on the establishment of the internal market for telecommunications services through the implementation of open network provision; OJ L192/​1, 24 July 1990. 142   Recommendation 92/​382/​E EC on the harmonized provision of a minimum set of packet-​s witched data services (PSDS) in accordance with open network provision (ONP) principles; OJ L200/​1, 18.7.1992. 143  Recommendation 92/​383/​E EC on the provision of harmonized integrated services digital network (ISDN) access arrangements and a minimum set of ISDN offerings in accordance with open network provision (ONP) principles; OJ L/​200/​10, 18 July 1992. 144  Directive 97/​ 33/​ EC of the European Parliament and of the Council on Interconnection in Telecommunications with regard to ensuring Universal Service and Interoperability through Application of the Principles of Open Network Provision, OJ L 199/​32, 26 July 1997. 145  Directive 95/​62/​EC on the application of open network provision to voice telephony, OJ L321/​6, 30 December 1995.

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Further market liberalization led to the replacement of the voice telephony directive in 1998, extending certain provisions to mobile voice telephony.146 Harmonization between Member State markets has inevitably involved greater complexity and detailed regulatory intervention than that required for the liberalization of national markets. Such detail arises both from the scope of the issues addressed, as well as the imposition of asymmetric obligations on market participants. One feature of the harmonization process is the key role played by the NRAs in implementing and complying with the principles contained in the harmonization measures. Such reliance on NRAs generated, in some instances, new areas of divergence between market conditions and practices in the Member States.147 This is reflected, in part, by the fact that the Commission pursued considerably more infringement proceedings against Member States under Article 258 of the Treaty, in respect of the harmonization directives, as compared with the liberalization directives.

4.6  ‘ SIG NIFIC A NT M A R K E T P OWER ’ With the extension of the liberalization process to infrastructure as well as services, the Leased Lines Directive was amended to reflect the new environment, introducing ex ante regulations for certain telecommunications operators.148 In particular, Member States were required to designate operators within their national markets who were required to provide the ‘minimum set’, usually comprising ‘organisations with significant market power’ (SMP) defined in the following terms:  . . . an organisation shall be presumed to have significant market power when its share of the relevant leased-​l ines market in a Member State is 25 per cent or more. The relevant leased-​lines market shall be assessed on the basis of the type(s) of leased line offered in a particular geographical area. The geographical area may cover the whole or part of the territory of a Member State.149

NRAs were required to notify the Commission that organizations had been so designated.150 They also had the discretion to determine that an organization on either side of the 25 per cent figure fell outside the presumption, based on factors such 146   Directive 98/​10/​EC on the application of open network provision (ONP) to voice telephony and on universal service for telecommunications in a competitive environment, OJ L 101/​2 4, 1 April 1998. 147   See generally the Sixth Implementation Report, see n 103. 148   Directive 97/​51/​EC of the European Parliament and of the Council of 6 October 1997 amending Council Directives 90/​387/​E EC and 92/​4 4/​E EC for the purpose of adaptation to a competitive environment in Telecommunications, OJ L 295/​2 3, 29 October 1997. 149 150   Ibid, at Art 2(3).   Ibid, at Art 11(1a).

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as an operator’s access to financial resources and its experience in the market. The concept of the so-​called ‘SMP operator’ was subsequently applied in the ONP measures on interconnection and voice telephony, imposing ex ante obligations on certain participants in each national market, generally the incumbent. The SMP concept was recognition that liberalization and harmonization of the telecommunications sector did not simply mean the removal of barriers to market entry and the establishment of a level playing field between participants. The legacy of national incumbents and the particular nature of the sector as a ‘network’ industry required a more interventionist stance, tipping the playing field to assist new entrants by imposing asymmetric regulatory obligations upon incumbents. The 25 per cent market share trigger represented a lower threshold than the traditional competition law concept of ‘dominance’, which has generally been considered to exist somewhere over 40 per cent of market share; although market share is not usually the sole factor in determining market power for competition purposes.151 The potential discrepancy between the 25 per cent SMP regulatory trigger and the concept of dominance was the subject of much criticism and, indeed, the German government refused to use the 25 per cent trigger for the application of the SMP obligations arguing, . . .  if the definitions used in the Directive resulted in a treatment of companies concerned, that is not in line with EC competition law, the question arises whether such a sector-​specific special provision is legally admissible.152

Justifying the lower threshold, the Commission argued that traditional competition law principles are not adequate to deal with some of the unique features of the telecommunications market; whilst the trigger also reduced the burden upon national regulatory authorities to assess ‘dominance’ on a case-​by-​case basis.153 However, as a result of the Commission’s desire to further deregulate the sector, as well as addressing legitimacy concerns and the EU’s commitments under the WTO Reference Paper, the NRF redefines the concept of an operator with ‘significant market power’ in the following terms, based on CJEU jurisprudence,154 An undertaking shall be deemed to have significant market power if, either individually or jointly with others, it enjoys a position equivalent to dominance, that is to say a position of economic strength affording it the power to behave to

  See further Chapter 10.   Letter from Dr Sidel, German Economic Ministry to Mr Cockborne, DG-​X III, dated 13 July 1998; quoted in Tarrant, A, ‘Significant market power and dominance in the regulation of telecommunications markets’, (2000) 21(7) European Competition Law Review 320–​325. 153 154  Ibid.   eg Case 322/​81 Michelin BV v Commission [1983] ECR 3461, para 6. 151

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an appreciable extent independently of competitors, customers and ultimately consumers.155

In addition, recognizing the peculiar nature of ‘network’ industries and the oligopolistic structure of various telecommunications markets, such as mobile, express reference was made to the possibility of two or more undertakings being in a ‘joint dominant position in a market’, a complex and developing area of EU competition law.156 As under the previous regime, NRAs are required to designate operators as having ‘significant market power’ (Article 14(1)). However, to address the concern about divergent approaches being taken by Member States, the designation procedure is subject to certain harmonization provisions at each stage of the process: market definition, market analysis, and remedies (ie imposition of ex ante obligations). First, the Commission issued a Recommendation on the 18 product and service markets, present at either a retail or wholesale level, in which it considered ‘ex ante regulation may be warranted’, and to which NRAs are required to give ‘utmost account’ when defining their national markets (Article 15(3)).157 This was subsequently revised in December 2007, reducing the number of markets to seven,158 and again in October 2014, down to four markets,159 illustrating the progress made towards liberalization. Second, when NRAs analyse the defined markets to establish whether any participant has SMP, they should also give ‘utmost account’ to guidelines concerning the analysis procedure issued by the Commission (Article 16).160 The intention behind the ‘utmost account’ provisions is clear; however, the enforceability of such provisions is less certain. When an NRA carries out a market definition, it must do so ‘in accordance with the principles of competition law’. The Recommendation sets out three criteria which it considers central to such an analysis: • The presence of high and non-​t ransitory entry barriers; • The dynamic state of competitiveness behind entry barriers; and • The sufficiency of competition in the absence of ex ante regulation.161

  Framework Directive, Art 14(2).   eg Commission decision:  Case IV/​M. 1524 Airtours/​First Choice [2000] OJ L 93/​01 and Court of First Instance decision: Case T-​3 42/​99 Airtours v Commission [2002] 5 CMLR 7. 157  Commission Recommendation (2003/​311/​EC) of 11 February 2003 on relevant product and service markets within the electronic communications sector susceptible to ex ante regulation in accordance with Directive 2002/​21/​EC, OJ L 114/​45, 8 May 2003. 158   Commission Recommendation (2007/​879/​EC) of 17 December 2007, OJ L 344/​65, 28 February 2007. 159   Commission Recommendation (2014/​710/​E U) of 9 October 2014, OJ L 295/​79, 11 October 2014. 160   Commission guidelines on market analysis and the assessment of significant market power under the Community regulatory framework for electronic communications networks and services, OJ C 165/​6, 11 July 2002. 161   Ibid, at Recital 9. 155

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Where the criteria are not shown to be present, the application of ex ante regulation would be considered inappropriate. Following such an analysis, were an NRA to identify a particular market and then to vary that definition to align with a market defined in the Recommendation, it is arguable that the validity of the NRA’s final determination could be judicially reviewed.162 Once a designation has been made, the NRA must then determine whether to maintain, amend, or withdraw existing obligations (Article 16(2)) or which obligations to impose on the SMP operator to remedy the identified problems. Primacy is given to the wholesale remedies detailed in the Access Directive (Articles 9–​ 13b163), with the possibility of imposing remedies at a retail level, where necessary, under the Universal Services Directive (Article 17).164 Where an SMP finding has been made, an NRA is required to impose at least one of the ex ante remedies (Article 16(4)). To ensure harmonization at this stage of the process, the European Regulators Group (ERG), in conjunction with the Commission, adopted a Common Position ‘on the approach to appropriate remedies in the new regulatory framework’.165 This elaborated a typology of 27 potential competition problems based around four market scenarios: • Vertical leveraging:  This occurs where a dominant firm seeks to extend its market power from a wholesale market to a vertically related wholesale or retail market. • Horizontal leveraging:  This applies where an SMP operator seeks to extend its market power to another market that is not vertically related. • Single market dominance:  The problems which may occur within the context of a single market are entry deterrence, exploitative pricing practices, and productive inefficiencies. • Termination (Two-​way access):  This relates to the link between price setting in termination markets and in the related retail markets that may be competitive. Once the competition problem(s) has been identified, the NRAs should follow certain principles in determining the appropriate remedy. First, the decision must be adequately reasoned, with full consideration of alternatives and representing the least burdensome option. Second, where infrastructure competition is not

162   Under the Communications Act 2003, OFCOM is only required to ‘take due account’ of the Commission’s Recommendation and Guidelines (s 79(2)). 163   ie transparency (Art 9), non-​d iscrimination (Art 10), accounting separation (Art 11), access to network facilities (Art 12), price control and cost-​accounting (Art 13), functional separation (Art 13a), and voluntary separation (Art 13b). 164 165   eg retail price caps.   ERG (03) 30rev1 (April 2004).

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feasible, sufficient access to wholesale inputs should be ensured. Third, where infrastructure replication is feasible, the remedies should assist transition to such a situation, for example through investment incentives. The final principle is that remedies should be ‘incentive compatible’, in terms of compliance by the designated SMP operator rather than evasion. The fourth harmonization element in the Framework Directive concerns the notification regime, whereby an NRA is required to notify the Commission, BEREC, and the other Member State NRAs about measures it makes in respect of the SMP process. Two distinct procedures exist:  the first applicable to NRA decisions on market definitions and whether to designate an operator as having SMP (Article 7); the second concerning decisions on the imposition of remedies (Article 7a), introduced under the 2009 Reforms. In both cases, comments may be submitted to the notifying NRA on the draft measures, which the NRA is obliged to take ‘utmost account’ of (Articles 7(7) and 7a(1) respectively). The legal nature of such comments has been subject to challenge by operators dissatisfied with the impact they have had, specifically those of the Commission, on subsequent NRA decisions. The Court of First Instance ruled that such comments did not have a binding effect and, therefore, could not be challenged under Article 263 of the TFEU.166 In addition, both procedures grant the Commission an exclusive right to issue a stand-​ still notification in respect of a draft measure (Articles 7(4) and 7a(1)), of two and three months duration respectively. The significant distinction between the two procedures lies in the power of the Commission to require an NRA to subsequently amend or withdraw a decision, where it is considered to create a barrier to the single market or be incompatible with Community law. The Commission has such a veto power in respect of market definition and designation decisions (Article 7(5)(a) and (6)), but not in respect of decisions regarding the imposition of remedies (Article 7a(7)). The reason for the differential treatment lies in the lack of competence that the Commission has to interfere with remedies under national law. With regard to the former procedure, the Commission has to date exercised its veto power on only thirteen occasions; although NRAs generally withdraw decisions that have been challenged by the Commission rather than have them formally vetoed.167 The Commission may only veto a draft NRA decision where it considers that it would ‘create a barrier to the single market or if it has serious doubts as to its compatibility with Community law’ (Article 7(4)). As such, Commission approval is also confined to the absence

166   Case T-​109/​0 6—​Vodafone (12 December 2008)  and Case T-​ 295-​ 0 6 Base NV v Commission (22 February 2008). 167   There have been 105 withdrawals. For an overview of notifications, as of January 2018, see .

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of these grounds, so an NRA’s market definition is still vulnerable to challenge at a Member State level.168 The Article 7 procedures have generated significant criticism and were one of the key areas of the 2009 Reform. First, achieving greater harmonization has proved somewhat illusory, as a significant degree of variation between Member States exists due to specific features of national market structure. Second, the inherent case-​by-​case analysis required by NRAs has been carried out with widely differing levels of competence, reflecting in part experience and resource issues. In some cases it would appear that those NRAs with least experience and resources most slavishly followed the Commission Recommendation on Markets; while at the other end of the spectrum, some NRAs, such as Ofcom, have elaborated a much more detailed market schematic than the Commission. Third, the notification procedures have themselves proved complex, burdensome, and time-​ consuming both for the NRAs and the Commission, which led to the process being further streamlined.169

4.7  R E GUL ATORY AU THOR ITIE S As discussed previously, DG Competition has treaty-​based authority to impose behavioural and structural controls on the activities of telecommunications operators, subject to the jurisdictional requirement that the anti-​competitive practice ‘may affect trade between Member States’.170 Otherwise, such anti-​competitive practices will have to be addressed by the competent authorities within a Member State, whether a specific telecommunications regulator, a general competition authority, or both. The ex ante controls were transposed into national law by the Member States, either through primary or secondary legislation. Prior to the introduction of the NRF, the Commission only exercised a monitoring role based on information supplied by the NRAs through notification and reporting obligations. The Commission’s ability to intervene was significantly enhanced under the NRF, with the power to require Member States to withdraw measures in certain circumstances. However, key aspects of EU telecommunications policy continue to be dependent on being appropriately implemented by the NRAs.

 eg British Telecommunications plc v Ofcom [2017] CAT 17.   Commission Recommendation 2008/​850/​EC ‘on notifications, time limits and consultations provided for in Article 7 of Directive 2002/​21/​EC’, OJ L 301/​2 3, 12 November 2008, which replaced Recommendation 2003/​561/​EC (OJ 190/​13, 30 July 2003). 170   Since 1 May 2004, jurisdiction is shared with Member States: Council Regulation No 1/​2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ L1/​1, 4 January 2003. 168 169

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One of the central features present in the Member States prior to liberalization of the telecommunications market was the fact that the regulatory institution responsible for regulating the market, often a Ministry of Communications, was usually also responsible for controlling the commercial activities of the incumbent operator. It was recognized that such merged functions would not be appropriate in a competitive market and that independent regulatory authorities for the sector would need to be established.

4.7.1  National Regulatory Authorities (NRAs) Under the ‘Equipment Directive’ the Commission required that the requirements imposed by the directive be ‘entrusted to a body independent of public or private undertakings offering goods and/​or services in the telecommunications sector’.171 The interpretation of this provision has been the subject of a significant amount of CJEU case law, primarily because those bodies entrusted with the responsibilities under the Directive did not generally have the necessary technical expertise to carry out the required examinations and tests on terminal equipment. Regulators tended, therefore, to be dependent on the incumbent to carry out such activities on their behalf, which gave rise to plenty of scope for abuse. As a consequence, the CJEU was required to clarify that Article 6, must be interpreted as precluding the application of national rules which prohibit economic agents from, and penalize them for, manufacturing, importing, stocking for sale . . . terminal equipment without furnishing proof, in the form of a type-​approval or another document regarded as equivalent, that such equipment conforms to certain essential requirements . . . where there is no guarantee that a test laboratory responsible for technically monitoring the conformity of the equipment with the technical specifications is independent from economic agents offering goods and services in the telecommunications sector.172

The ‘Services Directive’ reiterated the need for Member States to ensure that ‘a body independent of the telecommunications organisations’ carried out the regulatory functions.173 What this formulation does not adequately address is the issue

171   Commission Directive (88/​301/​E EC) of 16 May 1988 on competition in the markets of telecommunications terminal equipment; OJ L131/​73, 27 May 1988, at Art 6. This position had previously been taken by the Court of Justice in GB-​Inno-​BM, see n 100. 172  See Thierry Tranchant and Téléphone Store SARL [1995] Case C-​91/​94, ECR I-​3911, [OJ 96/​16/​6]. See also Procureur du Roi v Lagauche & Others, Evrard [1993] Cases C-​4 6/​9 0 and C-​93/​91, ECR I-​5267, [OJ 93/​C316/​3]; Ministere Public v Decoster [1993] Case C-​69/​91, ECR I-​5335, [OJ 93/​C332/​7]; Ministere Public v Taillandier-​Neny [1993] Case C-​92/​91, ECR I-​5383, [OJ 93/​C338/​6]. 173   Commission Directive (90/​388/​E EC) of 28 June 1990 on competition in the markets for telecommunications services; OJ L192/​10, 24 July 1990, at Art 7.

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of regulatory independence from the government as owner, in part or whole, of the incumbent operator. Where a government is concerned to maintain the value of its stake in the incumbent, with an eye to some form of future asset divestiture, then it has a natural incentive to inhibit the emergence of competition into the market. Phased divestiture of the government shareholding, as has occurred in most Member States, extends this dependency relationship over a longer period of time. Privatization will generally have a direct impact on government borrowing, which in an era of austerity will be of critical importance to a government. Even post-​d ivestiture, particularly in the short term, a government may show continued concern in the performance of the ‘national champion’s’ share price, as new shareholders among the general public represent future electorate. The issue of independence from government, as owner of the incumbent, was first addressed within the context of the ONP initiative. Initially, indirect reference is made to the need to conform to the ‘principle of separation of regulatory and operational functions’.174 Direct reference was subsequently made to the establishment of a ‘national regulatory authority’ (NRA) ‘legally distinct and functionally independent of the telecommunications organisations’.175 However, it is not until 1997 that the issue of independence from government becomes the subject of a specific legislative provision: In order to guarantee the independence of national regulatory authorities: • national regulatory authorities shall be legally distinct from and functionally independent of all organisations providing telecommunications networks, equipment or services, • Member States that retain ownership or a significant degree of control of organisations providing telecommunications networks and/​or services shall ensure effective structural separation of the regulatory function from activities associated with ownership or control.176

In addition, the decisions of an NRA must be capable of being appealed by any affected party to ‘a body independent of the parties involved’ (Article 5a(3)). Under the NRF, the concept of independence through structural separation has been extended to include local authorities that retain ‘ownership or control’ over

174   Council Directive 92/​4 4/​E EC, of 5 June 1992, on the application of open network provision to leased lines, OJ L165/​27, 19 June 1992, at Recital 14. 175   See Council Directive 95/​62/​EC, of 13 December 1995, on the application of open network provision to voice telephony, OJ L321/​6, 30 December 1995, at Art 2(2). 176   Directive 97/​51/​EC of the European Parliament and of the Council of 6 October 1997 amending Council Directives 90/​387/​E EC and 92/​4 4/​E EC for the purpose of adaptation to a competitive environment in Telecommunications, OJ L 295/​2 3, 29 October 1997: at Art 1(6), inserting Art 5a into Directive 90/​387/​E EC.

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operators and are involved in the granting of rights of way.177 In the UK, such a provision would have been applicable to Hull City Council, which had a controlling shareholding in Kingston Communications until 2007. Another aspect of the position of any regulatory authority is that such a body must be given the resources to carry out its assigned tasks. The effectiveness of a regulator depends to a considerable degree on the resources made available to it. This issue was indirectly addressed through the recitals of some of the ONP measures. Initially reference is simply made to an authority having ‘the necessary means to carry out these tasks fully’;178 although this was subsequently elaborated, whereas the national regulatory authorities should be in possession of all the resources necessary, in terms of staffing, expertise, and financial means, for the performance of their functions.179

To meet this objective, the NRA must either look to government or the regulated industry for the necessary resources. In an era of public sector spending restraint, sufficient resources from government must always appear doubtful. In terms of the providers of telecommunications networks, equipment, or services, one source of income is through the operation of the licensing regime. However, under the Authorisation Directive, NRAs are only permitted to charge fees that cover ‘the administrative costs which will be incurred in the management, control and enforcement of the general authorisation scheme’ and related matters (Article 12(1) (a)), effectively a form of cost-​accounting obligation placed on the regulator rather than the regulated, which clearly emphasizes the need to minimize the costs of regulation. Member States have adopted a diversity of models in establishing regulatory institutions, some granting regulatory tasks to the national legislature,180 while others disperse regulatory tasks among a number of separate institutions, which is seen as significantly weakening the exercise of such powers. Regulatory dependency on the incumbent for the provision of information, as well as expertise, continues to be perceived as a problem by some new entrants in a number of jurisdictions. In terms of resources, the main reported problem is the retention of staff in such a fast moving well-​remunerated employment market, which can lead to over-​reliance on seconded personnel from operators including the incumbent.

178   Framework Directive, at Art 11(2).   See Council Directive 95/​62/​EC, at Recital 10.   Directive 97/​51/​EC, at Recital 9. 180   See Case C-​389/​08, Base NV and others v Ministerraad (6 October 2010), where it was held that a determination that the provision of universal service was an ‘unfair burden’ for a designated undertaking (see further Section 4.8) could be made by the national legislature, provided it met the ‘requirements of competence, independence, impartiality and transparency’ stipulated in the Framework and Universal Services Directives. 177 179

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In the Commission’s 1999 Communications Review of the regulatory framework, it continued to express concern in respect of a number of areas of NRA activity: i) strengthening the independence of NRAs, ii) ensuring that the allocation of responsibilities between institutions at national level does not lead to delays and duplications of decision making, iii) improving co-​operation between sector specific and general competition authorities and iv) requiring transparency of decision making procedures at a national level.181

To address these concerns, the NRF consolidated existing provisions on regulatory independence,182 and sets out in some detail both the obligations of national regulatory authorities in the regulation of the provision of electronic communications networks and services,183 as well as the manner in which such functions should be carried out, including obligations to consult. However, the Commission’s review of Member State implementation of the NRF highlighted ongoing concerns about NRA powers and resources, independence, and appeals.184 As a consequence, the 2009 Reforms impose further detailed provisions on how Member States must ensure the independence, impartiality, and transparency of an NRA, by requiring that they have ‘adequate financial and human resources’;185 do not seek or receive instructions from any other body in relation to the day-​to-​day performance of its obligations; only permit NRA decisions to be suspended or overturned by the designated appeal body,186 and limiting the circumstances under which the head of the NRA can be dismissed.187 Member States are required to publish procedures for consultation and cooperation between different NRAs, particularly competition and consumer law authorities.188 In the UK, for example, the Office of Communications (Ofcom) exercises certain functions concurrently with the Competition and Markets Authority in

  See ‘The 1999 Communications Review’, see n 10, at section 4.8.3.   Framework Directive, at Art 3(2). 183   Ibid, at Chapter III, ‘Tasks of National Regulatory Authorities’. In Case C-​424/​07, Commission v Germany (3 December 2009), it was held that German law that excluded certain ‘new’ markets from regulation was an unlawful limitation of the NRA’s discretion. 184   eg see 13th Implementation Report, at p 10 et seq. 185   Framework Directive, at Art 3(3). In Case C-​2 40/​15, AGC v ISTAT (28 July 2016), it was held that this obligation does ‘not preclude . . . provisions for limiting and streamlining the spending of public administrative authorities’. 186   Framework Directive, at Art 3(3a). In Case C-​560/​15, Europa Way v AGCOM (26 July 2017), it was held that annulment by the Italian legislature of a selection procedure for radio frequencies being carried out by the NRA was precluded. 187   Framework Directive, at Art 3(3a). In Case C-​424/​15, Garai v Administración del Estado (19 October 2016), it was held that Art 3(3a) precluded dismissals from the NRA that resulted from a merger of regulators without rules designed to protect the independence of the NRA. 188   Framework Directive, at Art 3(4). 181

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respect of competition law and consumer protection issues,189 as well as advising the Office of the Information Commissioner in respect of the enforcement of the communications privacy regulations.190 It is also a requirement that any NRA decision be capable of appeal to an independent body, with the ‘appropriate expertise’;191 although the decision of the NRA should stand unless the appeal body decides otherwise, in order to prevent operators using the appeals mechanism to delay compliance with an obligation. Despite this provision, the Commission found that judicial practice in the Member States continued to involve the routine suspension of regulatory decisions.192 To address this, the 2007 reform proposals suggested strengthening the provision in respect of interim measures, stating that such measures may be granted only ‘if there is an urgent need to suspend the effect of the decision in order to prevent serious and irreparable damage to the party applying for those measures and the balance of interests so requires’,193 which reflected established CJEU jurisprudence.194 However, concerns about interference in national judicial procedures meant that the final provision simply states that the NRA decision ‘shall stand, unless interim measures are granted in accordance with national law’ (Article 4(1)). Furthermore, Member States are required to collect information on the occurrence of appeals and the granting of interim measures in order to inform the Commission (Article 4(3)). In the exercise of their regulatory functions, the NRAs must take ‘all reasonable measures’ to ensure that certain fundamental objectives are met: • ‘Promote competition in the provision of electronic communications networks, electronic communications services and associated facilities and services’ (Article 8(2)); • ‘Contribute to the development of the Internal Market’ (Article 8(3)); and • ‘Promote the interests of the citizens of the European Union’ (Article 8(4)). Inevitably, these principles may, in particular situations, be in conflict or require different courses of action from which the NRA will be obliged to choose.195

189   Communications Act 2003, s 370 (functions under Part 4 of the Enterprise Act 2002) and s 371 (functions under the Competition Act 1998). 190  ie Privacy and Electronic Communications (EC Directive) Regulations 2003, at r 33. See further Chapter 13. 191 192   Framework Directive, Art 4.   2006 Review, Staff Document, see n 28 at 5.3.2. 193   Proposed Directive amending the Framework Directive, at Art 2(4). 194   See, for example, Order of the President of the Court of First Instance of 30 April 1999 [1999] ECR II-​1427. 195  See R v Director General of Telecommunications (Respondent), ex parte Cellcom, [1999] ECC 314, with respect to reconciling the principles contained in the Telecommunications Act 1984, s 3(2).

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A final aspect of NRA responsibility concerns their role in intervening and resolving disputes between market participants. Under pre-​NRF, NRAs were required to make decisions in respect of disputes between undertakings, such as interconnection arrangements. However, the speed of NRA decision-​making is seen as a potential barrier to entry in some jurisdictions. Inexperience, insufficient powers, and appeal procedures often resulted in significant delays, which usually disadvantaged the market entrant. The Framework Directive therefore imposes an obligation upon NRAs to reach a binding decision within four months.196 The centrality of Member State NRAs in the regulation of the electronic communications sector continues to be a defining feature of EU law and regulation. National divergences in NRAs as institutions and personalities would seem an inevitable outcome of the unique historical, political, and juridical characteristics of the various Member States; as much as they are a result of market differences in each national market. However, the expression of these differences impacts on the realization of a single market for the electronic communications sector and, as such, is the concern of the Commission. Striking a balance between independent NRAs and a harmonized EU regulatory approach remains an ongoing challenge.

4.7.2  European regulatory bodies One proposal to address issues of NRA independence and harmonization of decision-​ making between Member States has been the establishment of a European regulatory authority to take responsibility for aspects of the regulatory regime. After funding two separate studies,197 the Commission decided, at the time when the NRF was being developed, that there was an insufficient case for the establishment of a European telecommunications authority. However, in the course of the 2006 Review, the Information Society Commissioner, Viviane Reding, called for the establishment of a European Communications regulator, For me it is clear that the most effective and least bureaucratic way to achieve a real level playing field for telecom operators across the EU would be to replace the present game of ‘ping pong’ between national regulators and the European Commission by an independent European telecom authority that would work together with national regulators in a system similar to the European System of Central Banks.198

  Framework Directive, at Art 20.  Report by NERA and Denton Hall, ‘Issues Associated with the Creation of a European Regulatory Authority for Telecommunications’ (March 1997); also ‘Report on the value added of an independent European Regulatory Authority for telecommunications’ (September 1999). 198   Speech of Viviane Reding, ‘From Service Competition to Infrastructure Competition: the Policy Options Now on the Table’ at ETCA Conference, Brussels, 16 November 2006. 196 197

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Subsequently, as part of the 2007 Reform Proposals, the Commission proposed the establishment of the European Electronic Communications Market Authority,199 although with nothing like the independence and exclusive decision-​m aking powers of the European Central Bank, as called for by Commissioner Reding, which indicated the controversial nature of the proposal in terms of the division of powers between Member States and the EU institutions. The final adopted measure established the Body of European Regulators for Electronic Communications (BEREC) to replace the existing body representing the NRAs, the European Regulators Group. 200 The BEREC is not a regulatory authority in any sense, being neither a Community agency, nor having legal personality. 201 As such, the BEREC has no decision-​m aking powers per se, but simply exercises an advisory function, being consulted and delivering opinions on various draft measures emanating from NRAs under Article 7 and 7a and the Commission, under various provisions. 202 The Commission has proposed establishing BEREC as EU agency, to strengthen its role in the development of a single market for telecommunications. 203 However, despite these proposed reforms, there continues to be institutional asymmetry in the regulation of the electronic communications sector in the EU, in stark contrast to the concurrency and co-​e xistence of Member State and EU competition authorities. Under the current regime, the Commission is assisted in the process of developing policy and legislative and regulatory measures, by a range of advisory committees, representing Member State governments as well as the NRAs. Under the pre-​2003 Regime, the Commission was primarily advised by the ‘ONP Committee’ and the ‘Licensing Committee’,204 and an ad hoc group composed of the regulatory authorities in the Member States.205 Under the NRF, the Commission currently has the following bodies to advise it, in addition to the BEREC:

199   Proposal for a Regulation of the European Parliament and of the Council establishing the European Electronic Communications Market Authority, COM(2007)699 rev 2. 200  Commission Decision 2002/​ 627/​ EC establishing the European Regulators Group for Electronic Communications Networks and Services, OJ L 200/​38, 30 July 2002. 201   See n 39, at Recital 6. 202   Ibid, at Art 3(1). BEREC was given additional tasks to draft guidelines for the implementation of the obligations of NRAs on open internet access, under Regulation 2015/​2120, at Art 5(3). 203   Proposal for a Regulation establishing the Body of European Regulators for Electronic Communications, COM(2016) 591 final, 14 September 2016. 204   Established under Directive 90/​387, Art 9, and Directive 97/​13/​EC on a common framework for general authorizations and individual licences in the field of telecommunications services, OJ L 117, 7 May 1997, Art 14, respectively. 205   Established by the Commission under Council Resolution of 17 December 1992 on the assessment of the situation in the Community telecommunications sector, OJ C 2/​5, 6 January 93.

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• The ‘Communications Committee’ (Cocom), composed of representatives of the Member States;206 • The ‘Radio Spectrum Committee’, composed of Member State representatives,207 as well as a ‘Radio Spectrum Policy Group’;208 • The ‘Telecommunications Conformity Assessment and Market Surveillance Committee’ (TCAM), to assist the Commission in respect of telecommunications equipment and comprising Member State representatives.209 Each of these institutions plays a role in the formulation of future EU policy in the communications sector. The BEREC, in particular, is best placed to promote a greater degree of harmonization in the implementation of the NRF. To date, BEREC, and its predecessor the ERG, has not proved very effective in carrying out this role’. One of the problems was that the ERG sought consensus before adopting any final common positions on issues, which, given the inevitable divergence of experience, attitude, and interest between 27 NRAs, proved problematic.210 To effectively monitor and lobby these different bodies, as well as the Commission Directorate-​ Generals, industry players have also established a range of EU-​w ide representative bodies and associations, such as the European Telecommunications Network Operators’ Association (ETNO).211

4. 8  UNIV ER S A L SERV IC E One key area of ongoing concern of Member States towards the policy of market liberalization has been the ability to preserve and pursue the potentially conflicting public policy objective of ‘universal service’: the provision of access to telecommunications services for all the state’s citizens. In many jurisdictions, the belief that the telecommunications market was one of natural monopoly was closely allied with this need to ensure ‘universal service’. Article 106(2) of the TEC recognizes that undertakings may be entrusted ‘with the operation of services of general economic interest’ and that the competition rules may be not be applicable to such undertakings where they ‘obstruct the

206  Framework Directive at Art 22. See further . 207   Decision No 676/​2002/​EC of the European Parliament and of the Council on a regulatory framework for radio spectrum policy in the European Community, OJ L 108/​1, 24 April 2002, at Art 3. See further . 208   Commission Decision 2002/​622/​EC establishing a Radio Spectrum Policy Group, OJ L 198/​49, 27 July 2002, as amended by Commission Decision 2009/​978/​E U, OJ L 336/​50, 18 December 2009. See further . 209 210 211   Directive 99/​5/​EC, at Art 13.   See n 172, at 3.1.   See .

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performance, in law or in fact, of the particular tasks assigned to them’:  the so-​ called ‘public service defence’.212 The initial liberalization process envisaged under the 1987 Green Paper was not seen as greatly disturbing the policy of universal service, since the provision of voice telephony (as a ‘reserved service’) and network infrastructure remained with the national incumbent operator. However, the issue came to the forefront of EU telecommunications policy with the Commission’s 1992 telecommunication review, which proposed extending the liberalization process from services to network infrastructure.213 The endorsement of this policy by the Member States was therefore qualified by the need to protect universal service, as noted by the European Parliament: . . . the process of liberalization has to be accompanied by maximum protection of the universal service . . . especially that of weaker consumers and that of peripheral and disadvantaged countries and regions.214

In response, the Commission adopted a Communication addressing the importance of protecting universal service in a liberalized environment and outlined some of the key issues that comprise a policy on universal service.215 The legislative framework for the European Union’s policy on universal service was initially set out in the ONP Voice Telephony Directive (95/​62/​EC), which detailed the various tiers that comprise the policy. First, a basic voice telephony service must be offered and provided on request without discrimination to all users. Second, this service must be supplied under certain harmonized conditions, including the quality of service, provision of information to consumers, and billing procedures. Third, certain advanced voice telephony facilities, such as caller line identification (CLI), should be made available. Subsequent measures addressed mechanisms to achieve the objectives of universal service, which were then consolidated under the NRF in the Universal Services Directive. As a regulatory concept, the ‘universal service obligation’ (USO) continues to comprise a number of different elements: • The provision of certain services throughout the Union; • Provided to a certain quality;

212   See Taylor, SM, ‘Article 90 and telecommunications monopolies’, (1994) 15(6) European Competition Law Review 332 et seq. 213   Commission Communication to the Council and European Parliament, ‘1992 Review of the situation in the telecommunications services sector’, SEC(92) 1048, 21 October 1992. 214   European Parliament Resolution of 20 April 1993 on the Commission’s 1992 review of the situation in the telecommunications services sector; OJ C 150/​39, 31 May 1993. 215   Commission Communication to the Council and the Council and European Parliament, ‘Developing universal service for telecommunications in a competitive environment’, COM(93) 543, 15 November 1993.

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• Available ‘to all end-​users in their territory, independently of geographical location’; and • At an affordable price.216 The regulatory challenge is to achieve this social policy objective without distorting competition between market participants, the objective of liberalization. Of the specified services, the fundamental requirement is the provision of a connection at a fixed location. This connection may be wireline or fixed wireless, but does not extend to the provision of mobile telephony. The connection must enable access to ‘publicly available telephone services’, which means ‘a service made available to the public for originating and receiving, directly or indirectly, national or national and international calls through a number or numbers in a national or international telephone numbering plan’ (Article 2(c)). The additional services include directory enquiry services and directories (Article 5), the provision of public pay telephones (Article 6), and special measures for disabled users (Article 7). Member States are given the right to mandate services beyond this minimized harmonized list, to reflect different national conditions and the principle of subsidiarity, such as ensuring that schools have internet access (Recital 46). However, such services are not part of the USO and may not be funded through the imposition of a ‘compensation mechanism involving specific undertakings’ (Article 32). What comprises this list of features within the concept of the USO needs to evolve over time to reflect the pace of technological and market developments. Under the 1999 Communications Review, consideration was given to extending the scope of the USO connection from ‘narrowband’ to include the provision of ‘broadband services’, but it was dismissed as premature in terms of market development and potentially detrimental to competition. Internet connectivity was referred to in the Universal Services Directive, with an obligation on Member States to ensure the provision of a ‘connection’ with the ability to support data communications ‘at data rates that are sufficient to permit functional Internet access’ (Article 4(2)).217 Recently, the Commission has proposed that the obligation be in relation to ‘functional internet access services’, defined by reference to ‘a dynamic basic list of online services usable over a broadband connection’, while removing certain legacy services, such as public payphones and directory enquiry services.218

  Universal Services Directive, Art 3(1).   The provision of an Integrated Services Digital Network (ISDN) connection is expressly excluded from the concept of the universal service ‘connection’ obligation (Recital 8). Under the pre-​2003 regime, Germany included such connections within its USO regime. 218   2016 Proposal, at Part III, Title I. Member States would have the option to retain these legacy services, if the need could be demonstrated. 216 217

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The Universal Services Directive also provides for a process of periodic review of the scope of ‘universal service’, to be carried out by the Commission. Reviews were carried out in 2005,219 2008,220 2011,221 and in 2015 as part of the 2016 Proposal. The 2009 Reforms, however, contained no significant amendment to the definition. The reviews consider a range of factors, such as whether the majority of consumers use the specific service and whether ‘non-​use by a minority of consumers result in social exclusion’ (as provided for at Annex V). As noted already, the scope is likely to expand soon, to reflect the status of the internet as the ubiquitous communications platform, although the entry of the twelve Accession States delayed somewhat the raising of the threshold. In respect of the second element of USO, quality, Member States must ensure that all designated operators publish information regarding their performance against certain parameters (Article 11(1)), addressing such matters as the supply time for initial connection, fault repair time, and complaints concerning the correctness of bills (Annex III). NRAs may also set additional quality of service parameters in respect of the provision of services to disabled end-​users and consumers (Article 11(2)). NRAs may set and monitor performance against certain targets, with the right to take measures where an operator persistently fails to meet such targets (Article 11(4)–​(6)). These measures are supplemented by the general consumer-​related measures in Chapter IV of the Universal Service Directive, which impose transparency obligations on operators (Article 22)  and, following the 2009 Reforms, the ability for an NRA to set minimum requirements (Article 22(3)).222 In terms of ‘affordability’, the cost of access is as critical an element as the actual provision of a connection. Under the Universal Services Directive, NRAs may require designated operators to offer tariff options or packages targeted specifically at those on low incomes or with special social needs (Article 9(2)). In addition, common tariffs, such as geographic averaging, may be imposed, or price caps (Article 9(3)–​(4)). In reality, geographic averaging was a traditional mechanism for funding the USO, which has been retained in all Member States. The NRAs have the right to designate which operators are required to ensure provision of the ‘set’ of services (Article 8(1)). While in most Member States the obligation will primarily lie with the incumbent operator, as markets become fully competitive USO may be imposed on a number of operators, including the provision of different service elements by different operators in different geographical

219   Commission Communication ‘on the review of the scope of universal service in accordance with Article 15 of Directive 2002/​22/​EC’, COM(2005) 203, 24 May 2005. 220 221   COM(2008) 572 final, 25 September 2008.   COM(2011) 975 final, 23 November 2011. 222   See further Chapters 9 and 15.

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areas. Indeed, in a fully competitive market, operators may perceive positive benefits in being designated as having USOs, and therefore Member States are required to ensure that ‘no undertaking is a priori excluded from being designated’ (Article 8(2)). In addition to designation, an NRA may also impose certain obligations upon those operators determined as having SMP on particular retail markets (Article 17). In contrast to the obligations imposed under the Access Directive,223 NRAs have certain flexibility in respect of the nature of the regulatory controls placed on retail services, but could for example include retail tariff controls (Article 17(2)). However, such retail remedies should only be imposed where wholesale remedies under the Access Directive would not prove effective (Article 17(1)(b)). Controls over the provision of a minimum set of leased lines and carrier selection and pre-​ selection were available remedies under the 2002 Universal Service Directive, but were withdrawn by the 2009 Reforms. Defining the scope of universal service enables regulators to determine the costs associated with its provision and, therefore, mechanisms for ensuring that adequate and appropriate financing is present within a competitive market. The Full Competition Directive was the first to address the issue of the cost of universal service and related funding mechanisms. In particular, the burden could only be placed upon undertakings providing ‘public telecommunications networks’, ie transmission infrastructure, rather than all telecommunication service providers.224 This contrasted with the position adopted in the United States, where ‘[e]‌very telecommunications carrier that provides interstate telecommunications services’ is required to contribute.225 EU companies felt such an approach effectively meant that EU network providers were subsidizing US operators supplying services into the EU. As a consequence, the Universal Services Directive provides that funding mechanisms levied on operators should be shared between providers of electronic communication networks and services (Article 13(1)(b)). The Full Competition Directive also addressed the need for incumbent operators to rebalance their tariffs in order to reduce the burden of universal service. Within the broader debate on universal service, the issue of rebalancing has been one of the most politically sensitive issues for Member State governments to tackle. Historically, incumbent operators have cross-​subsidized the cost of installation (ie line rental) from future call revenues, particularly long-​d istance and international. This approach was partly justified on the grounds of ensuring universal service. Indeed, the CJEU has recognized that the performance of such tasks of

223

  See further Chapter 8 at Section 8.4.2.   Directive 96/​19/​EC, Art 6, inserting Art 4c into Directive 90/​388/​EC.

224

225

  47 USC §254(d).

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‘general economic interest’ (under Article 106(2)) may involve cross-​subsidization between service elements and could justify the restriction of competition in the profitable market sectors.226 However, with market liberalization the incumbent was required to remove such cross-​subsidies as potential barriers to entry, and to move towards cost-​based tariffs. The consequence for customers is that they will often experience significant price rises in line rental and local call charges, whilst the cost of international and long-​d istance calls falls.227 However, the price rises may impact on government policies, particularly inflation targets, as well as being unpopular with the electorate. Therefore to counter any potential reticence at Member State level, the Full Competition Directive mandated that: Member States shall allow their telecommunications organisations to rebalance tariffs taking account of specific market conditions and of the need to ensure the affordability of a universal service. (Directive 96/​19/​EC, Article 6)

The term ‘universal service’ is supposed to have been originally coined by Theodore Vail, Chairman of AT&T, in 1907;228 although the concept he was promoting was that of universal interconnection, rather than universal access. However, there is an important relationship between network interconnection and the promotion of universal service. If an operator is providing elements of a universal service policy, such as full national network coverage, and also has an obligation to interconnect to any new entrant operator, then the former operator may be placed in a disadvantageous competitive position. In the absence of a regulatory obligation to provide such services, the operator would inevitably withdraw from the provision of any uneconomic universal service elements. This connection was recognized by the Council in its 1994 Resolution on universal service,229 and was given explicit recognition in the Interconnection Directive.230 Under the Interconnection Directive, where a Member State determined that meeting any universal service obligations represents an unfair burden upon an operator, the Member State could establish a mechanism to share the net cost. However, new entrants inevitably have concerns that any compensation mechanism may operate as a barrier to market entry, benefiting the incumbent. Calls have therefore been made for the cost of universal service, as a social policy

  Case C-​320/​91 Corbeau [1993] ECR I-​2533, at para 17 et seq.   See Sixth Implementation Report, see n 103, at p 27. See further Chapter 2, at Section 2.11. 228  Stated by Garnham, N, ‘Universal Service’, Melody (ed), Telecom Reform (Technical University of Denmark, 1997) at 207. 229   Council Resolution of 7 February 1994 on universal service principles in the telecommunications sector, at ‘Recognises’ (e). 230   See n 144. 226 227

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objective, to be borne by governments through general taxation, rather than imposed on operators. Responding to such concerns, the Universal Services Directive states that Member States shall decide to fund any unfair burden resulting from the provision of the universal service obligation either by introducing a mechanism for compensating the designated undertaking ‘from public funds’ or by sharing the cost between providers of electronic communication networks and services.231 Governments have unsurprisingly, not enthusiastically embraced the former option, although the 2016 Proposal would make this the only option. The latter may be in the form of a separately administered scheme, such as a ‘universal service fund’; or the levy of a supplementary charge. To date, most Member States have deemed that the provision of universal service is not an unfair burden on the incumbent;232 while of those that have, only France, the Czech Republic, and Romania have a fully operational compensation transfer scheme.233 As with many aspects of telecommunications regulation, a key issue is the determination of ‘net costs’ involved in meeting the universal service obligations, ie the additional costs attributable to the obligations. The Universal Services Directive details the means by which such cost should be calculated, specifically through the identification of those services provided, or categories of persons served, ‘at a loss or provided under cost conditions falling outside normal commercial standards’.234 Any revenues accruing from the service should be incorporated into the calculation of net cost on a ‘forward-​looking’ basis, since revenues from line rentals, call charges, interconnection, and international transit charges may, over the lifetime of the customer, render a service economic. In addition, the NRAs should take into account any market benefits, both tangible and intangible, which accrue from the provision of universal service, such as the perception of ubiquity in the marketplace. An alternative proposed mechanism for determining the net cost of ‘universal service’ is through the operation of public tenders or auctions. Under such an approach operators would be asked to bid for the level of public subsidy that they would require in order to meet the ‘universal service’ obligation or specific elements of it. The bidder requesting the lowest subsidy would then be ‘awarded’ the obligation under a service agreement.235

  USD, at Art 13(1).   See, for example, Ofcom Statement, Review of the Universal Service Obligation, March 2006, at p 3. 233   See 15th Implementation Report, COM(2010) 253 final/​3, 25 August 2010, at p 13. 234   Universal Services Directive, at Art 12 and Annex IV, Part A. 235   See further Chapter 2, at 2.12.2. 231

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To date, Member State experience would not appear to reflect the historic concern shown towards the threat posed by a competitive market to the provision of universal service. Instead, the perception of universal service provision is in the process of being transformed from a burden into an opportunity for market players.

4.9  FU T UR E DIR E C TIONS This chapter has attempted to examine the development of European Union communications law over the past thirty years. As the third distinct phase of development, the 2003 Regime inevitably raises the question whether it will be the final phase of regulatory evolution or whether a fourth, fifth, or even sixth phase can be envisaged. The NRF embodies a range of different regulatory initiatives. Perhaps the most significant and revolutionary of which is the idea that a single regulatory regime or framework should govern all forms of communications infrastructure and services, irrelevant of the content being communicated. Such an idea is based on current technological and market developments, generally referred to as convergence, which, although reflecting reality to an extent, also anticipates a process that has a long and unpredictable way to go. A truly converged environment may enable the removal of certain legacy regulatory concepts, such as the ‘must-​carry’ obligation in relation to broadcasting, and yet it may require others to be extended, such as the scope and nature of universal service.236 In addition, as the provision of network becomes a commodity, bundled into the cost of the content being transmitted, the bright line between carriage and content may become either more problematic or an irrelevant or meaningless regulatory distinction. A second objective of the NRF was to move from ex ante regulatory intervention towards ex post reactive regulation. The rationale being that with the successful introduction of competition, traditional market mechanisms will control anti-​ competitive practices, with traditional competition law rules operating as a backstop against abusive practices and situations. This is the model that operates in the information technology sector, whether successfully or not, and was viewed as an inevitable consequence of both liberalization and convergence. However, during the consultation on the 1999 Review, new entrants made it very clear that the current market was not yet sufficiently competitive and was unlikely to be in certain market segments for some time to come, if ever. Hence the NRF continues

  The 2016 proposal retains ‘must-​c arry’, but does amend the USO.

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to include a broad range of ex ante measures. While we can anticipate a further withering away of such measures, most commentators recognize that the unique features of the communications sector, as a networked industry, is likely to mean and require a base level of proactive regulatory intervention for the foreseeable future. A unique feature of European Union communications law is the parallel pursuit of the objectives of liberalization and harmonization. National electronic communications markets continue to exhibit a high degree of variation, both in terms of market development, as well as regulatory structures and intervention. The NRF attempts to address the worst of the variability and inconsistencies, through greater Commission oversight. However, issues of subsidiarity and Member State political manoeuvring have prevented this process from going as far as wanted by the Commission. We can therefore anticipate a continuing struggle between the Commission and the Member State NRAs over the theory and practice of regulating the electronic communications sector, which may simply be an inevitable outcome of the European project, rather than being specific to the sector. Finally, the prospective departure of the UK from the EU may have unexpected consequences for the future direction of EU telecommunications law. While the implications for UK law are considered in the previous chapter (see Section 3.4.6), it is worth noting that the UK has been one of the strongest voices in support of liberalization since the beginning, as well as one of the first to fully privatize the national incumbent and establish a converged regulator. The UK’s departure might, therefore, enable the more conservative Member States to have greater sway over the pace of future reforms.

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5 US TELECOMMUNIC ATIONS  L AW Karen Lee and Jamison Prime

5.1 Introduction  5.2 Regulatory Law and Policy: History and Developments  5.3 Overview of Key US Regulatory Bodies and Procedural Principles  5.4 Federal Bodies  5.5 State Bodies  5.6 Procedural Principles and Mechanisms: The Administrative Procedure Act and Administrative Law Principles  5.7 The Pre-​Emption Doctrine and FCC Jurisdiction  5.8 Licensing  5.9 Spectrum Management  5.10 Access, Interconnection, and Related Measures  5.11 Universal Service Obligations (USOs)  5.12 Competition Law  5.13 Consumer Privacy Measures  5.14 Concluding Remarks 

195 196 219 220 226 227 230 233 241 242 258 267 274 282

5.1 INTRODUC TION This chapter focuses on the regulation of the provision of telecommunication services and the operation of telecommunication networks in the US. It begins by giving a brief history of the American approach to the regulation of switched, cable, wireless, satellite, broadband, and IP networks and services. It then provides an overview of the numerous governmental bodies involved in the regulation of the US telecommunications market. It summarizes the licensing requirements under the Communications Act of 1934, and briefly explains the US approach to certain key regulatory issues:  access, interconnection and related measures, including network neutrality, spectrum management, universal service, the application of competition law to the sector, and consumer privacy.

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5. 2  R E GUL ATORY L AW A ND P OL IC Y: HIS TORY A ND DE V ELOPMENT S The Communications Act of 1934 (1934 Act) established the Federal Communications Commission (FCC),1 the primary communications regulatory body in the US, and thus is seen as the starting point of modern federal communications regulation. Since the adoption of the 1934 Act, the FCC has remained a constant. However, the regulatory policies Congress has required the FCC to implement and the initiatives the agency has pursued to achieve them have evolved. Despite a brief period of intensive competition between network operators in the late 1890s, the provision of telephony service was seen as a natural monopoly when the FCC was created. Telephony service was provided solely by AT&T, a privately-​ owned company, using the public switched telephone network (PSTN). However, the development of new microwave technology in the 1960s triggered a period of market liberalization and deregulation which culminated in the adoption of the Telecommunications Act of 1996 (1996 Act).2 The FCC now seeks to encourage vigorous competition in all markets for telecommunications services and between all modes of service delivery, including cable, wireless, and satellite. Nevertheless, it continues to regulate networks and services in a technology-​specific way, despite the increasing level of convergence of network systems brought about by the invention of IP technology. The purpose of this section is to explain the development and evolution of the regulatory frameworks for switched, cable, wireless, and satellite systems and to show how their legacies continue to influence the FCC’s approach to broadband and IP.

5.2.1  Switched networks 5.2.1.1  Pre-​Communications Act of 1934 Evolution of  the Bell network  Until its patents expired in 1893–​4, the Bell Company (Bell)—​ t he company founded by Alexander Graham Bell, the inventor of the telephone, and later known as AT&T—​monopolized the telephony market. Thereafter competition flourished for about a decade. At one stage, independent companies provided up to half of the telephone stations in local areas. However, absent an obligation for Bell to interconnect with the independents,

  For a discussion of the FCC’s powers, see Section 5.4.1.   Pub L No 104–​104, 110 Stat 56 (8 February 1996) (codified at 47 USC §§251–​261, 271–​276, 336, 363, 571–​573, 549, 613, 160–​161, 660–​561, 230, 232, 614, and at 15 USC §79z–​5c). 1 2

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the competition which existed was inefficient. It was not unusual for businesses to subscribe to two or more local telephone networks utilizing separate lines and equipment. Bell, meanwhile, successfully reorganized into a vertically integrated company, making use of its patented technology that significantly improved the sound quality of long-​d istance calls, and began to acquire independent phone companies at a rapid pace. Initial federal regulation  In response to calls to halt the rise of AT&T and cease the unnecessary duplication of infrastructure, Congress enacted the Mann-​Elkins Act 3 in 1910, which marked the start of telephony regulation at the federal level. Prior to the Mann-​Elkins Act, the states were largely responsible for it. Modelled on the Interstate Commerce Commission Act of 1877, which governed railroads, the Act gave the Interstate Commerce Commission (ICC) the power to regulate telecommunications providers as ‘common carriers’,4 which were required to ‘provide service on request at just and reasonable rates without unjust discrimination or undue preference’. The ICC had the power to set aside ‘unjust and unreasonable’ rates of common carriers providing communications services but lacked the authority to require them to file tariffs or interconnect their networks, thus greatly hindering its ability to regulate them effectively. The Kingsbury Commitment  In 1913, in response to the threat of federal anti-​ trust litigation by the Department of Justice, AT&T agreed to the Kingsbury Commitment pursuant to which it would interconnect with the independent phone companies and stop buying its competitors. However, the agreement did little to prevent AT&T’s growth. Exploiting loopholes in the agreement, it continued to acquire local phone systems and eliminate competition. In addition to having a monopoly in local and long-​d istance telephone infrastructure, AT&T dominated equipment manufacture through its Western Electric unit and communications research via Bell Telephone Laboratories. By the time of the adoption of the 1934 Act, regulators had concluded that the telephone was a natural monopoly that was best served by a single firm. AT&T, with its local operating companies and long-​ distance lines, appeared to be that firm. 5.2.1.2  The evolution of competition: 1950–​1996 Long-​distance competition  For decades after passage of the 1934 Act, the FCC allowed AT&T to retain its monopoly on telecommunications in order to secure the goal of securing a ‘rapid, efficient, Nation-​w ide and worldwide . . . communication   Mann-​E lkins Act (18 June 1910, ch 309, 36 Stat 539).   See Section 5.8.1 for the meaning of ‘common carrier’.

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service with adequate facilities at reasonable charges . . .’ In turn, AT&T subsidized the cost of line rentals and free local calls by charging heavy mark-​ups on national and international calls. However, in 1969, when the FCC granted a licence to Microwave Communications, Inc (MCI) to install and operate microwave facilities that enabled limited inter-​office communications, competition for telephony services began. Two years later, in its Specialized Common Carrier decision (Establishment of Policies and Procedures, 29 FCC 2d 870 (June 3, 1971)), the FCC determined MCI and others could compete with AT&T for private line services used by business customers. Following a 1977 decision of the United States Court of Appeals for the District of Columbia (the DC Circuit Court) overturning an FCC order requiring MCI to cease operation of its Execunet division, competitors could begin offering interstate long-​d istance services to the public (MCI Telecommunications Corp v FCC, 561 F 2d 365 (DC Cir 1977)). In 1978, the same court ruled that new entrants were legally entitled to interconnect with AT&T (MCI Telecommunications Corp v FCC, 580 F 2d 590 (DC Cir 1978)). Subsequently, the FCC reviewed the charges interstate common carriers paid to local exchange operators to terminate long-​d istance calls and adopted a number of measures forcing AT&T to begin rebalancing its tariffs in line with costs to remove the market distortions and artificial arbitrage opportunities which arose as a result of the subsidization of local services. Divestiture of  AT&T and the  modification of  final judgment  In 1974, the Department of Justice brought a suit against AT&T, Western Electric, and Bell Telephone Laboratories, Inc alleging that the monopolies held by the defendants in several telecommunications service areas and equipment manufacturing violated the Sherman Anti-​t rust Act.5 The case was pending for eight years until Judge Harold Greene of the DC Circuit Court entered the Modification of Final Judgment (MFJ), which slightly modified divestiture provisions voluntarily agreed to by the parties (US v AT&T Corp, 552 F Supp 131 (DC Cir 1982), aff’d sub nom Maryland v US, 460 US 1001 (1983)). The MFJ ordered AT&T to divest itself of its twenty-​t wo Regional Bell Operating Companies (RBOCs), which resulted in the separation of local and interexchange (long-​d istance) markets, and established procedures for the implementation of divestiture. Under the provisions of the MFJ, the twenty-​two RBOCs, which by 2011 had been consolidated into three main holding companies—​AT&T, CenturyLink, and Verizon—​would provide communication in ‘exchange areas’ (also known as local access and transport areas (LATAs)). Exchange areas referred to a geographic area   Sherman Anti-​t rust Act, ch 647, 26 Stat 209, 209–​10 (1892) (codified as amended at 15 USC §§1–​7).

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that encompassed one or more contiguous local exchange areas serving common social, economic, and other purposes. Within these exchange areas, RBOCs could originate and terminate calls but were prohibited from providing interexchange telecommunication services and information services (see Section 5.2.5). The original settlement provisions sought to restrict the manufacture and provision of customer premises equipment but the MFJ allowed RBOCs to market equipment once they divested from AT&T. The MFJ also sought to ensure that all interexchange service providers (eg MCI and Sprint) obtained equal access to RBOC services. The judgment imposed a duty on local exchange carriers to provide service on an ‘unbundled, tariffed basis’ that was equal in quality, type, and cost to that provided to AT&T and its affiliates. In addition, RBOCs were prohibited from discriminating against other service providers in favour of AT&T in the following areas: procurement, establishment and dissemination of technical information, interconnection standards, interconnection, and provision of new services and facilities. 5.2.1.3  Competitive carrier rulemaking In a series of rulings designed to adapt the regulatory framework to further promote competition among interexchange carriers in the late 1980s, the FCC distinguished between common carriers with market power (‘dominant’ carriers) and common carriers without market power (‘non-​dominant’ carriers). Dominant carriers were subject to all of the requirements of Title II of the 1934 Act which deals with common carriers, including the need to provide ninety days’ notice for new tariffs and to notify decisions to roll out network infrastructure. Such restrictions on non-​dominant carriers, on the other hand, were no longer to be applied and enforced by the FCC. However, non-​dominant carriers had to ensure that their service charges were not ‘unjust or unreasonable’. At this time, AT&T was declared to be dominant in the markets for interstate, domestic, and interexchange services in the US, including Hawaii, Alaska, and the US territories, but by 1995 the FCC reclassified AT&T as non-​dominant in all service markets (Motion of AT&T to be Re-​classified as a Non-​dominant Carrier, 11 FCC Rcd 327 (1995)). The obligations on dominant carriers have been reduced further in light of biennial regulatory reviews mandated by the Telecommunications Act of 1996 (1996 Act) to reflect the state of competition in relevant markets. 5.2.1.4  Local-​exchange competition and the Telecommunications Act of 1996 The 1996 Act marked the introduction of full competition in the market for telephony services. It declared invalid all state regulation that prohibited or restricted the entry of competitors into intrastate telecommunications services and

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overturned the MFJ provisions6 that allowed RBOCs to retain monopolies in the lucrative local market. It also removed the MFJ’s restrictions on the provision of interstate telephony services by RBOCs, provided they comply with a 15-​point ‘competitive’ checklist to the satisfaction of the FCC.7 This checklist included a number of resale, access, and interconnection obligations, including the provision of non-​d iscriminatory access to unbundled network elements, which are discussed in Section 5.10.1. In December 1999, Bell Atlantic was the first RBOC permitted by the FCC to offer interstate telephony services, provided it met certain conditions in the State of New York and complied with other specified safeguards.8 By 2003, all RBOCs had received approval to provide long-​d istance services in all of their regional areas. Since then, there has been significant consolidation in the sector and a return to vertical integration brought about by declining revenue for long-​d istance services and high prices for local access. Despite the mergers, RBOCs owned by Verizon, AT&T, and CenturyLink providing interstate telephony services must continue to comply with the competitive checklist and other requirements.9

5.2.2 Cable Since its inception in the 1950s, cable television has evolved from a simple video transmission service to an important provider of broadband services. The FCC has applied varying degrees of regulation to this medium throughout this evolution. This section focuses on cable’s historical development and legacy position as the original multichannel video programming distributor (MVPD). The regulation of cable’s broadband offerings is addressed in greater depth elsewhere in this chapter. Individual cable systems have traditionally been local in nature due to their design, although industry consolidation and regulatory changes have made this characteristic increasingly less important. Typically, a cable ‘head end’ facility receives terrestrial and satellite broadcast signals via a series of antennae and dishes. These signals are then transmitted via wire throughout the community the cable provider serves, usually on telephone poles or along streets. An individual cable line runs to each subscriber. While cable companies are subject to competition for the delivery of video programming from fibre and satellite providers and are themselves robust competitors in the fixed broadband market, cable companies

  The MFJ was officially terminated on 11 April 1996 following the enactment of the 1996 Act. 8   See 47 USC §271.   See 47 USC §272. 9   For further discussion of the obligations on RBOCs, see Section 272(f)(1) Sunset of the BOC Separate Affiliate and Related Requirements, Report and Order and Memorandum Opinion and Order, WC Docket No 02–​122, CC Docket No 00–​175, WC Docket No 06–​120, FCC No 07–​159, 22 FCC Rcd 16440 (2007). 6 7

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traditionally have respected each other’s exclusive franchise areas with respect to the delivery of video programming. 5.2.2.1  The development and regulation of cable The first cable systems served as community antenna television (CATV) systems, and allowed households in mountainous regions to view local television stations whose signals would otherwise be unavailable. Later, cable service expanded into metropolitan areas that could receive free-to-air broadcasts. In the late 1970s and throughout the 1980s, cable began to provide video programming unavailable through over-​t he-​a ir broadcast stations. The availability of specialized news and entertainment channels, as well as premium movie and sporting events, was a key to cable subscriber growth. Initially, the FCC declined to regulate cable. However, the FCC and state regulators soon became concerned that cable’s carriage of free-​to-​a ir broadcast signals could fragment audiences and harm local broadcasters’ revenue bases. In the 1960s, without specific statutory authority to do so, the FCC began its regulation of cable by adopting policies designed to protect free-​to-​a ir broadcasters. Despite the FCC’s initial hostility towards cable, the medium continued to grow. By 1980, the FCC had relaxed many of its initial cable regulations and Congress passed the first laws specifically addressing the medium. The Cable Communications Policy Act of 1984 (the 1984 Cable Act)10 served a dual purpose:  while it furthered efforts to deregulate cable, it set forth the first statutory framework for cable regulation. The 1984 Cable Act explicitly gave the FCC authority to regulate cable, but it removed issues such as subscriber rates and programme carriage from its jurisdiction. Similarly, the 1984 Cable Act limited state and local regulation, which at that time was viewed as an impediment to the growth of cable. Cable rates rose rapidly after deregulation, and both the FCC and Congress soon faced public pressure to do something about the situation. Congress acted by passing the Cable Television Consumer Protection and Competition Act of 1992,11 which repealed many provisions of the 1984 Cable Act. Congress greatly expanded the FCC’s role in cable regulation. This legislation was a departure from the previous approach, which emphasized less regulation and greater competition, particularly in rate regulation. Only a few years later, as part of its broad review of communications law and policy in the Telecommunications Act of 1996 (1996 Act), Congress again modified cable regulation. The 1996 Act repealed certain cable-​specific regulation, and adopted policies designed to encourage the broad provision of telecommunications

  Cable Communications Policy Act of 1984, Pub L No 98–​5 49, 98 Stat 2779 (1984).   Pub L No 102–​385, 106 Stat 1460 (1992).

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services. To that end, the 1996 Act removed restrictions that had limited telephone companies from providing cable services, while concurrently, over a three-​year period, phased out many of the cable rate regulations adopted in 1992. Cable entities traditionally have been required to obtain and periodically renew a local franchise licence in order to operate. A franchise benefits the cable provider by permitting access to public rights of way, as well as the local franchise authority, which can set renewal standards and charge the cable operator a fee for the right to operate its system in the designated area. However, the scope of what local authorities can regulate has generally diminished over time. The 1996 Act imposed limitations on local and state regulation of cable, such as the prohibition on grants of exclusive franchises or unreasonably withholding consent for a new service. In addition, some states have allowed cable and telecommunications entities to obtain a single franchise from the state, bypassing the need to negotiate individual local agreements. In 2005, the FCC released a then-​controversial Report and Order,12 that found evidence that local authorities had acted unreasonably to delay the entry of new competitors. In the Report and Order, it established rules regulating how local franchise authorities can act by, among other things, setting strict time limits for local governments to act on new applications to provide video services. In 2015, the FCC found that cable companies face ‘effective competition’ nationwide.13 As a result, local cable franchising authorities can no longer regulate the rates of basic cable services and equipment unless they overcome a rebuttable presumption that the particular local market is competitive. Previously, there was a rebuttable presumption that cable operators were not subject to effective competition, which resulted in numerous petitions to the FCC from cable operators (or other interested parties) seeking case-​by-​case determinations that a particular franchise area contained a sufficient quantity of consumer options to be deemed competitive.14 Cable’s once dominant role in the bundling and delivery of video content continues to be diminished by new entrants and challenged by new technologies. In response, cable providers have attempted to maintain their role by, for example, deploying a nationwide network of WiFi hotspots and promoting access to subscription video anywhere from any device. In addition, Comcast, the largest cable

12   Implementation of Section 621(a)(1) of the Cable Communications Policy Act of 1984 as amended by the Cable Television Consumer Protection and Competition Act of 1992, Report and Order and Further Notice of Proposed Rulemaking, MB Docket No 05–​311, FCC No 06–​180, 22 FCC Rcd 5101 (2007) (upheld in Alliance for Community Media v FCC, 529 F 3d 763 (6th Cir 2008)). 13   Concerning Effective Competition; Implementation of Section 111 of the STELA Reauthorization Act, 80 Fed Reg 38001 (2015) (upheld in Nat’l Ass’n of Telecom. Officers and Advisors v FCC (DC Cir 2017)). 14   Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992 Rate Regulation, Report and Order, 8 FCC Rcd 5631, 5669–​5670 (1993).

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operator, entered the video content market directly through its purchase of NBC Universal from General Electric, which was approved in 2011. The industry continues to see consolidation including, most recently, the merger of Time Warner Cable and Bright House Networks with Charter into a single entity that markets itself under the ‘Spectrum’ brand. Today, MVPDs are a mix of traditional cable operators; Direct Broadcast Satellite (DBS) systems that allow consumers to receive video via pizza box-​size dish antennae; fibre-​to-​the-​home services provided by traditional telephone companies; and to a lesser extent, competitive ‘overbuilders’ such as RCN and new technology companies such as Google. Premium subscription internet video services such as those provided by Hulu, Roku, and Apple TV, as well as original content from entities such as Amazon and Netflix, are also challenging the traditional cable model. As the cost of cable programming continues to rise due to increased fees for retransmission, particularly for sports programming, consumers appear to be more and more willing to embrace substitutes and drop their traditional cable television subscriptions. This evolving landscape can be illustrated by the experiences of AT&T. It had previously operated a traditional cable franchise model through AT&T Broadband, but sold that division to Comcast in 2002. However, by 2017 it had once again become a major MVPD through a combination of fibre-​to-​t he-​home, satellite television (it purchased DirecTV in 2015), and internet television subscription services. It counted 30 million content subscribers in a competitive marketplace, despite the fact that it no longer held any traditional cable assets. Throughout the evolution of cable, the courts have generally upheld efforts to regulate the medium. In 1968, the Supreme Court acknowledged the FCC’s right to regulate cable, concluding that it was ‘interstate commerce by wire or radio’ subject to the FCC’s authority under the broad provisions of the 1934 Act (United States v Southwestern Cable Co, 392 US 157 (1968)). Although cable providers are akin to broadcasters and newspapers, in that they select programming for distribution, they are also similar to common carriers in that they mostly transmit, unaltered, content originated by third parties. Courts have been deferential to cable regulation, but have been unwilling to afford the types of First Amendment protection for regulation offered to newspapers and, to a lesser extent, broadcasters. The FCC continues to have statutory obligations that relate to cable’s traditional role as a video provider. Recent regulatory decisions have involved the programme access rules, which are designed to ensure that all MVPDs have access to cable-​ owned programme networks, and retransmission consent, which relates to how cable providers and television stations negotiate for the carriage of over-​the-​a ir broadcast channels. Notwithstanding recent developments in broadband, these and other video issues will likely remain a significant component of the US cable regulatory practice.

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5.2.3 Wireless The regulation of radio communications has long been a part of the FCC’s mission, and government interest in this area can be traced back to before the agency’s founding. Similarly, the development of commercial wireless telephone systems can trace its roots to the development of cellular networks in 1947. Under the cellular concept, the use of geographically small service areas (cells) allows a limited number of frequencies to be reused across a larger geographic area, which in turn increases the capacity of a mobile network to process a large number of telephone calls using relatively few frequencies. At the time the cellular system was envisioned, however, the technology did not exist to deploy widespread wireless networks. From 1947 until 1968, the FCC sharply limited the number of frequencies available for cellular-​t ype telephone operations, and thus there was little research or development in the area. 5.2.3.1  Cellular radiotelecommunication services The modern cellular radiotelephone service was authorized in 1981. Cellular systems in each market area were divided into two 20 MHz channel blocks, with one block made available to a local wireline carrier. Block A was limited to non-​w ireline cellular systems and was issued by comparative hearings for the initial markets, and later, by lottery. This wireline/​non-​w ireline distinction no longer exists. Due to the growth in demand for cellular service, the FCC allocated an additional 5 MHz of spectrum to each cellular system in 1986, providing a total of 50 MHz for these ‘first generation’ cellular services. In 1994, the FCC began the auction of broadband personal communications service (PCS) spectrum, which consists of 120 MHz of spectrum in the 1850–​1910 MHz and 1930–​1990 MHz bands and is divided into six blocks. The FCC broadly defined PCS as mobile and fixed communications offerings that serve individuals and businesses, and can be integrated with a variety of competing networks. As a practical matter, however, the services that were developed under broadband PCS were essentially marketed as and were widely perceived to be a type of cellular service. The Specialized Mobile Radio (SMR) service was first established by the FCC in 1979 to provide land mobile communications on a commercial basis and was configured to provide dispatch-​like services. Several companies—​ most notably, Nextel (now Sprint)—​u sed their licences to provide cellular-​ like services. Modern networks and multi-​b and phones can use frequencies licensed for the purposes of first generation, PCS and SMR services, and the regulatory distinctions (made in different FCC rule parts) are largely invisible to consumers.

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The licensing of PCS in the mid-​1990s represented a technological improvement in mobile telephone networks, as these systems incorporated digital technology. PCS deployment also marked a significant evolution in auction and relocation policies. To deploy PCS, it was necessary to relocate incumbent 2 GHz licensees who had employed point-​to-​point microwave links in their private internal radio networks. The FCC’s Emerging Technologies relocation principles, which set forth a negotiation process that consisted of multiple negotiation phases and which provided incentives for incumbent users to quickly vacate the band, were developed at this time and have since been used as a model for the relocation of incumbent users from other spectrum bands.15 Further evolution of these relocation principles led to the groundbreaking 2016 broadcast incentive auction. There, the FCC successfully used a ‘two sided’ auction in which incumbent broadcasters indicated the amount of money they would be willing to receive for relinquishing their spectrum rights and prospective new wireless licensees indicated what they would pay for this spectrum. Ultimately, the auction resulted in the repurposing of television channels 38 and above, making available for wireless licensees 70 MHz of spectrum that is highly valued for its superior propagation characteristics. Advances in technology have also made it possible to entertain more complex spectrum scenarios, including those in which radios consult an online database to determine real-​time spectrum availability. Today, a robust, competitive market for mobile telephone services exists in the US. As documented by the FCC’s annual reports on the state of mobile service competition,16 mobile telephony dramatically and quickly transformed from an expensive service used by a relatively small percentage of the American population to a widely accepted medium that was marked by falling prices, increased service areas, and such innovations as unlimited phone calls and no long-​d istance charges. Prior to this time, the use of mobile telephone services in the US lagged behind that of many other countries, including much of Europe. The increasing use of data services—​whether texts and messages, internet browsing, or streaming media services—​has slowed the growth of and reduced the revenues associated with traditional voice-​based telephony over wireless networks. These developments have created new challenges for wireless providers, as they work to upgrade their networks to support the higher data rates necessary for these services. They are particularly challenging for wireless providers serving low population density

15  See generally Redevelopment of Spectrum to Encourage Innovation in the Use of New Telecom­ munications Technologies, ET Docket No 92–​9. 16   These reports are docketed under the caption ‘In the matter of Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993; Annual Report and Analysis of Competitive Market Conditions With Respect to Commercial Mobile Services’ and are maintained on the FCC’s website at .

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rural areas who are only just completing initial roll-​outs or are transitioning from early-​generation technology best suited for voice-​based communications. 5.2.3.2  Evolution of wireless broadband The transition from mobile telephony to mobile broadband began in 2002, when the FCC allocated an additional 130 MHz of spectrum for ‘advanced wireless services’ (also known as AWS or 3G, for the ‘third generation’ technologies to follow cellular and PCS deployments). This spectrum consists of the 1710–​1755 MHz, 1915–​1920 MHz, 1995–​2000 MHz, 2020–​2025 MHz, and 2110–​2180 MHz bands. This effort followed work at the World Radiocommunication Conference 2000, which had identified spectrum for ‘next generation’ technologies under the general label of ‘IMT-​2000’. 3G was succeeded by 4G, which is characterized by even higher data speeds that can support such features as mobile internet access, video conferencing, and advanced gaming. The ITU released the IMT-​Advanced standards associated with 4G in 2008. The 4G standards were forward-​looking and pushed at the boundaries of existing technologies. Carriers first turned to the LTE—​long-​ term evolution—​technology standard to upgrade their existing 3G networks. Even though LTE did not meet all of the 4G requirements, it permitted carriers to begin to achieve data rates nearing those identified by the ITU for 4G. Subsequently approved standards, such as LTE Advanced, were designed to satisfy the criteria for 4G systems. By 2017, wireless carriers were making steady progress in making 4G services available, although the US continued to lag behind many other countries in average speeds. The need to make more spectrum available for wireless broadband continues to be an important policy issue. For example, the National Broadband Plan, which the FCC was required to submit to Congress in 2010,17 called for the FCC to make 500 additional megahertz of spectrum available for broadband use by 2020. By 2015, US regulators reported that they were more than halfway to the goal, although it is becoming increasingly challenging to find additional suitable frequency bands because of use by incumbents. Some spectrum is being used for vital national security purposes, for example. Another development that has given rise to demands for more spectrum has been the interest in ‘5G’ networks. Parties have differing views about what constitutes 5G, but they are in general agreement that these networks will support increasingly large amounts of data, including that used for machine-​to-​machine communications as part of the Internet of Things. To this end, spectrum in the bands above 24 GHz has received newfound attention. These frequencies were previously seen as undesirable by the mainstream

  See further Section 5.11.1.

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incumbent wireless carriers due to their short propagation distances and greater susceptibly to disruption. Use of such spectrum is expected to result in the deployment of dense networks consisting of clusters of low-​power small cells with advanced beam-​forming technologies, especially in urban areas, where such small cells can be readily deployed within buildings and on light poles and other public infrastructure. Mobile telephone services do not have the long history associated with fixed-​ line services, and have operated under a relatively simpler regulatory structure. US policy has focused on fostering robust competition in this space, and regulators have relied on vigorous competition among licensees to deliver service improvements and ensure reasonable prices. As a result, there has been relatively limited involvement in setting pricing or service quality standards. Instead, the FCC has focused much of its attention on the amount of spectrum a particular entity controls, and has employed various means to ensure that no particular entity becomes so dominant as to threaten the competitive environment. One notable exception to this rule involves net neutrality. When the FCC adopted net neutrality rules in 2015, it applied the rules equally to fixed and mobile broadband networks despite strong objections from the wireless industry.18 As wireless telephony transitions to wireless broadband, services that have not been traditionally considered part of the mobile telephone service are more easily integrated into a broadband network. Spectrum previously set aside for educational broadcast purposes, recovered from television broadcasting, and repurposed from satellite use have all been used to expand mobile broadband networks. Because many of these services have been licensed under different schemes, regulators have revisited existing allocations and service rules to remove impediments to flexible spectrum use. While the mechanisms for reallocating or repurposing spectrum continue to evolve, it has become increasingly difficult to identify users that can be easily relocated and suitable spectrum in which to relocate their services. Accordingly, spectrum policy increasingly focuses on how to promote successful band sharing among different and traditionally incompatible services.

5.2.4 Satellite The provision of domestic and international communications services by satellite in the US has increased dramatically since the 1960s. Historically, domestic satellite services in the US were provided by private entities; however, international satellite communications services in the US were offered exclusively by

18

  See further Section 5.2.5.3 below.

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the Communications Satellite Corporation (Comsat), a government-​controlled entity established under the Communications Satellite Act of 1962 (1962 Act).19 Comsat was the US signatory to the International Telecommunications Satellite Organization (Intelsat) and the International Mobile Satellite Organization (Inmarsat) and resold Intelsat’s services to US telecommunications carriers. Users and service providers were not permitted to access directly Comsat services. To ensure the economic viability of Inmarsat and Intelsat, the FCC did not authorize the operation of other international satellite systems until 1984 when President Ronald Reagan determined that competing systems were in the national interest.20 However, the newly licensed satellite operators were precluded from interconnecting to the PSTN, so commercial providers focused on broadcasting and international private communications. The FCC gradually lifted the interconnection restrictions and by 1997 they were removed. As a result, there are now multiple satellite providers offering integrated packages of traditional telephony and video programming services to their customers. The desire to encourage greater competition in the US and other foreign markets for international satellite services and to establish a level playing field for competitors also led to the elimination of state control over Comsat, Intelsat, and Inmarsat. In 2000, the Open-​Market Reorganization for the Betterment of International Telecommunications Act 21 (ORBIT) was enacted by Congress which amended the 1962 Act by mandating that Intelsat and Inmarsat privatize. If they failed to privatize, the FCC was directed to refuse to grant them the authorizations necessary to provide specified mobile and broadcasting services in the US.22 ORBIT removed many of the privileges and immunities granted to Comsat and, in particular, the private sector ownership restrictions on Comsat. It also gave customers and service providers direct access to Intelsat services. Although the purpose of ORBIT was to establish a competitive global market for satellite communication services, ORBIT highlights an inconsistency in the US’s current technology-​neutral approach to regulation. Section 647 of ORBIT prohibits the FCC from awarding spectrum used for the provision of international satellite services by auction even though wireless carriers have incurred significantly higher costs for their spectrum because it was auctioned. Satellite providers now offer competition to traditional terrestrial and mobile networks in many fields, including radio programming, television, broadband, and telephony. Satellite communications are increasingly being viewed as vital to

20   Pub L No 87–​624, 76 Stat 419 (1962).   Presidential Determination No 85–​2 .   Pub L No 106–​180, 114 Stat 48 (2000). 22   Inmarsat was privatized on 15 April 1999, prior to the enactment of ORBIT; Intelsat was privatized on 18 July 2001. See further Chapter 16, at Section 16.2.1.2. 19 21

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the provision of public safety services during times of emergency when terrestrial networks may be unavailable; and the provision of telephony services where traditional communications networks are not present, such as in wilderness areas and aboard yachts and other vessels. Most recently, there has been growing interest in developing and deploying networks that consist of constellations of thousands of satellites that would operate in low-​earth orbits. Because such satellites would reside much closer to the surface of the earth than many traditional satellites, these new networks would allow for high bandwidth transmissions with minimal latency. With the advent of small satellite forms that can be produced quickly, relatively inexpensively, and in large quantities; increased competitive commercial launch options offered by companies such as SpaceX; and technological improvements in satellite communications, these once audacious plans now appear more practical.

5.2.5  Broadband and IP The deployment of broadband services and the IP technology used to provide them over the last decade has created a number of regulatory difficulties for the FCC. One of the most contentious issues has been whether broadband services should be classified as ‘telecommunications services’ or ‘information services’. If these services are ‘telecommunications services’ they are, absent a decision of the FCC to forbear from regulation, regulated in accordance with the obligations of Title II of the 1934 Act including tariff notification, access, and interconnection.23 If they are properly classified as ‘information services’, they are subject to the rules (if any) adopted by the FCC exercising its ‘ancillary jurisdiction’ set out in Title I—​t he power to ‘perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with [the 1934] Act, as may be necessary in the execution of its functions’. The 1996 Act defines the terms ‘telecommunications services’—​the ‘offering of telecommunications24 for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used’25—​a nd ‘information services’—​‘the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes electronic publishing, but does not include any use of any such capability for the

  See Sections 5.8 and 5.10.   ‘Telecommunications’ is defined as ‘the transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form or content of the information as sent and received’. 47 USC §153(43). 25   47 USC §153(46). 23 24

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management, control, or operation of a telecommunications system or the management of a telecommunications service’.26 However, the essence of the two concepts and many of the rules and principles that govern them originated in a series of rulings made by the FCC in 1971, 1980, and 1986 known as the Computer Inquiry cases, which dealt with the regulation of the then nascent data-​processing industry and the use of traditional telephony lines by common carriers such as AT&T to provide data-​processing services. Given these rulings continue to influence the regulatory debate surrounding the classification of broadband and IP services and the regulatory framework that should govern them, it is worth reviewing them in some detail before reviewing how the FCC has classified and regulated broadband services. 5.2.5.1  The Computer Inquiry cases In Computer Inquiry I (Regulatory Pricing Problems Presented by the Interdependence of Computer and Communication Facilities, Final Decision and Order, 28 FCC 2d 267 (1971)), the FCC declined to regulate the data-​processing industry by distinguishing between ‘hybrid communications’ which were regulated and ‘hybrid data processing’ which was not. These distinctions, however, caused significant confusion and the FCC was forced to revisit them in Computer Inquiry II (Amendment of §64.702 of the Commission’s Rules and Regulations, Second Computer Inquiry, Final Decision, 77 FCC 2d 384 (1980)). In that decision, the FCC distinguished between so-​called ‘basic’ and ‘enhanced’ services. ‘Basic’ services consisted of the provision of transmission capacity and were regulated by Title II of the 1934 Act. ‘Enhanced’ services were basic transmission services coupled with computer processing applications and were regulated in accordance with the FCC’s ancillary jurisdiction. It also decided that, with the exception of AT&T and its affiliates, all common carriers were no longer required to establish a separate subsidiary company if they wished to offer data-​processing services. However, all carriers who owned their own transmission facilities and provided enhanced services had to acquire the basic services needed for those enhanced services pursuant to tariff. Moreover, they had to make available basic services to competing enhanced service providers on the same rates, terms, and conditions. Following the implementation of the MFJ, the FCC issued Computer Inquiry III (Amendment of §64.702 of the Commission’s Rules and Regulations, Third Computer Inquiry, Report and Order, 104 FCC 2d 958 (1986)). Although AT&T and RBOCs remained free to offer enhanced services through separate subsidiary companies, Computer Inquiry III gave them the flexibility to integrate their basic and

  47 USC §153(20).

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enhanced services, provided they comply with specified cost-​a llocation methods and targeted regulations designed to prevent RBOCs from abusing their market power in basic services. Initially, RBOCs were expected to comply with ‘comparably efficient interconnection’ (CEI) requirements. In the longer term, RBOCs had to comply with certain Open Network Access (ONA) obligations that required them to unbundle their basic services into ‘basic service elements’ for purchase by enhanced service providers. In addition, quality, installation, and maintenance reporting requirements were imposed. Like other carriers, RBOCs had to offer the basic services used in their enhanced service offerings pursuant to tariff and on a non-​d iscriminatory basis. Because of procedural errors some aspects of the FCC’s decision in Computer Inquiry III were overturned on appeal (People of the State of California v FCC, 905 F 2d 1217 (9th Cir 1990)), but CEI requirements and some ONA obligations were eventually imposed. 5.2.5.2  The regulatory classification of broadband services After the decision of the US Court of Appeals for the Ninth Circuit in AT&T v City of Portland, 216 F 3d 871 (2000), which held that the conveyance element of cable modem services was a ‘telecommunications service’, the FCC issued a Declaratory Ruling and Notice of Proposed Rulemaking,27 which ignored the court’s holding. The FCC determined that cable modem services were not telecommunications services. For the FCC, a cable modem service entailed a single, integrated internet access service which comprised computer processing, the provision of information, computer interactivity, and data transport. While the FCC conceded that cable modem services were provided via ‘telecommunications’, the conveyance service was not a standalone product being offered to the public for a fee. Rather, the conveyance service was seen as integral to and indivisible from other internet services, such as email and access to content, offered by cable operators. As such, the conveyance element of the cable modem service was not a telecommunications service. Instead, cable modem services were classified as ‘information services’. However, the FCC found that, as the conveyance element of a cable service was indivisible from the other internet services provided by cable operators, it did not need to be provided to competitors in accordance with the FCC’s ruling in Computer Inquiry II. The FCC’s interpretation of the term ‘telecommunication service’ was arguably strained, but it was nevertheless upheld by the Supreme Court in National Cable & Telecommunications Association v Brand X Internet Services, 545 US 967 (2005).

27   Inquiry Concerning High-​Speed Access to the Internet Over Cable and Other Facilities, Declaratory Ruling and Notice of Proposed Rulemaking, GN Docket No 00–​185, CS Docket No 02–​52, FCC No 02–​77, 17 FCC Rcd 4798 (2002).

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The Supreme Court’s decision gave the FCC a legal basis on which to implement a deregulatory approach to broadband services. Shortly after it was made, the FCC determined that ‘wireline broadband Internet access services’ were ‘information services’.28 The reasons given for the FCC’s decision, which was upheld by the US Court of Appeals for the Third Circuit in Time Warner Telecom v FCC, 507 F 3d 205 (3rd Cir 2007), were similar to those articulated in its cable modem decision. Significantly, the FCC also decided that common carriers offering these services, including BOCs, no longer had to comply with its Computer Inquiry rules. In 2006, the FCC determined that Broadband over Power Line-​enabled internet access services were ‘information services’. In 2007, wireless broadband internet access services were classified as ‘information services’.29 In its wireless declaratory ruling, the FCC found that wireless broadband internet access services were not ‘commercial mobile services’30 on the basis that they do not involve the provision of an ‘interconnected service’.31 Hence they were not subject to the application of Title II of the 1934 Act. Importantly, in each regulatory classification decision, the FCC argued that if it needed to regulate broadband services it could rely on its ancillary jurisdiction under Title I of the 1934 Act. However, the April 2010 decision of the US Court of Appeals in Comcast v FCC, 600 F 3d 642 (DC Cir 2010)  called into question the FCC’s ability to regulate on this basis. The case, discussed further in Section 5.2.5.3, overturned the FCC’s 2008 decision that Comcast had breached the Commission’s policy on network neutrality, holding that absent a ‘statutorily mandated responsibility’, such as Title II (common carrier), Title III (spectrum management), and Title VI (cable), the FCC had no authority to regulate Comcast’s internet management practices. In its Comcast order, the FCC asserted jurisdiction by relying

28   Appropriate Framework for Broadband Access to the Internet over Wireline Facilities, Report and Order and Notice of Proposed Rulemaking, CC Docket Nos 02–​33, 01–​337, 95–​20, 98–​10, WC Docket Nos 04–​2 42, 05–​ 271, FCC No 05–​150, 20 FCC Rcd 14853 (2005). The FCC’s decision was in sharp contrast to its earlier policy. Previously, the FCC had sought to require ILECs providing wireline broadband internet access services using xDSL services to provide access to the high frequency portion of the local loop (or line share) in order to increase the roll-​out of broadband services on the basis that the conveyance element was a ‘telecommunications service’. See Deployment of Wireline Services Offering Advanced Telecommunications Capability, Third Report and Order in CC Docket No 98–​147 and Fourth Report and Order in CC Docket No 96–​98, FCC No 99–​ 355, 14 FCC Rcd 20912 (1999). 29  Appropriate Regulatory Treatment for Broadband Access to the Internet Over Wireless Networks, Declaratory Ruling, WT Docket No 07–​53, FCC No 07–​30, 32 FCC Rcd 5901 (2007). 30   These are defined in the 1934 Act, §332(d)(1) (as amended) as ‘any mobile service . . . that is provided for profit and makes interconnected services available (A) to the public or (B) to such classes of eligible users as to be effectively available to a substantial portion of the public, as specified by regulation by the Commission’. 31   47 USC §332(d)(2) defines the term ‘interconnected service’ as a ‘service that is interconnected with the public switched network . . . or service for which a request for interconnection is pending pursuant to subsection (c)(1)(B)’.

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primarily on two policy statements contained in §§1 and 230(b) of the 1934 Act. Section 1 specifies the purpose for which the FCC was created: ‘regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all of the people of the United States . . . a rapid, efficient, Nation-​w ide, and world-​w ide wire and radio communication service . . . at reasonable charges’. Section 230(b) states it is the policy of the United States to ‘preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation’. In its judgment, the Court of Appeals left open the possibility that the FCC could regulate internet management practices if it could sustain an argument that such regulation was necessary in order to regulate matters over which it did have express statutory authority. Shortly after the decision of the Court of Appeals, the FCC launched a notice of inquiry32 on the adequacy of the legal framework for broadband internet access services soliciting comments on three options: • Retaining the current arrangements; • Classifying the access component of broadband internet services as a ‘telecommunications service’ and applying all Title II regulation to it; or • Classifying the access component of broadband internet services as a ‘telecommunications service’ and ‘forbearing’ from most provisions of Title II. The 1996 Act gives the FCC the power not to apply Title II in whole or part to providers of telecommunications services provided specified criteria are met. Despite quickly launching an inquiry on the matter, the FCC did not reclassify broadband services until the decision of the US Court of Appeals in Verizon v FCC, 740 F 3d 623 (DC Cir 2014). In that decision, the Court of Appeals overturned portions of the FCC’s 2010 Open Internet Order that sought to codify the Commission’s network neutrality policy.33 The FCC’s order was grounded primarily in §706 of the 1996—​a provision that directs the FCC to encourage the deployment of ‘advanced telecommunications capability’. The Court of Appeals held that §706 empowered the FCC to adopt rules regulating broadband services, including network neutrality provisions. However, the proposed network neutrality provisions regulated broadband providers as if they were common carriers subject to Title II of the 1934 Act, and the FCC was prohibited from relying on its §706 power to regulate broadband providers in this way unless the FCC found that broadband services

32   Framework for Internet Broadband Service, Notice of Inquiry, GN Docket No 10–​127, FCC No 10–​114, 25 FCC Rcd 7866 (2010). 33   Preserving the Open Internet, Report and Order, GN Docket No 09-​191, WC Docket No 07-​52, FCC No 10-​ 201, 25 FCC Rcd 17905 (2010).

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were telecommunications services. Because the FCC had previously concluded that broadband services were information services, the Court of Appeals ruled that, with the exception of the transparency rule (discussed in Section 5.10.11), the network neutrality provisions were invalid. Nevertheless, the Court of Appeals made it clear that had the FCC concluded that broadband services were telecommunications services, it would have upheld the Commission’s network neutrality provisions. In 2015, fifteen months after the Verizon decision, the FCC declared broadband services delivered over any technology platform to be telecommunications services and imposed the network neutrality rules discussed in Section 5.10.11 below.34 Both decisions were upheld on appeal in 2016.35 The reclassification of broadband services as telecommunications services meant that broadband providers were common carriers and were regulated in accordance with Title II of the 1934 Act. In addition to the network neutrality rules, broadband providers were required to comply with obligations relating to customer privacy,36 disability access, and access to poles, ducts, conduits and rights of way. However, the FCC elected to forbear from many Title II obligations, including tariffing and interconnection, and did not require broadband providers to pay universal service contributions.37 Since Ajit Pai, who was a dissenting commissioner in the FCC’s 2015 Open Internet Order, was appointed by President Donald Trump as the new chair of the FCC in January 2017, the FCC’s approach to the regulation of broadband services has radically changed. On 23 May 2017, the FCC issued a Notice of Proposed Rulemaking (NPRM) in which it proposed to reclassify all broadband services (fixed and mobile) as information services;38 and on 14 December 2017, a majority of the Commission consisting of the FCC’s three Republican members voted in favour of the proposal. The text of the Declaratory Ruling, Report and Order, and Order that the FCC adopted was released on 4 January 2018.39 Its content closely followed that of the preliminary draft the Commission had released before the vote, and pointed to new legal analysis and reduced investment by ISPs in network infrastructure following the adoption of the 2015 Open Internet Order as important factors supporting the decision. Even though broadband services will no longer

34   Protecting and Promoting the Open Internet, Report and Order on Remand, Declaratory Ruling, and Order, GN Docket No 14-​2 8, FCC No 15-​2 4, 30 FCC Rcd 5601 (2015). 35   USTA v FCC, 825 F 3d 674 (DC Cir 2016). En banc review by the DC Circuit Court of Appeals of its 2016 decision was denied on 1 May 2017. See USTA v FCC and USA, No 15-​1063 (DC Cir 1 May 2017). 36 37   See further Section 5.13.5.   See further Section 5.11.3. 38   Restoring Internet Freedom, Notice of Proposed Rulemaking, WC Docket No 17-​108, FCC No 17-​6 0, 32 FCC Rcd 4434 (2017). 39   Restoring Internet Freedom, Declaratory Ruling, Report and Order, and Order, WC Docket No 17-​108, FCC No 17-​166, 33 FCC Rcd 311 (2018).

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be treated as telecommunications services, providers of broadband services will have to comply with a transparency rule that requires them to disclose accurate information about their network management practices, including blocking, ‘throttling’, paid prioritization, and affiliated prioritization. In addition, the FTC will regulate the privacy of broadband customers (see further in Section 5.13.5). Undoubtedly, the Declaratory Ruling, Report and Order, and Order will be subject to legal challenge. More than 22 million submissions were made in response to the NPRM. Most of these submissions were brief comments that expressed a particular point of view as opposed to a detailed legal analysis, with many calling for the retention of the classification of broadband services as telecommunications services and the more stringent regulatory obligations of the 2015 Open Internet Order. Since the FCC first started classifying broadband services, entrants other than traditional common carriers have established their role in the broadband market. Cable operators, which began upgrading their systems in the mid-​1990s at an estimated cost of US$172 billion, are now the market leaders in the delivery of fixed broadband services. They hold the majority of the fixed broadband market, followed by telephone companies that provide residential digital subscriber line (DSL) services and fibre-​to-​the-​home applications (such as Verizon’s FiOS and AT&T’s U-​verse). Cable operators have been more successful at increasing broadband speeds to meet consumer demand than telephone providers, who face technological limits with DSL technology and who have been reluctant to incur the capital expense of widespread fibre deployments. In 2015, some 58 per cent of all residential households with broadband service used cable modems, while 22 per cent connected to the internet via DSL and 10 per cent employed fibre. Other competitors, including satellite broadband, fixed wireless, and broadband over power line providers, served the remaining premises. To date, satellite has only been able to obtain a limited share of the fixed broadband market. Until satellite providers can overcome high system costs, limited bandwidth and latency issues, satellite broadband is likely to remain attractive only to those consumers who have no terrestrial service option. Over the last decade, the demand for mobile broadband services provided by cellular providers has also grown at a phenomenal rate. In 2015, there were 253  million mobile internet connections. Mobile broadband services have not been considered substitutes for fixed broadband services for several reasons, including that they have not been able to consistently achieve the same speeds as fixed broadband services and that handheld devices cannot support some of the most data intensive applications used with fixed broadband services. However, the advent of faster mobile connections could diminish many of the traditional reasons for this distinction. In 2017, as part of its statutory requirement to evaluate annually whether advanced telecommunications capability is being deployed in

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a reasonable and timely fashion,40 the FCC observed that Americans are increasingly using mobile broadband services to achieve advanced telecommunications capability. Notably, it asked whether it should evaluate deployment based on the presence of both fixed and mobile services. Whether and when consumers or policy makers might begin viewing fixed and mobile broadband as substitutes for each other was unclear at the time this chapter was written. 5.2.5.3  Network neutrality 41 One of the principal reasons for the FCC’s decision to classify broadband services as information services early on was its fear that Title II regulation or any other form of direct regulation would hinder their deployment. However, the FCC was also concerned that the underlying technology allowed providers of these services to discriminate against data packets containing particular types of data or sent from application providers which may be competing directly with broadband providers or their affiliates, either by blocking access to them or giving them lower network priority. In 2005, it responded to these concerns by adopting a policy of ‘net neutrality’.42 The policy set forth four broad principles, declaring that consumers were, among other things, entitled to access content, run applications, and use services and devices of their choice, subject to law enforcement and technical network concerns. The FCC promoted the policy in a number of ways. It accepted or required undertakings to comply with the policy before approving the mergers of SBC/​ AT&T, Verizon/​MCI, and AT&T/​Bell South. Moreover, all licences, awarded in 2008, authorizing use of C block spectrum in the 700 MHz band, technically suitable for wireless broadband services, included an obligation to treat lawful content, applications, and services in a non-​d iscriminatory manner. Similarly, the FCC sought to enforce the terms of the policy. In 2005, it entered into a consent decree43 with a telephone company providing DSL services, following complaints from a voice over internet protocol (VoIP) provider, that it was preventing its customers from using VoIP services. On 1 August 2008, the FCC found that Comcast, then the second largest provider of broadband internet access in the United States, breached the policy by deliberately interfering with the ability of Comcast

40   Inquiry Concerning Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, Notice of Inquiry, GN Docket No 17-​199, FCC No 17-​109, 32 FCC Rcd 7029 (2017). 41   See further Chapter 15, at Section 15.8. 42   Appropriate Framework for Broadband Access to the Internet over Wireline Facilities, Policy Statement, CC Docket Nos 02–​33, 01–​337, 95–​20, 98–​10, GN Docket No 00–​185, CS Docket 02–​52, FCC No 05–​151, 20 FCC Rcd 14986 (2005). 43   Madison River Communications, Order, File No EB-​05–​1H-​0110, 20 FCC Rcd 4295 (2005).

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customers to use BitTorrent and other peer-​to-​peer applications which allow the sharing of video and other large data files.44 As discussed in Section 5.2.5.2, the FCC’s Comcast decision was overturned by the Court of Appeals. However, prior to the decision of the court, the FCC signalled its intention to codify the net neutrality policy. In December 2010, the FCC adopted three rules implementing and expanding upon the principles of the policy. The ‘transparency rule’ applied to all providers of ‘mass market’ broadband internet access services (other than dial-​up), regardless of the type of network technology used. It required relevant providers to publicly disclose accurate information about their network management practices and the performance and commercial terms of their broadband internet access services. The ‘no blocking rule’ stipulated that fixed and mobile broadband providers could not prevent customers from accessing, amongst other things, lawful content, applications and services, subject to ‘reasonable network management’. The ‘no unreasonable discrimination’ rule prohibited fixed broadband providers from unreasonably discriminating in the transmission of lawful network traffic over a consumer’s broadband internet access service. These provisions were overturned by the Court of Appeal in Verizon v FCC, 740 F 3d 623, in 2014, although the FCC adopted similar provisions in 2015.45 As discussed in Section 5.2.5.2, the FCC concluded in December 2017 that the network neutrality framework adopted in 2015 was too onerous because it hindered ISP investment in broadband infrastructure. It therefore decided to abolish the no blocking rule and the ‘no-​u nreasonable interference/​d isadvantage rule’ (the Commission’s revised ‘no unreasonable discrimination’ rule adopted in 2015). It decided that a revised transparency rule that stipulates broadband providers must also disclose information about their blocking, throttling and paid and affiliated prioritization practices to their customers, in conjunction with anti-​ trust and general consumer protection legislation, was better tailored to address identified regulatory harms. Determining the appropriate regulatory framework for broadband services has been and remains one of the most controversial areas of US telecommunications regulation. The issue has generated a level of public awareness and interest that is uncharacteristic of most FCC regulatory matters. Moreover, participants in the debate continue to be split along party political lines. The FCC commissioners appointed by President Obama who were members of the Democratic Party supported more robust network neutrality rules. The current chair of the FCC

44  Formal Complaint of Free Press and Public Knowledge Against Comcast Corporation for Secretly Degrading Peer-​to-​Peer Applications, Memorandum Opinion and Order, File No EB-​0 8–​1H-​1518, WC Docket No 07–​52, FCC No 08–​183, 23 FCC Rcd 13028 (2008). 45   See n 34.

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appointed by President Trump, Ajit Pai, and Commissioners Michael O’Rielly and Brendan Carr, also Republicans, staunchly oppose them, preferring less intervention in the market to address regulatory harms. 5.2.5.4  VoIP and other IP-​enabled services Early on, certain states asserted they had jurisdiction to regulate services enabling users to make or receive voice calls using IP technology. However, in 2004, the FCC concluded that it had exclusive jurisdiction over IP-​enabled services.46 Despite its assertion of jurisdiction, the FCC has thus far declined to determine if VoIP should be classified as a ‘telecommunications service’ or an ‘information service’. Instead, it has relied on its general ancillary powers under Title I of the 1934 Act and has, in a rather piecemeal fashion, imposed a series of obligations designed to promote public safety or advance the goal of universal service on ‘interconnected VoIP services’.47 Many of these obligations are covered elsewhere in this chapter, and include compliance with the FCC’s rules governing customer proprietary information48 and local number portability,49 and duties to enable users to contact emergency services,50 to ensure access by those with disabilities,51 and to contribute to the universal service fund.52 In 2012, the FCC required interconnected VoIP service providers to report network outages to the Commission.53 The FCC first began consideration of the complex legal and regulatory issues raised by IP-​enabled networks and services in February 2004, but the development of a general framework for all IP-​enabled networks and services has been

46   Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an Order of the Minnesota Public Utilities Commission, Memorandum Opinion and Order, WC Docket No 03–​211, FCC No 04–​267, 19 FCC Rcd 22404 (2004). 47   These are services that satisfy four criteria: first, they enable ‘real-​t ime, two-​w ay voice communications’; second, they require ‘a broadband connection from the user’s location’; third, they require ‘Internet protocol-​ compatible customer premises equipment’; fourth, they allow ‘users generally to receive calls that originate on the public switched telephone network and to terminate calls to the public switched telephone network’. 48  Implementation of the Telecommunications Act of 1996, Report and Order and Further Notice of Proposed Rulemaking, CC Docket No 96–​115, WC Docket No 04–​36, FCC No 07–​22, 22 FCC Rcd 6927 (2007). 49  Telephone Number Requirements for IP-​E nabled Service Providers, Report and Order, Declaratory Ruling, Order on Remand, and Notice of Proposed Rulemaking, WC Docket No 07–​2 43, FCC No 07–​188, 22 FCC Rcd 19531 (2007). 50   IP-​E nabled Services, First Report and Order and Notice of Proposed Rulemaking, WC Docket Nos 04–​36, 05–​196, FCC No 05–​116, 20 FCC Rcd 10245 (2005). 51   IP-​E nabled Services, Report and Order, WC Docket No 04–​36, FCC No 07–​110, 22 FCC Rcd 11275 (2007). 52   Universal Service Contribution Fund, Report and Order and Notice of Proposed Rulemaking, WC Docket Nos 06–​122, 04–​36, CC Docket Nos 96–​45, 98–​171, 90–​571, 92–​2 37, 99–​200, 95–​116, 98–​170, NSD File No L–​0 0–​ 72, FCC No 06–​94, 21 FCC Rcd 7518 (2006). 53  The Proposed Extension of Part  4 of the Commission’s Rules Regarding Outage Reporting to Interconnected Voice Over Internet Protocol Service Providers and Broadband Internet Service Providers, PS Docket No 11-​82, FCC No 12-​22, 27 FCC Rcd 2650 (2012).

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slow to emerge. In recent years, however, the FCC has adopted a number of important regulatory measures to support the deployment of and transition to IP-​ enabled networks and services. In 2011, the Commission developed transitional intercarrier compensation arrangements for VoIP-​PSTN traffic, which it has since clarified on several occasions (see Section 5.10.4.1). In 2015, it allowed interconnected VoIP providers to directly obtain telephone numbers from American numbering administrators (see Section 5.10.3). In addition, there is an ongoing inquiry into whether telephone numbers should no longer be associated with the geographic location of a user.54

5.3  OV ERV IE W OF K E Y US R E GUL ATORY B ODIE S A ND PRO C EDUR A L PR INC IPL E S Telecommunications regulation occurs at both state and federal levels in the US and the number and different types of regulatory bodies reflect the diversity of the fifty states and the federal government, as well as the involvement of the executive and legislative branches of government in this area. At the federal level the FCC is principally responsible for all interstate and foreign telecommunications issues, and, following the passage of the Telecommunications Act of 1996, for certain intrastate issues. It is the most well-​k nown US regulatory body. The FCC’s jurisdiction covers numerous sectors, including fixed, mobile, satellite, and broadcasting, as well as licensing, enforcement, and consumer outreach functions. The FCC’s broad authority is similar in size and scope to that afforded to the UK’s Office of Communications. The work of the FCC is complemented by that of other federal government entities, most notably the National Telecommunications and Information Administration of the Department of Commerce, the Department of Justice, and the Federal Trade Commission. Unlike other countries, the US has never attempted to combine telecommunications service and regulation into a single state-​r un postal telegraph and telephone entity. Telephony and radio broadcasting have always been run by private-​sector entities, subject to separate government regulation. At the state level, each of the fifty states and the District of Columbia has a public utility or public commission responsible for all telecommunications issues, including policy, licensing, and enforcement, arising within its jurisdiction. Having said that, state jurisdiction in certain areas has been reduced by the Telecommunications Act of 1996 and the use of the

54   Numbering Policies for Modern Communications, Notice of Proposed Rulemaking, Order and Notice of Inquiry, WC Docket Nos 13-​97, 04-​36, 07-​2 43, 10-​9 0; CC Docket Nos 95-​116, 01-​92, 99-​200, FCC No 13-​51, 28 FCC Rcd 5842 (2013).

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federal pre-​emption doctrine (see Section 5.7). The work of the state regulators is also coordinated by the National Association of Regulatory Utility Commissioners (commonly known by its acronym, NARUC). The FCC is significant in that it wields a significant amount of policy-​making authority. It has expansive jurisdiction over telecommunications issues, despite certain statutory limitations contained in the Communications Act of 1934. It exercises its authority via its rule-​making and order functions, but like all federal government agencies, remains subject to certain restrictions and key procedural principles contained in the Administrative Procedure Act.55

5.4  FEDER A L B ODIE S 5.4.1  The Federal Communications Commission 5.4.1.1  Role and jurisdiction The FCC has full jurisdiction over all issues surrounding interstate and foreign communications which originate and/​or are received in the US, including all aspects of fixed, mobile, cable, satellite, broadcasting, and commercial radio spectrum, and, in particular, tariffs and the transfer of 1934 Act licences in the context of mergers and acquisitions of authorized communications providers. The FCC’s jurisdiction covers both service providers and facilities-​based operators. Within its jurisdiction, the FCC has broad authority to ensure compliance with federal telecommunications law, subject to the requirement that any action taken is ‘consistent with the public interest, convenience, and necessity’, and is specifically granted the power to ‘perform any and all actions, make such rules and regulations, and issue such orders . . . as may be necessary in the execution of its functions’ (referred to as ancillary jurisdiction). It is important to note that the regulatory power is conferred to the FCC as a whole rather than to an individual. 5.4.1.2 Commissioners The FCC currently consists of five Commissioners, each of whom is appointed by the President and confirmed by the US Senate. Commissioners serve five-​year terms, and Commissioners may be reappointed. Commissioners who are appointed to fill vacant positions must serve the remaining term (as opposed to starting a five-​year term), and Commissioners who are not reappointed are limited in how long they may remain in office even if a replacement has yet to be confirmed. Accordingly, the Commission can and often will operate with fewer than five Commissioners if

55

  Administrative Procedure Act, ch 324, 60 Stat 237 (1946) (codified as amended at 5 USC).

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there are delays in the nomination and confirmation process. All Commissioners must be US citizens, and a maximum of three Commissioners may have the same political party affiliation. On a practical level, the Commissioners are responsible for formulating key policy initiatives, implementing new legislation, and adopting agency rules and regulations. However, the Commissioners delegate the day-​to-​ day running of the FCC to its bureaux and offices. One of the five Commissioners is designated by the President to serve as its chair, whose general duty is to coordinate the ‘prompt and efficient disposition of all matters within the jurisdiction of the Commission’. In practice, the chair wields considerable power by setting the agency’s agenda and directing the work of the Commission’s bureaux. While the chair serves as the public face of the agency, all Commissioners are entitled to present their own non-​binding views on any particular issue. 5.4.1.3  Bureaux and offices The 1934 Act confers on the FCC the general power to organize its staff in such integrated bureaux and/​or other divisional organizations as it deems necessary. It may also (in the interests of efficiency and cost-​effectiveness) delegate its powers to its employees. The Commissioners may not delegate certain functions, such as evaluating the lawfulness of tariffs and the resolution of complaints, but, effectively, the bureaux share with the Commissioners the duties of conducting the FCC’s business. The FCC is staffed by approximately 1,700 employees (down from a high of more than 2,100 in 1995), the vast majority of whom work in the FCC’s Washington, DC headquarters. The FCC also operates a technical laboratory in Maryland, a licensing office in Pennsylvania, and has a small network of enforcement field offices throughout the US. As of 2017, the FCC is organized into seven operating bureaux, which collectively handle the majority of the FCC’s workload. The FCC continues to maintain an organizational structure that is generally based on the different types of services the FCC regulates. For example, the Wireline Competition Bureau is concerned primarily with ‘traditional’ fixed and radio common carriers. It also oversees programmes that promote access to broadband and voice services (including rural and health care support mechanisms), as well as matters relating to access to poles and rights of way. The Wireless Telecommunications Bureau regulates all aspects of mobile communications, including cellular services, specialized mobile radio, microwave radio, and amateur and other personal radio services. It has developed an expertise in auction design that has been used beyond traditional mobile service licensing. Other major bureaux include: the Media Bureau, which is charged with regulating AM and FM radio stations, television broadcast stations, multichannel video programming distributors, such as cable television entities; the

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International Bureau, which is responsible for the FCC’s international telecommunications and satellite programmes, implements international treaties concerning telecommunications, and licenses cable landings as well as satellite and earth stations; and the Public Safety and Homeland Security Bureau, which was created in 2006 to focus on public safety, network security and reliability, and anti-​ terrorism interests. Two additional bureaux—​the Enforcement and Consumer Affairs bureaux—​address matters that arise across different communications services (such as consumer complaints regarding television programming content and cellular service bills). In addition to the work of its bureaux, the FCC is supported by eight offices. These offices, among other things, represent its legal interests, provide technology and economic advice, and offer general administrative support. Individual offices play a significant role in the FCC’s policy-​making activities. For example, the Office of General Counsel is involved in the review of all matters regarding the approval of mergers and acquisitions by FCC-​regulated companies, and the Office of Engineering and Technology supports those rule-​making proceedings that relate to the allocation of the electromagnetic spectrum to the different types of radio services (such as broadcasting, satellite, fixed, and mobile terrestrial operations, etc). In 2018, the FCC adopted an order creating a new Office of Economics and Analytics.56 This new office is intended to more thoroughly integrate economic analysis and data collection into the FCC’s decision-​making processes. It will house the vast majority of the Commission’s economists, who are presently deployed throughout the FCC’s organization, and will assume some functions, such as auction design and implementation, that are currently managed by other bureaux and offices. The majority of the FCC’s licensing and regulatory work continues to be conducted by service-​specific bureaux even though many communications policy issues now affect communications services overseen by more than one bureau. To overcome this difficulty, one bureau (or office, when appropriate) will take the lead role and consult with other bureaux and offices when formulating proposals and drafting documents for Commission vote. 5.4.1.4  Enforcement powers Under the Communications Act of 1934, the FCC enjoys broad and powerful enforcement mechanisms. The FCC may enforce the provisions of the Act directly, or request the US federal district courts to initiate enforcement proceedings. Breach of the 1934 Act’s provisions may result in monetary fines, revocation of the

  Establishment of the Office of Economics and Analytics, Order, MD Docket No 18-​3, FCC No 18-​7 (2018).

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underlying authorization, or obligations to take the necessary steps to remedy the breach. The FCC and the district courts may also require authorized carriers to produce documentation relevant to investigations upon request.

5.4.2  National Telecommunications and Information Administration The National Telecommunications and Information Administration (NTIA) was created by executive order of the President in 1978 and by statute in 1993 (Executive Order 12046 and statute codified at 47 USC §901 et seq). It is an agency of the Department of Commerce. While the FCC is generally well known to the American public, the NTIA has traditionally operated with little public recognition. The NTIA advises the President on telecommunications policy and negotiates for greater market access in foreign countries for US companies and administers grant programmes related to telecommunications. Additionally, the NTIA administers spectrum for exclusive government use such as those radio frequencies used by the armed services (in contrast to the ‘public’ spectrum administered by the FCC). Because the NTIA and FCC together control use of all electromagnetic spectrum in the US, both agencies have a strong incentive to work cooperatively to determine the most efficient way to allocate spectrum resources and to resolve competing proposals for its use. The NTIA and FCC divide the spectrum into that used for exclusive federal use, exclusive non-​federal use, and shared use. The majority of spectrum is classified as shared use, and there are procedures in place by which the NTIA and FCC coordinate both individual authorizations within these frequencies and broader changes in overall band use policies. Also, the FCC and the NTIA can agree to redesignate spectrum from an existing type of use to another, and to change the rights of authorized users within particular bands. In recent years, the NTIA has worked to develop long-​range national spectrum planning policies that account for the needs of federal users—​such as the military—​while identifying spectrum that can be transferred to or shared with commercial users who seek access to the large quantities of federal-​use spectrum under the NTIA’s jurisdiction. Thus, while the NTIA has no official power over non-​governmental interests, its decisions can have a substantial effect on the interests of private entities.

5.4.3  Other federal agencies Federal anti-​trust law has played a key role in the regulation of telephony and to a lesser extent in other areas such as broadcasting and television. The primary US anti-​trust laws are the Federal Trade Commission Act, 57 Clayton 57   Federal Trade Commission Act, ch 311, 38 Stat 711 (26 September 1914) (codified as amended at 15 USC §§41–​58).

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Act, 58 and the Sherman Anti-​t rust Act. All of the legislation is enforced by the Federal Trade Commission’s Bureau of Competition and the Antitrust Division of the Department of Justice (DoJ). Technically, the jurisdiction of these two bodies overlaps, but the agencies have agreed that the DoJ has primary responsibility for the enforcement of US anti-​trust law in the telecommunications sector. Both the DoJ and the Federal Trade Commission (FTC) have also been heavily involved in assessing the competitive effects of key industry mergers. The FTC has also traditionally worked to promote consumer rights. For example, it manages the Do-​Not-​Call Registry, which places limitations on telemarketing phone calls, and investigates complaints against businesses that violate the rules, even though such jurisdiction is shared with the FCC and state and local authorities. It has also used its authority under §5 of the Federal Trade Commission Act to become the most active US agency in matters of consumer and online privacy. It is worth noting that the FTC lacks the jurisdiction to take action against unfair or deceptive acts or practices and unfair methods of competition by common carriers. This particular power, which is reserved to the FCC, took on added relevance within the context of net neutrality when the FCC’s reclassification of fixed and mobile internet providers as common carriers had the side effect of reducing the scope of the FTC’s jurisdiction for the period of time when the 2015 network neutrality decision was in effect. Moreover, the line between the FTC’s and the FCC’s authority is not always clear. Recent litigation challenged the assumption that the FTC could regulate non-​communication services that are provided by telecommunication companies. The US Court of Appeals for the Ninth Circuit initially found otherwise in 2016, but the full court subsequently overturned that decision after rehearing the case.59 The Department of Homeland Security (DHS) was created in March 2003 in the wake of the September 2001 terrorist attacks against the US, and integrated all or part of twenty-​t wo different federal departments and agencies into a single cabinet-​level agency. DHS works with the FCC on matters relating to public safety and security and, in conjunction with the DoJ and Federal Bureau of Investigation, has taken an active role in matters relating to cybersecurity. Other federal entities can become involved in telecommunications matters. The US Department of State coordinates treaty negotiations and preparation for international radiocommunication conferences, in coordination with the FCC’s International Bureau. Both the US Patent and Trademark Office and the Copyright

58   Clayton Act, ch 323, 38 Stat 730 (15 October 1914) (codified as amended at 15 USC §§12–​278 and 29 USC §§52, 53). 59   FTC v AT&T Mobility, 835 F 3d 993 (9th Cir 2016); 883 F 3d 848 (9th Cir 2018) (en banc).

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Office, part of the Library of Congress, are involved in issues relating to intellectual property and content rights. New technologies increasingly require the FCC to work with different specialized federal agencies. For example, the Department of Transportation has been involved in the development of policies related to unmanned aeronautical vehicles (‘UAVs’ or ‘drones’) and autonomous automobiles, while the Food and Drug Administration has an important role in the regulation of medical devices that incorporate radio transmitters.

5.4.4 Courts The passage and implementation of the Telecommunications Act of 1996 triggered a flurry of legal challenges to the federal courts (and the DC Circuit Court in particular), resulting in several key decisions regarding federal pre-​emption and unbundled network elements. Judicial intervention is not new in the telecommunications area, however. Where judicial authority has been exercised in the past, the courts have tended to adopt a more pro-​competitive approach than the FCC.

5.4.5  Congress and the President The FCC is an ‘independent’ agency established by Congress under the Communications Act of 1934. However, both Congress and the President exercise considerable influence over the agency. The Congress consists of the Senate and the House of Representatives. The Senate is composed of 100 members. Two are elected from each of the fifty states. Each member (‘Senator’) serves a term of six years. The House of Representatives, on the other hand, is composed of 435 representatives from all of the fifty states. The number of representatives for each state is determined by the population that resides there. Each state is entitled to at least one representative, who serves a term of two years. Broadly speaking, any proposed legislation must be approved by a majority of members in both the Senate and the House of Representatives before it is passed to the President, who will decide whether to sign the proposed legislation into law. The FCC’s budget is authorized by Congress, although nearly all of this amount (approximately US $388  million in 2017)  comes directly from regulatory fees and other FCC-​collected funds, such as a portion of proceeds from the auction of electromagnetic spectrum. The FCC must account for its annual spending and file an annual report to Congress containing information to facilitate Congressional review of its performance. Much of the FCC’s work is conducted under a broad legislative mandate by which the FCC has wide discretion to establish specific policies. Congress can also pass legislation directing the FCC to implement specific policy objectives,

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such as to auction a designated frequency block by a set date, or prohibiting the FCC from spending money to implement or enforce policies of which members of Congress disapprove. Congress is heavily lobbied by industry participants and consumer advocate groups, and the telecommunications sector is often listed among the top industries for both political lobbying activity and monetary contributions to Congressional interests. Members of Congress are not hesitant to criticize the FCC’s actions publicly, call Commissioners to testify before Congressional committees, and threaten to enact legislation to modify or reform Commission procedures. The President (and his Administration) also exert influence over the FCC. The President appoints FCC Commissioners, the majority of whom may represent his political party, subject to approval by the Senate. The President also names the FCC’s chair. Because the chair has the power to set the FCC’s agenda and oversees the workings of the staff, the President can utilize selection of the chair as a means to influence the tone and direction that a particular Commission is likely to take on matters of interest to the Administration and the political party it represents—​a power recently and dramatically illustrated by the Commission’s new approach to network neutrality, that reflects the views of the Trump Administration. Also, while independent from the President, the chair can and often will maintain contact with members of the Administration.

5.5  S TATE B ODIE S 5.5.1  Public Utility Commissions The 1934 Act conferred extensive interstate jurisdiction on the FCC, while at the same time explicitly reserving jurisdiction over intrastate communication services to the fifty states as well as the District of Columbia. The state Public Utility Commissions (PUCs) are responsible for telecommunications regulation at this level. State jurisdiction over telecommunications has, in some areas, been reduced by the Telecommunications Act of 1996 and other legislation and the use of the federal pre-​emption doctrine by the FCC (see Section 5.7). The PUCs approve tariffs and interconnection rates for intrastate telephony, handle customer complaints, and issue intrastate licences. In addition to regulating telecommunications, PUCs oversee all other public utility functions. The structure and size of the PUCs and each of their telecommunications policies differ (significantly in some cases) from state to state, but generally all PUCs are state-​created agencies with a division specializing in telecommunications regulation. Historically, some PUCs, in states such as Illinois,

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New York, and California, embraced competition within the local exchange markets; others thwarted competitive efforts by the FCC. Although the Telecommunications Act of 1996 extends the FCC’s authority to cover local competition, state regulators retain some jurisdiction over telephony issues. Their jurisdiction is limited, however, in many cases to ensuring compliance with federal regulations rather than developing policy. State regulators have the right to prohibit market entry of service providers if necessary to advance or preserve universal service, public safety, and telecommunications services. However, any regulation imposed by the states must be done so on a ‘competitively neutral basis’ and be consistent with the universal service obligations set forth in §254 of the 1934 Act.

5.5.2  National Association of Regulatory Utility Commissioners In addition to the PUCs, the National Association of Regulatory Utility Commissioners (NARUC) plays a role in the development of US telecommunications policy. The NARUC is comprised of federal and state utility regulators and strives to coordinate action by state regulators and to develop cooperation between federal and state regulators. Despite these aims, in practice the NARUC represents the interests of state regulators and becomes publicly involved with issues only when consensus already exists among the PUCs. It has a standing committee on telecommunications.

5.6   PRO C EDUR A L PR INC IPL E S A ND ME C H A NISMS: THE A DMINIS TR ATIV E PRO C EDUR E AC T A ND A DMINIS TR ATIV E L AW PR INC IPL E S Because the FCC is neither a judicial nor a legislative body, it operates under the general principles of administrative law. Administrative agencies such as the FCC are considered to have regulatory expertise in discrete subject areas. Under a theory of delegation, agencies exercise broad discretion to interpret and apply the laws passed by Congress and use their authority to enact their own specific rules and regulations that are legally enforceable. For example, §303(a) of the 1934 Act gives the FCC authority to classify radio stations, prescribe the nature of service to be provided in each class, and to determine the location and frequency bands of such stations. The FCC has used this broad authority to establish different types of radio services, such as the Microwave Radio Service and Television Broadcast Stations, and to establish rules and regulations regarding their operation. Each agency’s rules are compiled in the Code of Federal Regulations (CFR). The FCC’s

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rules are contained in Volume 47. The US government maintains an electronic version of the CFR at www.ecfr.gov that is updated each business day. It is worth remembering that the print edition of the CFR, published annually, may fail to include an agency’s most recently adopted rules or will list rules that have been rescinded or modified.

5.6.1  Administrative Procedure Act—​rulemaking Although administrative agencies such as the FCC have wide discretion to interpret and apply laws, they must act within established procedural guidelines. The Administrative Procedure Act sets forth the basic ‘notice and comment’ framework that the FCC uses in promulgating rules, and ensures both publication of proposed rules and the opportunity for the public to comment before a rule is adopted. Either on its own motion, or in response to a ‘Petition for Rulemaking’, the FCC typically issues a ‘Notice of Proposed Rulemaking’ that announces proposed rules, describes the legislative authority on which the rules are based, and provides the public with an opportunity to file comments addressing the proposal. The FCC sets a specific pleading cycle for each proceeding. It begins when the Notice (or a summary thereof) is published in the Federal Register, which is the US government’s daily compilation of actions taken by the FCC and other agencies. Typical cycles allow from thirty to ninety days for interested parties to file comments and an additional fifteen to forty-​five days for reply comments. The Commission may extend the filing dates, if circumstances warrant. The FCC may first issue a ‘Notice of Inquiry’ that contains no firm proposals to create public discussion of a subject that can aid the FCC in developing a proposed policy. A Notice of Inquiry is sometimes employed when the FCC seeks to introduce new and potentially controversial concepts that may or may not generate enough interest or consensus to support incorporation into the FCC’s rules. In practice, this step is often omitted. As a consequence, Notices of Proposed Rulemaking issued by the FCC can read like broad inquiries into a subject area. These Notices ask many questions and propose different possible courses of action. Unlike with a Notice of Inquiry, however, the FCC may proceed to adopt binding rules once a Notice of Proposed Rulemaking has been issued. For the FCC to adopt binding rules, it must issue a decisional document called a ‘Report and Order’. The Report and Order must take into account the record generated by the Notice of Proposed Rulemaking and the FCC’s original proposals. A  large body of case law exists that interprets how closely an administrative agency’s action must correspond to its proposals or the comments that parties have filed. Although considerable leeway exists for an agency to adopt final rules that differ from those that were proposed, the agency’s action must be ‘based on

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the record’ of the proceeding. In addition, while the agency does not have to adopt proposals submitted by commenting parties, it cannot ignore them altogether. It must acknowledge those comments and explain why it has not adopted the parties’ proposals. Rules adopted in a Report and Order typically do not take effect immediately upon release of the Commission’s decision. After a Report and Order is adopted, a summary of the rules it contains and the date, designated by Commission, on which the rules will become effective have to be published in the Federal Register. Because it can take weeks (and sometimes even months) for this information to be published, a significant amount of time can elapse between the date the Commission makes its decision and when the rules it adopts come into force. In especially complex proceedings, the FCC may issue a document adopting rules while simultaneously proposing additional rules. Thus, a docket in a proceeding may remain ‘open’ for years and the FCC may issue documents with complex titles such as ‘Second Report and Order and Third Notice of Proposed Rulemaking’. The majority of Commissioners’ votes is needed to adopt an item, and it is typical for individual Commissioners to attach statements explaining their decisions. Items require an affirmative vote of the majority of the sitting Commissioners to be adopted. Such decisions are made at the regular monthly meeting of the Commission that is open to the public or through an internal circulation process. The FCC publishes announcements of upcoming meetings and associated agenda items, as well as a list of draft rulemaking documents that are ‘on circulation’ awaiting votes.

5.6.2  Issuance of orders—​adjudicatory action Much of the FCC’s day-​to-​day work involves the issuance of adjudicatory orders addressing individual applications and petitions brought under the existing rules. Although these orders generally relate to a discrete matter, they are significant in that they provide insight as to how the FCC interprets its own rules and may be cited as precedent in subsequent actions before the FCC. Many of these orders are issued under delegated authority, either by a bureau chief or deputy, or by a division chief, although some orders are adopted by the FCC as a whole. FCC staff may also resolve matters by issuing a non-​published letter, although this option is often used for routine processing matters, such as the dismissal of a defective application.

5.6.3  Review of FCC action Review of FCC action is generally accomplished by the filing of a ‘Petition for Reconsideration’, or, if the action was taken under delegated authority (such as by

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a chief of a bureau or office), by an ‘Application for Review’. A party must file its application or petition within a set time period (generally thirty days) to preserve its right of review. In addition, the FCC may set aside an action on its own motion within thirty days. The Commission will respond to an application or petition by issuing a ‘Memorandum Opinion and Order’. If the Commission makes new determinations and also modifies, clarifies, or upholds prior decisions in a particular proceeding, it may combine a further ‘Report and Order’ and a ‘Memorandum Opinion and Order’ into one document. The document will, however, always list the relevant docket and include both titles. Both the Administrative Procedure Act and the FCC’s rules contain provisions for formal hearings. However, the use of these procedures has become uncommon, most likely because the decision of an administrative law judge is still subject to review by the full Commission. Parties typically choose to bring matters to the Commissioners directly by filing a petition for reconsideration or they will appeal directly to federal courts, including the DC Circuit Court. A party may seek court review of final FCC actions. In its review, a court will consider whether the FCC acted within its powers, both within the broad powers of the Communications Act of 1934 and under the specific legislation upon which the FCC based its rule or action. In addition, a court may, under the Administrative Procedure Act, set aside the FCC’s decision if it is arbitrary, capricious, an abuse of discretion, or unsupported by evidence in the record. Courts often invoke the Administrative Procedure Act when the FCC has not explained the basis for its decision in the written order it adopted. In many cases, the court will send the matter back to the FCC (remand), with instructions to adequately explain all or a portion of the decision.

5.7  THE PR E - ​E MP TION D O C TR INE A ND F CC JUR ISDIC TION The 1934 Act created a two-​t iered system of regulators: (i) the FCC, which is responsible for regulating interstate and foreign commerce in wire and radio communications; and (ii) state PUCs, with implicitly reserved powers to regulate intrastate communications. Under the Tenth Amendment of the US Constitution, all powers not expressly given to the federal government are reserved to the states. The creation of dual regulators reflected the need to balance the interests of state and federal governments in the US federal system and, in theory, states retain complete control over common carriers providing telecommunication services within their borders. The actual power states have to regulate intrastate commerce, however, has been reduced as a result of expansive interpretations of the Commerce Clause

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by the Supreme Court and the use of the pre-​emption doctrine based on the Supremacy Clause. The Commerce Clause of the US Constitution gives the federal government the power to regulate commerce ‘among the several states’ and with foreign nations. The Supremacy Clause of the US Constitution enables Congress to pass law overriding state legislation. It also enables federal agencies, acting within the scope of their statutory authority, to pre-​empt state law when, for example, state law frustrates or is in conflict with the federal purpose of legislation. In the telecommunications sector, the Supreme Court has found that many seemingly intrastate activities directly and/​or indirectly affect interstate commerce and thus fall within the ambit of the FCC. The FCC began to rely on the pre-​emption doctrine in the 1960s, when it sought to stimulate competition in the intrastate telephony market and tension between state regulators arose over the funding of universal service. North Carolina Utilities Commission v FCC, 537 F 2d 787 (4th Cir 1976), cert denied, 429 US 1027 (1976) (NCUC I) was the first in a series of cases that enlarged the jurisdiction of the FCC to include some power over intrastate communications via reliance on the pre-​emption doctrine. NCUC I arose because several state regulators imposed conditions on the interconnection of non-​AT&T telephone hardware to the local system in an effort to limit the scope of the FCC’s Carterfone decision (The Use of the Carterfone Device in Message Toll Service v AT&T, 13 FCC 2d 420 (1968)), which permitted apparatus conforming to AT&T’s system specifications to be connected to the phone network. The Fourth Circuit reasoned that because the same handsets were used by customers to place interstate and intrastate calls, the state and federal regulations were incompatible with each other and that state regulation had to give way to federal law. The case is significant as it attempted to define the ambiguous terms ‘interstate’ and ‘intrastate’ found in the 1934 Act. The court held that §2(b) of the 1934 Act only limits the FCC from regulating matters that ‘in their nature and effect are separable from and do not substantially affect the conduct or development of interstate communications’ (NCUC I at 793). Under this two-​prong test, state regulators retain jurisdiction over issues that are separable from interstate communications and that have no impact on interstate telecommunications. If separation of interstate and intrastate communications is impossible, the FCC has or acquires jurisdiction. The Supreme Court modified the NCUC I test in Louisiana Pub Serv Commission v FCC, 476 US 355, in 1986. In Louisiana, the court held that the FCC has jurisdiction only if the FCC can demonstrate that interstate and intrastate issues are inseparable and that the exercise of jurisdiction by the state frustrates the statutory authority of the FCC.

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The scope of the FCC’s jurisdiction over intrastate telephony matters was formally augmented in the Telecommunications Act of 1996. The 1996 Act required the FCC to introduce competition into the local loop. To that end, the Act expressly enables the FCC to pre-​empt any state legislation that contravenes the purposes of local competition.60 In addition, the FCC may pre-​empt any state regulation that may ‘prohibit or have the effect of prohibiting the ability of any entity to provide interstate and intrastate telecommunications service’. Attempts by the FCC to implement measures to introduce local competition were challenged by incumbent local exchange carriers (ILECs) and PUCs on the grounds that the FCC lacked the requisite authority to promulgate rules on such issues as pricing of local services and dialling parity. The Supreme Court in AT&T Corporation v Iowa Utilities Board, 525 US 366 (1999), however, affirmed that the FCC had general jurisdiction to implement the provisions of the 1996 Act, notwithstanding the provisions of the 1934 Act which reserve jurisdiction over intrastate matters to the states. More recent examples of the FCC’s reliance on the pre-​emption doctrine include its decisions concerning VoIP,61 the deployment of wireless facilities,62 and municipal broadband providers.63 In the municipal broadband providers decision, taken in 2015, the FCC attempted to pre-​empt certain state law provisions restricting the ability of municipal providers to offer cable, video, and internet services outside of their service areas by arguing that the provisions conflicted with the federal policy, set out in §706 of the 1996 Act, of ensuring ‘reasonable and timely’ deployment of broadband services. The Court of Appeals for the Sixth Circuit eventually overturned the FCC’s decision,64 holding that §706 did not contain a sufficiently clear statement of pre-​emption. However, the decision  (along with those concerning VoIP and the deployment of wireless facilities) serves to illustrate the continuing importance of the pre-​emption doctrine and the role of the courts in delineating the boundaries of federal and state jurisdiction over communications matters.

  47 USC §251(d)(3)(A)–​(C).   See n 46. The FCC’s decision was upheld in Minnesota Public Utilities Commission v FCC, 483 F 3d 570 (8th Cir 2007). 62   Acceleration of Broadband Deployment by Improving Wireless Facilities Siting Policies, Report and Order, WT Docket Nos 13-​2 38, 13-​32, WC Docket No 11-​59, FCC No 14-​153, 29 FCC Rcd 12865 (upheld in Montgomery County v FCC, 811 F 3d 121 (4th Cir 2015)). See also Section 5.10.9. 63   City of Wilson, North Carolina Petition for Preemption of North Carolina General Statutes Sections 160A-​ 340 et seq, Memorandum Opinion and Order, WC Docket Nos 14-​115, 14-​116, FCC No 15-​25, 30 FCC Rcd 2408 (2015). 64   Tennessee v FCC, 832 F 3d 597 (6th Cir 2016). 60 61

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5. 8 L IC ENSING 6 5 Subject to exemptions adopted by the FCC and limited statutory exceptions, Title II of the Communications Act of 1934 (1934 Act) requires operators and providers of interstate and overseas communications services who meet the definition of ‘common carrier’ to obtain the permission of the FCC before network operation and service provision. Common carriers must therefore ensure they hold and comply with the relevant authorization(s). Carriers that wish to use radio broadcasting, such as microwave links, must also obtain permission from the FCC to use the radio spectrum (see Section 5.8.4). If carriers wish to provide intrastate services, they must obtain the requisite authorizations from the PUC in each relevant state.

5.8.1  Common carriers defined The 1934 Act unhelpfully defines a ‘common carrier’ as ‘any person engaged as a common carrier for hire, in interstate or foreign communication by wire or radio or in interstate or foreign radio transmission of energy’. However, under common law, the term was interpreted to mean any carrier who holds itself out to the public for hire on general terms and who transmits communications signals at the request of a user without any change to their form or content.66 The 1996 Act codified these requirements. It specifies that a ‘telecommunications carrier’ (or provider of ‘telecommunications services’) is treated as a common carrier ‘only to the extent that it is engaged in providing telecommunications services’. The definition of ‘telecommunications services’ is explained in Section 5.2.5. Examples of common carriers include AT&T and its subsidiary AT&T Mobility, Verizon, Verizon Wireless, Sprint, and T-​Mobile US. Cable operators are not classified as common carriers. Instead they must obtain and comply with the licences granted by local municipalities and/​or PUCs in the states in which they operate and any rules adopted by the FCC under Part VI of the 1934 Act. The FCC has not decided if VoIP providers are common carriers. Consequently, they do not need an authorization from the FCC, but as discussed in Section 5.2.5.4, providers of ‘interconnected VoIP’ must nevertheless comply with certain Title II obligations.

  See further Chapter 6.

65

  See further Chapter 15, at Section 15.7.1.

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5.8.2  Common carrier authorization for provision of domestic fixed services Prior to 1999, the FCC required persons wishing to provide domestic or interstate communications services over wire, or to construct related facilities, to apply to the FCC for an individual authorization under §214 of the 1934 Act. Authorizations were granted on a case-​by-​case basis and applicants had to be able to demonstrate that a grant would serve the public interest, convenience, and necessity. The FCC now gives ‘blanket’ authority for all carriers to provide domestic services, so there is no longer a need to obtain individual authorizations. However, carriers must register their details with the FCC. All carriers who provide services and operate networks pursuant to the FCC general authorization must comply with the FCC’s rules applicable to them or face revocation of the authorization. Carriers must also pay annual administrative fees levied by the FCC to recoup the costs of its regulatory activities. These regulatory fees (which are different from application processing fees and forfeitures that carriers may also have to pay) are calculated by reference to a carrier’s revenue.

5.8.3  Common carrier authorization for provision of international services Persons wishing to provide international services, or to construct facilities, must apply to the FCC for an individual authorization in accordance with §214 of the 1934 Act. Applicants must be able to demonstrate that the grant of the authorization will serve the public interest, convenience, and necessity. They must provide details of, among other things, their state of incorporation; all parties who directly or indirectly own at least 10 per cent of them; and the services to be provided. In addition, they must certify any affiliation with a foreign carrier; the countries to which services will be provided if the applicant is a foreign carrier or controls a foreign carrier in those countries; and the absence of any special concessions from foreign operators which have market power on a US international route. As a result of its 1998 biennial regulatory review, the FCC streamlined the application process for granting §214 authorizations for the provision of international services. Provided an applicant is not (i) affiliated with a foreign carrier who possesses market power in the destination market; (ii) affiliated with a dominant US carrier whose international switched or private line services the applicant wishes to resell; or (iii) otherwise deemed to be ineligible for streamlined processing by the Commission, the FCC may grant the authorization fourteen days after issuing a public notice. The applicant may provide services fifteen days after the FCC’s publication of a notice to the public. It can take ninety days or more for the FCC to

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process a filing made by an applicant caught by one of the above conditions or if the FCC otherwise deems an application ineligible for the streamlined procedure. Pursuant to a §214 authorization, the applicant must file copies of all operating agreements with foreign operators. Carriers must also file tariffs in accordance with 47 CFR §§61.31 to 61.59 if they have been classified as dominant on particular US international routes for reasons other than having an affiliation with a foreign carrier that possesses market power. In some cases, carriers must report the number of international circuits in operation.

5.8.4  Spectrum licensing As has become common in Europe, the FCC awards spectrum licences for mobile services by auction. The spectrum is typically allocated to the highest bidder, although successful applicants must also be able to demonstrate their technical, financial, and legal ability to provide the underlying service. An auction winner does not acquire a property right in the underlying spectrum but can expect to hold and renew the licence without having to participate in subsequent auctions. Spectrum licences are for a set period (typically ten years) with an expectation of renewal, so long as the licensee has taken steps to meet the service requirements for its licence, such as building out facilities or meeting minimum service thresholds. Most services are licensed on a geographic basis—​either nationwide, or in defined service areas. Licensees are permitted to partition (geographically split) their licence and/​or disaggregate (divest a portion of the spectrum within their licensed area). They may also lease spectrum to third parties or enter into private common arrangements. Roll-​out obligations vary, with nationwide licences typically requiring construction of base stations to cover a certain percentage of the population within a specified time period. In other cases, the FCC has required that the carrier provide ‘substantial’ service upon renewal. This service level is purposely unspecific, and is intended to take into account the nature and scope of communication services that have developed in the radio band without requiring the carrier to meet a certain benchmark (such as coverage to a fixed percentage of population). The FCC attempts to prevent companies from obtaining market dominance through a variety of means, including setting auction rules that exclude bidding by licensees of like services, and allocating multiple frequency channels within a given market. The FCC has also mandated spectrum caps, but this means of control has fallen out of favour. The FCC eliminated its fixed spectrum cap for commercial radio services effective from 1 January 2003, opting instead to evaluate the competitive effects of spectrum aggregation by these carriers on a case-​by-​case  basis.

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The FCC’s auction authority dates to 1993, when Congress added §309(j) to the 1934 Act. Spectrum auctions are available for situations where there would be ‘mutually exclusive’ applications for the same licence, such as licensing an exclusive right to operate in a particular frequency band within a set geographic area. When multiple applications can be accommodated without conflict, such as narrow point-​to-​point microwave links, there is no mutual exclusivity and auctions are not appropriate. Although the billions of dollars in public revenue raised by spectrum auctions have attracted considerable attention, the 1934 Act (as amended) requires the FCC to consider efficient spectrum use and not the expectation of revenues as the dominant factor in designing and implementing auctions. The FCC is also mandated to ensure that licences are disseminated among a ‘wide variety of licensees’, including small businesses, rural telephone companies, and women-​ and minority-​owned businesses. The FCC has addressed this requirement by establishing bidding credits for ‘designated entities’. Other methods which have been employed (and generally without widespread success) include the offering of FCC-​sponsored financing for winning designated entities and the setting aside of specific spectrum blocks that only designated entities may bid on. The current auction process promotes both efficiency and participation by serious applicants. Whereas the very first auctions were chaotic affairs with a live auctioneer conducting proceedings in a large public function space, modern auctions are more akin to routine business transactions. Simultaneous bidding for multiple licences is conducted remotely by computer, and bidding rounds can last weeks if not months. In general, each interested bidder must file a ‘short form’ application prior to an auction that discloses its qualifications, and must submit an upfront deposit in relation to the licences it wishes to bid on. In each auction round, the bids may be increased only by a set increment. Once bidding activity drops below a set level, the auction closes and the FCC announces tentative winners for licences that have satisfied the auction’s conditions (such as the ‘reserve’—​a minimum bid amount). Shortly thereafter, winning bidders must file a ‘long form’ application and submit payments. Bid withdrawal and default penalties are designed to ensure that only serious bidders participate. In addition, the FCC has adopted rules to prevent bidding collusion. The spectrum auction policy is considered to be a success. Auctions can quickly allocate licences and promote the rapid deployment of service. In addition, the FCC has developed considerable expertise in designing and conducting auctions that have served as models for other countries considering their own spectrum auctions. The auction policy has not been without problems, however. Traditionally, the FCC faced the greatest difficulties in implementing its designated entity procedures. Constitutional challenges undermined the FCC’s women and minority bidding preference programmes, and some designated entities either defaulted on

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instalment payments or declared bankruptcy. In addition to hindering the rapid deployment of service, these developments have pitted the FCC against federal bankruptcy courts and have weakened the FCC’s control over its licensing process. More recent challenges have been policy related, focusing on matters of auction design. Decisions on how much spectrum to auction, the size of geographic areas covered by licences (eg nationwide, regional, or local), and even when to conduct auctions can affect how many bidders participate and how much revenue the auction will generate (which is popularly seen as a measure of its success). The FCC’s decision to attach a special condition on the C-​block in the 2008 700 MHz auction stating the licensee ‘shall not deny, limit, or restrict the ability of their customers to use the devices and applications of their choice’ remains controversial. Proponents assert that this condition furthered what was then considered the important public policy goal of network neutrality while critics claim that it skewed auction participation and lowered the final bid prices. Despite the challenges, auctions have become an entrenched part of the US licensing process. Congress has endorsed auctions by expanding the FCC’s authority and mandating the use of auctions far beyond the original commercial mobile service auctions. While auctions have become the predominant model for awarding licences for commercial wireless services, other licensing models exist. Another option used on a limited basis is to ‘license by rule’, in which an individual is considered to hold an FCC authorization and must abide by specific rules of operation for a radio service, but where the individual does not submit an application to the FCC to obtain a physical licence document. The CB Radio Service (formerly known as Citizens Band Radio) is the most well-​k nown radio service that is licensed by rule, although this model is increasingly used for a variety of applications where individual licences might be difficult to administer. Examples include implanted medical devices, medical telemetry, and automotive radars used for collision avoidance, lane departure warning, parking assist, and other safety and convenience features. An additional authorization model that continues to gain prominence is unlicensed operation. So-​called ‘Part 15’ devices (named for the part of the FCC rules under which they are administered) may be operated without a licence. However, such devices must comply with technical standards that preclude high-​power operations, as well as other conditions set forth in the rules, including equipment authorization requirements. Users have no exclusive rights to use the spectrum; must not cause interference to authorized (eg licensed) users; and must accept any interference received, including that caused by other unlicensed devices. While unlicensed operations are permitted in any frequency not expressly prohibited by the rules, most use has congregated in specific parts of the spectrum, including portions of the 2 and 5 GHz bands. The minimal barriers to entry have

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made unlicensed operations an attractive proposition for entities that may not have the resources or business need to invest in exclusive spectrum licences, and the unlicensed model has fostered innovations in wireless spectrum technologies and use. Originally characterized by cordless telephones, garage door openers, and baby monitors, unlicensed devices have now become a vital part of the communications landscape. WiFi and Bluetooth protocols are designed for unlicensed use, and the future ‘Internet of Things’ is expected to make extensive use of the unlicensed model. Wireless internet service providers (mostly small and rural in nature) have long operated on an unlicensed basis. Commercial mobile operators have increasingly come to rely on WiFi to provide backhaul support for their licensed networks and, in 2016, began deploying equipment designed to provide 4G LTE services under the unlicensed rules. This development has been controversial; while the technology promises to enhance mobile carriers’ service and reliability by increasing data speeds over short distances, WiFi and cable providers expressed concerns over its compatibility with existing unlicensed devices and protocols that already crowd the spectrum available for unlicensed use. The future of spectrum licensing is likely to be increasingly complex, and will include combinations of the licensing and authorization models discussed above. For example, the Commercial Spectrum Enhancement Act of 2004,67 which established a mechanism for reimbursing federal agencies out of spectrum auction proceeds for the cost of relocating existing operations and was used in the auction of Advanced Wireless Services in 2006, represents an important milestone for the repurposing of federal spectrum for commercial use. The television incentive auction in 2016 provided evidence that incumbent licensees will voluntarily agree to give up some or all spectrum rights in exchange for a portion of the auction proceeds. The adoption of service rules for a new radio service, the Citizens Broadband Radio Service, in 2015 is particularly noteworthy because it introduced a mechanism by which different users holding different spectrum rights and authorized under different models will be permitted to operate in the same 3.5 GHz band spectrum. Incumbent Access users, consisting of federal government users and grandfathered fixed satellite service operations, will receive protection from harmful interference from all other band users. Priority Access Licenses, awarded by auction, will be authorized to use their licensed channel(s) in a specific geographic area for a multiple-​year period. General Authorized Access users will be permitted to use any portion of the band not assigned to Incumbent Access users and Priority Access users and will be licensed-​by-​rule. In addition, General Authorized Access

67   Commercial Spectrum Enhancement Act, Pub L No 108–​494, 118 Stat 3986, Title II (2004) (codified in various sections of 47 USC).

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users may operate in unused Priority Access channels by using advanced radios that consult with online databases to determine where and when such vacant channels exist. This idea—​that users will be authorized to access spectrum opportunistically on an ad hoc basis as opposed to a pre-​arranged assignment—​draws on the work of the ‘TV White Spaces’ proceeding. There, the FCC permitted the operation of consumer devices that make use of location-​sensing technologies to avoid interference with the signals of incumbent broadcasters, on an unlicensed basis in spectrum between licensed television channels.68

5.8.5  Local entry licences Facilities-​based operators and resellers who wish to provide telephone services, such as intra-​and interLATA services, for a fee, must also apply for the requisite licences in each of the fifty states in which they operate. However, some states have exempted VoIP and broadband/​internet access providers from their licensing rules. The application forms and specific requirements differ for each state and are too detailed to summarize here. Broadly speaking, each PUC requires basic information about the applicant (name and contact details), as well as information about the technical, administrative, and financial ability of the applicant to provide the service.

5.8.6  Foreign ownership requirements Until the adoption of the WTO’s telecommunications ‘Reference Paper’, the FCC had a long-​standing policy of protecting its domestic markets as well as US carriers abroad under the guise of promoting effective competition. For example, it required all foreign carrier applicants to satisfy the ‘effective competitive opportunities’ (ECO) test when applying for international §214 and cable landing licences. It also required all applicants seeking permission for ownership in excess of 25 per cent of US entities that directly or indirectly control broadcast, common carrier, or aeronautical radio licensees to satisfy the ECO test when evaluating if such ownership was in the public interest in accordance with §310(b)(4) of the 1934 Act. This test required a showing that there were no legal or practical restrictions on US carriers’ entry into the foreign carrier’s domestic market. On 15 February 1997, the US and sixty-​eight other countries adopted the WTO Basic Telecommunications Agreement in addition to specific market entry commitments contained in the telecommunications ‘Reference Paper’.69 In light of the 68   ET Docket 04–​186. At the time of writing, the Commission was re-​evaluating its rules for the 3.5 GHz service, but was not expected to alter the fundamental three-​t iered licensing approach. 69   See further Chapter 16, at Section 16.4.3.1.

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requirements of the Basic Telecommunications Agreement, the US substituted the ECO test with an ‘open entry’ standard for applicants from WTO countries. It now presumes that applications for international §214 and cable landing licences should be granted to foreign owners from WTO countries unless it can be shown that they pose a high risk to competition in the US. The Commission also applies this presumption when evaluating if petitions for ownership of more than 25 per cent in US entities that directly or indirectly control common carrier and certain aeronautical radio licensees are in the public interest. However, since 2013, it no longer distinguishes between WTO and non-​W TO applicants seeking ownership of more than 25 per cent in US entities that control directly or indirectly common carrier and certain aeronautical radio licensees.70 The presumption applies to all applicants, regardless of their WTO status. Applicants for international §214 and cable landing licences from non-​W TO signatories must continue to satisfy the ECO test. Over the last few years, the FCC has relaxed and sought to simplify its foreign ownership policies and procedures, especially in relation to §310 of the 1934 Act, which imposes various restrictions on the foreign ownership of broadcast, common carrier, or aeronautical radio licences. All modifications have been prompted by a desire to facilitate increased foreign investment in US wireless networks. In addition to adopting a unified approach for WTO and non-​W TO applicants for ownership in excess of 25 per cent of US entities that directly or indirectly control common carrier and certain aeronautical radio licensees (discussed above), the Commission in 2012 elected to forbear from applying §310(b)(3) of the 1934 Act to foreigners seeking to own more than 20 per cent of a US entity that has shares in but does not control a common carrier licensee, provided such ownership is consistent with the public interest.71 Section 310(b)(3) prohibits foreigners from owning more than 20 per cent of the shares of a US entity that has shares in but does not control a broadcast, common carrier, or aeronautical radio licensee. In 2013, the Commission adopted the same open entry standard for applicants from WTO and non-​W TO countries when filing petitions under §310(b)(3).72 Since 2016, it has permitted foreign applicants to file petitions

70   Review of Foreign Ownership Policies for Common Carrier and Aeronautical Radio Licensees under Section 310(b)(4) of the Communications Act of 1934, as Amended, Second Report and Order, IB Docket No 11-​133, FCC No 13-​50, 28 FCC Rcd 5741 (2013). 71   Review of Foreign Ownership Policies for Common Carrier and Aeronautical Radio Licensees under Section 310(b)(4) of the Communications Act of 1934, as Amended, First Report and Order, IB Docket No 11-​ 133, FCC No 12-​93, 27 FCC Rcd TBA 9832 (2012). 72   See n 70.

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for approval to own 100 per cent of shares in US entities that control broadcast radio licensees.73

5.9  SPE C TRUM M A N AG EMENT 74 The portion of the electromagnetic spectrum that is suitable for radiocomm­ unications represents a vital resource, particularly with the increasing demand for mobile communications. First used for distress communications and, later, to provide over-​t he-​a ir broadcasting of audio and video programming, radio frequencies are now an integral part of nearly all communications systems. Spectrum management in the US has been based on the idea that spectrum is a scarce resource, and this scarcity rationale has served as one justification for government intrusion into areas of content and speech that would otherwise be constitutionally protected (as in matters relating to broadcast indecency). It is important to remember, however, that radio frequencies can be used to provide services that fall into any number of regulatory schemes, including common carrier, subscription, and mass media broadcasting models. Although technological innovation continues to expand the portion of the electromagnetic spectrum that is suitable for radio propagation and to reduce the amount of bandwidth necessary to transmit vast quantities of information, the increasing demand for radio services and the deployment of new bandwidth-​intensive applications continue to make spectrum a valuable resource. The radio bands consist of the portion of the electromagnetic spectrum between 3 kHz to 3000 GHz. At the time of writing, the US had only allocated the frequencies between 8.3 kHz and 275 GHz, although limited scientific, amateur, and experimental operations exist above 275 GHz. Although the US has sovereignty to regulate the use of the electromagnetic spectrum within its borders, its spectrum management is heavily influenced by the decisions of the International Telecommunication Union (ITU), an international organization within the United Nations system where governments and the private sector coordinate global telecommunication networks and services.75 The majority of the US lies within Region 2, although certain Pacific territories are part of Region 3. By following the international allocation for a particular band, the US can promote economies of scale in the development and manufacture of equipment and, in the case of non-​geostationary satellite systems or terrestrial

73   Review of Foreign Ownership Policies for Broadcast, Common Carrier and Aeronautical Radio Licensees under Section 310(b)(4) of the Communications Act of 1934, as Amended, Report and Order, GN Docket No 15-​2 36, FCC No 16-​128, 31 FCC Rcd 11272 (2016). 74 75   See further Chapter 7.   See further Chapter 16, at Section 16.3.2.

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systems located near international borders, avoid harmful interference from the use of incompatible types of services. The US uses the same terms to designate categories of services and allocations as does the ITU in the international Radio Regulations.76 The FCC publishes a table of frequency allocations at 47 CFR §2.106 that lists the international allocation for each region, the US table of frequency allocations for both federal government and non-​federal government use, and a list of the relevant FCC rules for each band. As discussed in Section 5.4.2, a separate body, NTIA, administers spectrum used by federal government entities. Accordingly, while the FCC lists federal government allocations in the US table of frequency allocations, it does not control that use. A spectrum band may have both primary and secondary allocations. Within a band, secondary services must not cause harmful interference to stations of primary services, nor may secondary services claim protection from stations of a primary service. Generally, however, a station operating on a secondary basis may claim protection from a secondary station that begins operation at a later date. This allocation model serves as the basic framework for organizing the electromagnetic spectrum. Once spectrum has been allocated for a particular purpose (eg fixed or mobile services, broadcasting, earth-​to-​space satellite operations), the FCC may then designate a particular type of radio service to use that spectrum band and set forth appropriate licensing and operational rules for that service. Spectrum licensing is discussed in greater detail in Section 5.8.4. It is important to keep in mind that spectrum use under an unlicensed authorization model, as discussed in that section, falls outside of the allocation framework. There are no allocations for unlicensed services. Instead, unlicensed devices operate on a sufferance basis and must accept any interference from and not cause interference to any and all licensed services.

5.10  ACC E SS , INTERCONNE C TION, A ND R EL ATED ME A SUR E S 7 7 This section reviews some of the important access, interconnection, and related measures imposed by Congress, the FCC, and other bodies. Where possible, it highlights the tensions which have arisen between established operators and their competitors, both of whose revenue streams are significantly affected by the underlying policy.

76

  See further Chapter 16, at Section 16.3.4.

  See further Chapter 8.

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5.10.1  Unbundled network elements To break the monopolies that ILECs had in the local access market for narrowband services, Congress enacted the Telecommunications Act of 1996. The Act imposed a broad duty on ILECs to provide any requesting telecommunications carrier ‘non-​ discriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms and conditions that are just, reasonable and non-​d iscriminatory’.78 The Act also required ILECs to provide unbundled network elements (UNEs) so that requesting carriers are able to combine UNEs to provide telecommunications services. Under the Act, all carriers (including resellers, facilities-​based operators, and wireless providers) are entitled to UNEs. The FCC had the responsibility of implementing the Act’s unbundling provisions, and, under the FCC’s current unbundling rules,79 ILECs must provide access to ‘proprietary’ network elements—​elements in which an ILEC can demonstrate that it has invested resources to develop information or functionalities that are protected by patent, copyright, or trade secret law—​where access is ‘necessary’. Access is deemed to be necessary if, taking into consideration the availability of elements outside the incumbent’s network (eg self-​provisioning and alternative suppliers), access to that propriety network element would, as a practical, economic, and operational matter, preclude the requesting carrier from providing the services it intends to offer.80 In certain limited cases, the FCC will mandate the unbundling of proprietary network elements even if access is not necessary, where, for example, lack of access may frustrate the purposes of the 1996 Act.81 Access to non-​proprietary network elements is determined by reference to an ‘impairment’ standard. If a carrier can demonstrate that an inability to access a non-​proprietary network element ‘impairs’ its capacity to provide a telecommunications service, then the relevant ILEC must make that element available to the requesting carrier. Impairment occurs when ‘lack of access to that element poses a barrier or barriers to entry, including operational and economic barriers that are likely to make entry into a market by a reasonably efficient competitor uneconomic’.82 As occurs under the ‘necessary’ standard, when making this assessment the availability of elements outside the incumbent’s network (eg self-​provisioning and alternative suppliers) must be taken into account. The scope of the term ‘telecommunications services’ as used in the Act is broad; however, the FCC has stipulated that a carrier cannot use UNEs to provide wireless and long-​d istance services.83 As these markets are competitive, no impairment arises.84 The current 79 80   See 47 USC §251(c)(3).   47 CFR §§51.307–​51.321.   47 CFR §51.317(a)(1). 82 83   47 CFR §51.317(a)(2)(iii).   47 CFR §51.317(b).   47 CFR §51.309(b). 84   Unbundled Access to Network Elements, Order on Remand, WC Docket No 04–​313, CC Docket No 01–​338, FCC No 04–​290, 20 FCC Rcd 2533 (2005). 78 81

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FCC rules mandate that ILECs provide local loops, subloops, network interface devices, dedicated transport, 911 and Enhanced 911 databases which enable calls to emergency services and operations support systems (OSS), although certain restrictions apply.85 Access to these network elements is designed to facilitate competition in narrowband and broadband services. When carriers are unable to agree the prices of UNEs, PUCs determine them in accordance with a forward long-​r un incremental methodology adopted by the FCC or a series of proxy ceilings and ranges, also set by the FCC.86 It is an understatement to say that, for the FCC, formulating the necessary and impair tests and determining the specific network elements to be unbundled was a fraught process. Implementation of the unbundling provisions finally ended in 2006, a decade after the 1996 Act was adopted. The FCC’s difficulty was in part due to the lack of guidance given in the Act about the factors it should take into account when determining which network elements should be unbundled. The Act stated only that the FCC had to consider ‘at a minimum’ if access to proprietary network elements was ‘necessary’ and if denial of access to non-​proprietary network elements would ‘impair’ the ability of a carrier seeking UNEs to provide telecommunications services.87 In addition, the FCC had significant difficulty developing rules that passed judicial scrutiny. The courts overturned the FCC’s unbundling rules in whole or in part on three occasions. In 1999, the Supreme Court rejected the FCC’s first formulations88 of the necessary and impair standards.89 In 2002, the US Court of Appeals’ DC Circuit 90 upheld the FCC’s revised necessary standard91 but overturned its new impairment test. In 2004, the court92 was again critical of the FCC’s third formulation93 of the impairment standard. However, in 2006, the court 94 upheld the FCC’s new definition of impair developed in light of the 2004

  47 CFR §51.319.   47 USC §252(d)(1); 47 CFR §§51.501–​51.515. See also Review of the Commission’s Rules Regarding the Pricing of Unbundled Network Elements, Notice of Proposed Rulemaking, WC Docket No 03–​173, FCC No 03–​224, 18 FCC Rcd 18945 (2003). 87   See 47 USC 251(d)(2). 88   Implementation of the Local Competition Provisions in the Telecommunications Act 1996, First Report and Order, CC Docket Nos 96–​98, 95–​185, FCC No 9–​325, 11 FCC Rcd 15499 (1996). This report and order is also known as the Local Competition Order. 89   FCC v Iowa Utilities Bd, 525 US 1133 (1999). 90   United States Telecom Association v FCC, 290 F 3d 415 (DC Cir 2001) (USTA 1). 91  Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, Third Report and Order and Fourth Further Notice of Proposed Rulemaking, CC Docket No 96–​98, FCC No 99–​2 38, 15 FCC Rcd 3696 (1999). This report and order is also known as the UNE Remand Order. 92   United States Telecom Association v FCC, 359 F 3d 554 (DC Cir 2004) (USTA II). 93   Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, Report and Order and Order on Remand and Further Notice of Proposed Rulemaking, CC Docket Nos 01–​338, 96–​98, 98–​ 147, FCC No 03–​0 6, 18 FCC Rcd 16978 (2003). This report and order is also known as the Triennial Review Order. 94   Covad Communications Co and DIECA Communications, Inc v FCC, 450 F 3d 528 (DC Cir 2006). 85

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ruling.95 As the court stated, ‘the Commission’s fourth try [was] a charm’.96 One of the consequences of the extensive litigation has been a shift to a higher threshold for unbundling than the FCC had originally envisaged and competitive local exchange carriers (CLECs) had wished. The revised standards implicitly adopt an ‘essential-​facilities’ type focus which favours ILECs.97

5.10.2  Co-​location within ILEC premises An issue closely related to UNEs is co-​location, which also proved to be highly contentious. As a result of the 1996 Act, ILECs are required to provide physical co-​location of equipment necessary for interconnection or access to UNEs at their premises. Where subject to technical and space limitations, ILECs must provide virtual co-​location.98 The FCC’s Local Competition First Report and Order specified where CLECs could locate equipment, the types of equipment they could co-​ locate, and the allocation of space if insufficient physical co-​location space existed. For example, space within an exchange was allotted on a first-​come, first-​served basis. ILECs were not obliged to construct or lease additional space to facilitate co-​location but had to take into account projected demand for co-​location of equipment when planning construction work. In addition, ILECs which rejected co-​location applications citing space constraints had to permit applicants to ‘walk through’ the relevant space so that they could confirm that no space was available. Three years later, the FCC modified its rules in its Advanced Services Order 99 to enable CLECs to share co-​location space at an ILEC’s premises and to co-​locate equipment without the need for a cage surrounding their equipment. In addition, if there were insufficient co-​location space, ILECs had to permit co-​location in adjacent controlled ‘environmental vaults’ or similar structures where technically feasible. The FCC’s order was challenged before the DC Circuit Court in GTE v FCC, 205 F 3d 416 (DC Cir 2000). Some of the order’s provisions were upheld but the DC Circuit Court directed the FCC to reconsider rules requiring ILECs to permit the co-​location of equipment which performs functions in addition to those strictly needed to interconnect or access UNEs and the cross-​connection of CLEC

95   Unbundled Access to Network Elements, Order on Remand, WC Docket No 04–​313, CC Docket No 01–​338, FCC No 04–​290, 20 FCC Rcd 2533 (2005). 96   Covad, 450 F 3d at 531. 97   For further information on the saga of the FCC’s unbundling rules, see Lee, K and Prime, J, ‘Overview of US Telecommunications Law’, in Walden, I  (ed), Telecommunications Law and Regulation (2nd edn, Oxford: OUP, 2005), at 531–​538. 98   See 47 USC §251(c)(6). 99   Deployment of Wireline Services Offering Advanced Telecommunications Capability, Third Report and Order in CC Docket No 98–​147 and Fourth Report and Order in CC Docket No 96–​98, FCC No 99–​355, 14 FCC Rcd 20912 (1999).

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equipment co-​located at different ILEC premises. The right of CLECs to select the physical co-​location space at an ILEC’s premises and the prohibitions on ILECs requiring CLECs to use separate rooms for co-​location were also overturned. The FCC published its revised rules in 2001.100 It determined that ILECs had to permit CLECs to co-​locate switching and routing equipment. Other multifunction equipment could be co-​located only if its primary purpose was for interconnection and/​or access. ILECs also had to provide cross-​connection to CLECs co-​located within the same premises as ILECs. The FCC’s current co-​location rules are set out in 47 CFR §51.323.

5.10.3 Interconnection The 1996 Act, at 47 USC §251(a), imposes a duty on all telecommunications carriers to interconnect ‘directly or indirectly’ with the facilities and equipment of other carriers. ILECs must permit other carriers to interconnect to the PSTN at any technically feasible point in their networks to enable the transmission and routing of telephone exchange and exchange access services.101 The rates ILECs charge must be ‘just, reasonable and non-​d iscriminatory’,102 and any service provided by an ILEC must be equal in quality to the service it supplies to itself or any affiliate. The responsibility for day-​to-​day interconnection issues, including determinations of whether or not rates are ‘just and reasonable’, falls to PUCs. However, in the Local Competition First Report and Order, the FCC mandated that the states had to apply the same long-​run incremental cost methodology (LRIC) pricing standard it adopted for UNEs. PUCs challenged the FCC’s decision but in FCC v Iowa Utilities Bd, 525 US 1133 (1999), the Supreme Court held that the FCC had the authority to direct states to adopt a uniform pricing methodology. The adoption of a LRIC standard was also attacked by ILECs but was ultimately upheld by the Supreme Court in Verizon v FCC, 535 US 467 (2002). The FCC may also directly intervene in interconnection disputes where a PUC fails to carry out its responsibilities under the Telecommunications Act of 1996 codified at 47 USC §252. In an important ruling for VoIP providers in March 2007,103 the FCC affirmed that CLECs providing wholesale telecommunications services to VoIP service providers are entitled to interconnect with ILECs under §251(a) and (b)  of the Act.

100   Deployment of Wireline Services Offering Advanced Telecommunications Capacity, Fourth Report and Order, CC Docket No 98–​147, FCC No 01–​204, 16 FCC Rcd 15435 (2001). 101 102   47 USC §252(c)(2)(A)–​(B).   47 USC §252(c)(2)(D). 103   Time Warner Cable Request for Declaratory Ruling that Competitive Local Exchange Carriers May Obtain Interconnection Under Section 251 of the Communications Act of 1934, as Amended, to Provide Wholesale Telecommunications Services to VoIP Providers, Memorandum Opinion and Order, WC Docket No 06–​55, DA 07–​709, 22 FCC Rcd 3513 (2007).

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Certain PUCs had denied CLECs rights of access to ILEC interconnection services in 2005 on the ground that CLECs were not telecommunications carriers when providing wholesale services to VoIP service providers—​they were not offering ‘telecommunications for a fee directly to the public’. The FCC’s ruling enables the exchange of voice calls between broadband networks and the PSTN when VoIP service providers procure interconnection services through CLECs. The FCC has yet to determine if VoIP providers are ‘telecommunications carriers’ and consequently permitted in their own right to rely on §251 of the Act to interconnect directly with ILECs. There remain no FCC rules specific to the interconnection of IP networks, even though the Commission has recognized for many years that the rights and obligations of providers need to be clarified. However, it has adopted a number of measures designed to facilitate IP-​to-​IP interconnection. One example is its 2015 decision to permit interconnected VoIP providers to directly access telephone numbers from American numbering administrators. Previously, they had to obtain them from a telecommunications carrier.104 The FCC also continues to reiterate its expectation that carriers will negotiate IP-​to-​IP interconnection requests in good faith.

5.10.4  Origination, transportation, and termination of calls 5.10.4.1  Intercarrier compensation Currently, the rates carriers pay one another for origination, transportation, and termination of calls are determined by two different arrangements. Access charges—​the fees interexchange carriers (IXCs) and Commercial Mobile Radio Services carriers pay to LECs for originating, terminating, and transporting long-​ distance calls—​a re governed by determinations of the FCC. The FCC sets the rates for interstate access charges in accordance with §201 of the 1934 Act and a series of FCC rules contained in 47 CFR Part 69. Intrastate access charges are set by PUCs. Reciprocal compensation—​t he fees for terminating and transporting local calls—​ are set by PUCs with reference to a framework adopted by the FCC.105 PUCs can determine rates using LRIC methodology. In the event that a PUC lacks access to adequate cost information, it can determine a default rate. As a general rule, the rates for CLECs and ILECs have to be symmetrical, although asymmetrical rates can be used if certain conditions are met. PUCs can also select a ‘bill and keep’ arrangement, whereby neither carrier charges the other carrier for termination

104   Numbering Policies for Modern Communications, Report and Order, WC Docket Nos 13-​97, 04-​36, 07-​ 243, 10-​9 0; CC Docket Nos 95-​116, 01-​92, 99-​200, FCC No 15-​70, 30 FCC Rcd 6839 (2015). 105   47 CFR §§51.701–​51.717.

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services, provided a roughly equivalent amount of traffic is exchanged between the two carriers. The 1996 Act, at 47 USC § 251(b)(5), imposes a general requirement on all LECs to establish reciprocal compensation arrangements. Since the FCC’s Declaratory Ruling in 1999106 when it first asserted jurisdiction over ISP-​bound traffic, there has been growing recognition that the intercarrier compensation arrangements, which are based on per-​m inute charges and were designed before the development of the internet, are in need of reform. It has been argued that, because termination rates are not uniform and are above cost, the current arrangements create opportunities for regulatory arbitrage and disincentives for carriers, particularly ILECs, to invest in broadband and IP technology. How to reform the current system, however, has been the subject of much dispute due to the amount of money involved, the entrenched positions of ‘winners’ under the existing regime, the effect reform will have on the funding for universal service, and the likelihood of price increases for consumers. In April 2001,107 the FCC proposed a ‘bill and keep’ arrangement for all types of interconnection whereby carriers were not permitted to charge each other for call termination, although they could recover the carriage costs involved from their respective customers. Pending adoption of this arrangement, the FCC adopted an ‘interim’ arrangement for ISP-​bound traffic.108 In 2005, the FCC consulted on a number of alternatives proposed by industry109 to the ‘bill and keep’ arrangement and, in 2006, sought comment110 on the ‘Missoula Plan’111 proposed by the National Association of Regulatory Utility Commissioners’ Task Force on Intercarrier Compensation and supported by many in industry. In 2008, there was hope that the FCC would finally resolve the intercarrier compensation issue, as a result of a decision of the Court of Appeals112 that year which held that the interim arrangement for ISP-​bound traffic would cease to have effect unless the FCC could

106  Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, Declaratory Ruling and Notice of Proposed Rulemaking, CC Docket Nos 96–​98, 99–​6 8, FCC No 99–​38, 14 FCC Rcd 3689 (1999). The jurisdiction of the FCC to regulate ISP-​bound traffic was upheld in Bell Atlantic Telephone Companies v FCC, 206 F 3d 1 (2000), although other aspects of the Declaratory Ruling were overturned. 107   Developing a Unified Intercarrier Compensation Regime, Notice of Proposed Rulemaking, CC Docket No 01–​92, FCC No 01–​132, 16 FCC Rcd 9610 (2001). 108   See ibid paras 77–​8 8 for a description of the interim regime. The FCC argued that ISP-​bound traffic was not subject to the reciprocal compensation requirements of §251(b)(5). Nevertheless, it had authority to regulate ISP-​bound traffic pursuant to §251(g) of the 1934 Act. 109   Developing a Unified Intercarrier Compensation Regime, Notice of Proposed Rulemaking, CC Docket No 01–​92, FCC No 05–​33, 20 FCC Rcd 4685 (2005). 110  Federal Communications Commission, Public Notice, Comment Sought on Missoula Intercarrier Compensation Reform Plan, DA 06–​1510 (25 July 2006). 111  A  copy of the plan is available at . 112   In re Core Communications, Inc, 531 F 3d 849 (2008).

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identify a legal basis on which the FCC could exclude ISP-​bound traffic from its reciprocal compensation rules. The decision was prompted by the FCC’s failure to articulate a legal basis for the interim arrangement following the decision of the Court of Appeals in 2002113 not to vacate the FCC’s decision adopting the interim rules even though it held the FCC could not base the interim regime on 47 USC §251(g) added by the 1996 Act. The unusual action of the Court of Appeals was a result of the court’s belief that there was a strong likelihood that the FCC had statutory power to regulate ISP-​bound traffic. The FCC’s response to the 2008 decision of the Court of Appeals disappointed many, however. Rather than announce sweeping reforms, the FCC adopted a narrow order114 to address the specific concerns of the court,115 enabling the FCC to keep the interim arrangements in place, and solicited comment on yet another three proposals for reform. One proposed option involved doing nothing. Unsurprisingly, the FCC task force responsible for development of the National Broadband Plan identified reform of the intercarrier compensation regime as a priority. It called for a three-​stage reform process which included the rebalancing of intrastate and interstate termination rates and the abolition of per-​m inute charges phased in over time with corresponding incremental increases in subscriber line charges to offset revenue losses. Implementation of these broad objectives began in 2011 with the publication of a Report and Order and Further Notice of Proposed Rulemaking.116 In the Report and Order, the FCC adopted amendments to its interstate access rules to address the problems of ‘access stimulation’117 and made changes to its call-​signalling rules to stop the problem of ‘phantom traffic’.118 Further, it stated the current per-​m inute system would eventually be replaced with a bill and keep framework as the default methodology for all intercarrier compensation traffic. Carriers remain free to negotiate alternative arrangements. In order to reach the goal of bill and keep, the FCC adopted a series of transitional

  WorldCom v FCC, 288 F 3d 429 (2002).   High-​Cost Universal Service Support, Order on Remand and Report and Order and Further Notice of Proposed Rulemaking, WC Docket Nos 05–​337, 03–​109, 06–​122, 04–​36, CC Docket Nos 96–​45, 06–​122, 99–​200, 96–​98, 01–​92, 99–​6 8, FCC No 08–​262, 24 FCC Rcd 6475 (2008). 115   The FCC determined that ISP-​bound traffic was subject to the statutory requirements of reciprocal compensation. Nevertheless, it asserted it could regulate ISP-​bound traffic in accordance with the interim arrangements as a result of §201 of the 1934 Act. 116   Connect America Fund, Report and Order and Further Notice of Proposed Rulemaking, WC Docket Nos 10–​9 0, 07–​135, 05–​337, 03–​109, GN Docket No 09–​51, CC Docket Nos 01–​92, 03–​109, WT Docket No 10–​208, FCC No 11–​161, 26 FCC Rcd 17663 (2011). 117   Access stimulation occurs when LECs seek to generate revenue by increasing the volume of traffic terminated to their networks by entering into access revenue sharing agreements with high volume customers such as chat line and adult entertainment providers. 118   Phantom traffic is the practice of carriers and providers disguising the origin of calls in an effort to avoid or minimize termination payments. 113 114

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arrangements which included capping rates for all forms of interstate access and intrastate termination. Carriers had to bring interstate and intrastate termination rates to parity by July 2013 and to gradually reduce their rates to bill and keep over a period of six to nine years, depending on the type of carrier involved. To help offset termination revenue lost during the period of transition, ILECs and other carriers may recoup some costs from their customers in accordance with FCC rules developed for this purpose and, in some instances, from the Connect America Fund (see Section 5.11). The FCC also adopted interim arrangements for VoIP–​PSTN traffic but has yet to determine the appropriate transitional measures for origination and transportation rates. The FCC has had to clarify the complex rules implementing its 2011 Report and Order on numerous occasions,119 but it remains committed to the adoption of a bill and keep framework. 5.10.4.2  Calls to mobile The termination of calls to US mobile networks is not regulated. This is unlike the UK and Europe where a significant amount of regulatory resource has been directed to the prices mobile operators charge for terminating calls to their networks. In the US, the charges for calls to and from mobile phones are paid for by the mobile subscriber. There has been a lack of interest in ‘calling party pays’ (CPP) offerings, in the US, even though the FCC concluded in 2001120 that carriers were not precluded from offering CPP. Given the ongoing shift from voice to data services and the low cost of wireless calls (which many plans offer on an unlimited basis), CPP is not likely to become an issue in the future. The FCC has not tried to regulate the termination rates for calls to overseas mobile networks, despite initiating a Notice of Inquiry to gather information on foreign mobile termination rates, action by overseas regulators, and the effect foreign termination rates were having on US consumers in October 2004.121

5.10.5  Re-​sale 47 USC §251(b)(1), added by the 1996 Act, requires all LECs to make their telecommunications services available for resale on reasonable and non-​ d iscriminatory terms. All resale services must be of equal quality and provided

119   See, eg, Connect America Fund, WC Docket No 10-​9 0, CC Docket No 01-​92, FCC No 15-​14, 30 FCC Rcd 1587 (2015). 120   Calling Party Pays Service Offering in the Commercial Mobile Radio Services, Memorandum Opinion and Order on Reconsideration and Order Terminating Proceeding, WT Docket No 97–​207, FCC No 01–​125, 16 FCC Rcd 8297 (2001). 121   The Effect of Foreign Mobile Termination Rates on US Customers, Notice of Inquiry, IB Docket No 04–​ 398, FCC No 04–​2 47, 19 FCC Rcd 21395 (2004).

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within the same period of time as LECs provide to others.122 The wholesale rates that incumbent LECs may charge are determined by PUCs, subject to directions from the FCC, and are calculated by reference to the retail rate for the relevant telecommunications service less ‘the portion thereof attributable to any marketing, billing, collection and other costs’123 avoided by the ILEC by not providing its services to retail customers. In its Local Competition First Report and Order, the FCC adopted a ‘reasonably avoidable standard’ to determine avoidable costs. However, the Commission’s ILEC re-​sale pricing rules were overturned by the Eighth Circuit Court of Appeals in Iowa Utilities Bd v FCC, 219 F 3d 744 (2000). The court held that the FCC’s interpretation was inconsistent with the plain meaning of the statute. The appropriate standard for determining avoided costs was those costs that the ILEC actually avoid incurring in the future, because of its wholesale efforts, not costs that ‘can be avoided’. The court also stated that PUCs must assume that ILECs are acting as both a wholesale and retail provider when they determine costs whereas previously the FCC’s rules had treated ILECs as only wholesalers. No modifications to the resale rules were made following the court’s decision, although the FCC sought comment on the need to adopt new rules implementing the relevant statutory provision in 2003.124

5.10.6  Poles, ducts, conduits, and rights of way Section 224(f)(1) of the 1934 Act requires ‘utilities’—​ILECs and electric, gas, water, and other public utilities—​to provide cable operators and ‘telecommunications carriers’ (a term interpreted by the FCC to include wireless providers125) with non-​discriminatory access to any pole, duct, conduit, or right of way owned or controlled by them. Under the Act, a state may elect (but is not compelled) to regulate the rates, terms, and conditions of access by way of a process of FCC ‘certification’. Absent certification, the FCC retains jurisdiction and access is governed by a series of rules set out in 47 CFR §§1.1401 to 1.1424. Under these provisions, all requests for access must be in writing; utilities must either grant or reject the request within forty-​five days and provide evidence why a request cannot be granted. In the event of a dispute, the parties may refer the matter to the FCC for resolution.

123   47 CFR §51.603.   47 USC §252(d)(3).   Review of the Commission’s Rules Regarding the Pricing of Unbundled Network Elements and the Resale of Service by Incumbent Local Exchange Carriers, Notice of Proposed Rulemaking, WC Docket No 03–​173, FCC No 03–​224, 18 FCC Rcd 20265 (2003). 125  The FCC’s interpretation received the backing of the Supreme Court in National Cable & Telecommunications, Inc v Gulf Power Co, 534 US 327 (2002). 122

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The National Broadband Plan, which the FCC was required to submit to Congress in 2010,126 highlighted a number of weaknesses in the FCC’s rules dealing with pole attachments, including significant disparities between the rates cable and telecommunications carriers paid for access to poles (cable rates were lower) and inefficiencies in access procedures, all of which it was argued increased the cost of broadband deployment for both wireless and wired carriers. The FCC subsequently amended its rules in April 2011127 to establish a four-​stage process for pole attachments, each with prescribed deadlines. Among other measures, it modified its cost formulae to ensure that the rates paid by telecommunications carriers were on par with those of cable operators and imposed obligations on parties to escalate disputes to their respective corporate executives prior to filing complaints with the FCC. In an Order on Reconsideration issued more than four years later,128 the FCC addressed concerns that its 2011 Order, as written, allowed pole owners to apply the cost formulae in a way that still allowed for disparities between the rates charged to cable and telecommunications carriers. The decision was intended to foster a more harmonized cost model to bring the cost of pole attachments for telecommunications carriers in line with the traditionally lower cable rate. This FCC action was especially important in light of its decision to reclassify broadband services as telecommunications services.129 That decision led to the worry that pole owners would begin imposing higher telecommunications carrier rates on cable companies. Although a consortium of electric utilities challenged the FCC’s decision, it was upheld in 2017 by the US Court of Appeals for the Eighth Circuit.130 The FCC continues to recognize that access to poles, conduits, ducts, and rights of way are keys to improved infrastructure use and broadband deployment, especially with the advent of 5G and the consequential need for additional mobile network infrastructure. Popular ideas being discussed by policy makers include mandating ‘one touch’ access in which a single construction crew would be permitted to complete all of the work necessary to make a pole ready for a new attachment, including making necessary modifications to existing equipment installed by attachers, and ‘dig once’ requirements in which in-​street conduits must be built to accommodate future users so the streetscape is not re-​d isturbed. In 2017, the Commission formed a new federal advisory committee, the Broadband

  See further Section 5.11.1.   Implementation of Section 224 of the Act and a National Broadband Plan for Our Future, Report and Order and Order on Reconsideration, WC Docket No 07-​2 45, GN Docket No 09-​51, FCC No 11–​50, 26 FCC Rcd 5240 (2011). 128   Implementation of Section 224 of the Act and a National Broadband Plan for Our Future, Order on Reconsideration, WC Docket No 07-​2 45, GN Docket No 09-​51, FCC No 15–​151, 30 FCC Rcd 13731 (2015). 129 130   See further Section 5.2.5.2.   Ameren Corporation v FCC, 865 F 3d 1009 (8th Cir 2017). 126 127

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Deployment Advisory Committee (BDAC) to examine pole attachment and other infrastructure issues as it identifies ways to accelerate the deployment of broadband services. The BDAC began issuing the first of its recommendations later that year.

5.10.7  ‘Dialling parity’ LECs are required to provide ‘dialling parity’ (or carrier pre-​selection, as it is known in Europe) for all originating telecommunications services. LECs must not cause unreasonable dialling delay and must provide customers with the option of using different carriers for local calls as well as inter-​and intraLATA services. ‘Anti-​slamming’ measures prohibit carriers from changing a customer’s designated carrier(s) without consent. In 2005, the FCC adopted rules governing the exchange of customer billing data between carriers to facilitate dialling parity.131

5.10.8  Number portability The 1996 Act amended the 1934 Act to require LECs to provide number portability for fixed line numbers to the extent ‘technically feasible’ in accordance with requirements prescribed by the FCC. The FCC permits carriers to recover certain costs associated with number portability from other providers which use a carrier’s number portability facilities to process their own calls and from end-​ users. Charges incurred by end-​users are included in their monthly telephone bills. In 2003, the FCC clarified that wireline carriers must port numbers to wireless carriers where the coverage area of the wireless carrier overlaps with the geographic location in which a wireline number is provided.132 In 2007, it extended the obligations of local number portability to providers offering interconnected VoIP services which enable customers using a broadband connection to receive calls from and terminate calls to the PSTN.133 In 2015, following its decision to allow interconnected VoIP providers to obtain telephone numbers directly from numbering administrators, the Commission imposed a rule clarifying that all

131   Rules and Regulations Implementing Minimum Customer Account Record Exchange Obligations on All Local and Interexchange Carriers, Report and Order and Further Notice of Proposed Rulemaking, CG Docket No 02–​386, FCC No 05–​29, 20 FCC Rcd 4560 (2005). 132  Telephone Number Portability, Memorandum Opinion and Order and Further Notice of Proposed Rulemaking, CC Docket No 95–​116, FCC No 03–​2 84, 18 FCC Rcd 23697 (2003). 133  Telephone Number Requirements for IP-​E nabled Service Providers, Report and Order, Declaratory Ruling, Order on Remand and Notice of Proposed Rulemaking, WC Docket Nos 07–​2 43, 07–​2 44, 04–​36, CC Docket Nos 95–​116, 99–​200, FCC No 07–​188, 22 FCC Rcd 19531 (2007).

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telecommunications carriers must facilitate a valid customer’s request to port a telephone number to or from an interconnected VoIP provider.134 Relying on other powers in the 1934 Act, the FCC mandated in 1996 that all cellular, broadband PCS, and specialized mobile radio (SMR) providers (collectively referred to as Commercial Mobile Radio Service carriers) had to enable their subscribers to port their wireless telephone numbers to other wireless carriers. Phased in over a number of years, wireless number portability has been available in all areas of the US since 24 May 2004. Wireless-​to-​w ireline porting is also required in some cases, although the vast majority of porting has been away from wireline services.

5.10.9  Siting of wireless towers and antenna Until adoption of the Telecommunications Act of 1996, the construction of antenna towers and other physical facilities had traditionally been regulated at the local level where it was subject to local zoning and land-​use regulations. However, the 1996 Act’s addition of §332(c)(7) to the Communications Act of 1934 limited state and local authority over zoning and land use decisions for personal wireless service facilities. Under that provision, a state or local government may not unreasonably discriminate among providers of functionally equivalent wireless services and must not regulate in a manner that prohibits or has the effect of prohibiting the provision of personal wireless services. In addition, §332(c)(7) requires state and local entities to act on applications within a ‘reasonable period of time’. These entities must also make any denial of an application in writing supported by substantial evidence in a written record. Furthermore, it expressly pre-​empts decisions that are premised (either directly or indirectly) on the environmental effects of radio frequency (RF) emissions, so long as the provider complies with the FCC’s RF rules. Allegations that a state or local government has acted inconsistently with §332(c)(7) are to be resolved exclusively by the courts. The extensive record of court decisions developed in this area generally has found in favour of wireless carriers seeking access to site towers, although municipalities have prevailed when they have accompanied their denials with a clear, written record, and when the courts have been convinced that they are not acting to effectively deny all new facilities. In AT&T Wireless PCS v Virginia Beach, 155 F 3d 423 (4th Cir 1998), the Court of Appeals for the Fourth Circuit found that the city of Virginia Beach did not violate the Act when it denied an application for approval to erect a communications tower

134

  See n 104.

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on a church’s roof despite the fact that the denial effectively precluded the provision of service to a part of the community. Subsequently, courts distinguished or explicitly rejected the Virginia Beach decision as not adequately recognizing the extent of pre-​emption provided in the Telecommunications Act of 1996. The FCC has frequently taken actions to try to reduce the regulatory barriers faced by providers who need to deploy additional towers and antenna to fulfil consumer demand. For example, in 2009 it defined the meaning of ‘reasonable period of time’ for the purposes of §332(c)(7) as ninety days for co-​location applications and 150 days for all other siting applications.135 Prior to its decision, there were reports of applications pending for up to three years. The National Broadband Plan the FCC submitted to Congress in 2010 emphasized the need for federal, state, and local governments to further minimize barriers to infrastructure roll-​out, calling for, among other things, the development of a standard form master contract for the placement of wireless towers on all federal land. The agency has also regularly turned to advisory committees to investigate this issue. The Technology Advisory Council has periodically examined wireless antenna requirements, recommending such measures as the adoption of an Executive Order to expedite the approval process for antenna sitings on federal land and the elimination of redundant requirements in state and local planning practices. The Broadband Deployment Advisory Committee, discussed in Section 5.10.6, began identifying barriers to wireless siting in late 2017, information which the FCC has incorporated into its 5G-​related rulemaking proceedings. When making decisions in this area, the FCC has to consider the requirements imposed on it by the National Historic Preservation Act (NHPA),136 the Endangered Species Act (ESA),137 and the National Environmental Policy Act (NEPA).138 NEPA is a ‘cross-​cutting law’ in that it applies broadly to federal undertakings and requires agencies to implement procedures for considering potential environmental effects during the agency’s decision-​making process. FCC licensees and applicants are required to review whether or not their proposed actions will have environmental consequences and, if applicable, prepare an environmental assessment that leads to a series of steps designed to evaluate the environmental 135   Petition for Declaratory Ruling to Clarify Provisions of Section 332(c)(7)(B) to Ensure Timely Siting Review and to Preempt Under Section 253 State and Local Ordinances that Classify All Wireless Siting Proposals as Requiring a Variance, Declaratory Ruling, WT Docket No 08–​165, FCC 09–​99, 24 FCC Rcd 13994 (2009). 136   National Historic Preservation Act of 1966, Pub L No 89–​6 65, 80 Stat 915 (1966) (codified as amended at 16 USC §470 et seq). 137   Endangered Species Act of 1973, Pub L No 93–​205, 87 Stat 884 (1973) (codified as amended at 16 USC §1531 et seq). 138   National Environmental Policy Act of 1969, Pub L No 91–​190, 83 Stat 852 (1970) (codified as amended at 42 USC §§4321–​4347).

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effect of the proposed action and, if the impact is significant, to seek alternatives or mitigations. The filing of an environmental assessment is required, among other times, when a proposed facility may have a significant effect on historic properties, could threaten endangered species or critical habitats, or may affect Native American religious sites. One particular challenge has been the issue of migratory birds. Many parties, including the US Fish and Wildlife Service (FWS), have estimated that communications towers kill between four and five million birds per year, and have a potentially significant impact on migratory birds—​including some 350 species of night-​m igrating birds that may be affected by tower lights. In February 2008, the US Court of Appeals for the DC Circuit139 struck down a 2005 FCC decision denying a petition of the American Bird Conservancy and the Forest Conservation Council which requested, among other things, that the FCC prepare an environmental impact assessment of communications towers on migratory birds in the Gulf Coast region of the US. The 2008 decision of the Court of Appeals also triggered an ongoing nationwide environmental assessment of the FCC’s antenna structure registration procedures. Since that time, federal agencies have worked to better harmonize their interests in this area, and to unify the guidance they give regarding tower siting issues. For example, the Federal Aviation Administration (FAA) has revised its procedures to make it easier to discontinue the use of steady burning lights on towers (which are more likely to attract birds); the FCC provides more detailed guidance for when tower construction might trigger the need to conduct an environmental assessment; and FWS has issued a set of recommended best practices for the design, siting, construction, operation, maintenance, and decommissioning of communications towers. Wireless siting issues have taken on a newfound importance with the advent of 5G networks. The deployment of dense networks of small cells threaten to overwhelm existing site approval processes, and the Commission has indicated that it intends to play an active role in this area. A Notice of Proposed Rulemaking and Notice of Inquiry issued in April 2017140 critically reviewed, among other things, the FCC’s existing rules and procedures for site evaluations under NHPA and NEPA, as well as the effect of state, local, and tribal review. In announcing the proceeding, the Commission cited ‘evidence that despite Commission action to reduce delays and costs of infrastructure review, providers continue to face significant costs and delays and reform may be needed’. The FCC adopted an initial

  American Bird Conservancy, Inc and Forest Conservation Council v FCC, 516 F 3d 1027 (DC Cir 2008).  Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment, Notice of Proposed Rulemaking and Notice of Inquiry, WT Docket No 17-​79, FCC No 17-​38, 32 FCC Rcd 3330 (2017). 139 140

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set of rules intended to remove barriers to the siting process in March 2018, while continuing to examine other issues raised in the proceeding. The Commission will still have to find ways to balance its obligation to promote the widespread availability of telecommunications with the interests of state, local, and tribal communities, historical preservationists and environmental groups, as well as the limits imposed by NEPA and other laws. However, the extensive deregulatory activities of the Trump administration in conjunction with pressure to ensure that the US does not fall behind in 5G development may alter the balance in favour of telecommunications interests.

5.10.10 Roaming Since 2007, all Commercial Mobile Radio Service (CMRS) carriers offering text messaging, push-​to-​talk, and mobile voice and data services that interconnect to the PSTN must permit subscribers of other CMRS networks to ‘roam’ onto their networks on a non-​d iscriminatory basis (with an exception for when the networks are not technologically compatible).141 Following submission of the National Broadband Plan to Congress, the FCC moved swiftly to impose an obligation to roam on all facilities-​based providers of commercial mobile data services, including those that do not interconnect with the PSTN.142 Subject to certain exceptions, facilities-​based providers must enter into roaming arrangements with other providers on commercially reasonable terms and conditions. It provided further guidance on the commercially reasonable standard in a December 2014 declaratory ruling.143 Within the US, roaming is no longer a significant consumer issue. Most carriers have implemented ‘nationwide’ plans and no longer charge for domestic roaming, although off-​network access often does not provide the full breadth of services available on the user’s home network and some carriers will limit or even cap excessive data use while roaming. Moreover, the prevalence of WiFi access offers an acceptable substitute in many cases. The experience is markedly different for travellers who leave the US, who remain subject to high international roaming charges for voice and data use.

141   Reexamination of Roaming Obligations of Commercial Mobile Radio Service Providers, Report and Order and Further Notice of Proposed Rulemaking, WT Docket No 05–​265, FCC No 07–​143, 22 FCC Rcd 15817 (2007). The obligation arises from the FCC’s interpretation of §§201 and 202 of the 1934 Act. 142  Reexamination of Roaming Obligations of Commercial Mobile Radio Service Providers and Other Providers of Mobile Data Services, Second Report and Order, WT Docket No 05–​265, FCC No 11–​52, 26 FCC Rcd 5411 (2011). 143  Reexamination of Roaming Obligations of Commercial Mobile Radio Service Providers and Other Providers of Mobile Data Services, Declaratory Ruling, WT Docket No 05-​265, DA 14-​1865, 29 FCC Rcd 15483 (2014).

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5.10.11  Network neutrality As already mentioned, the FCC’s network neutrality framework was significantly altered in December 2017. Prior to then, the framework was made up of the transparency and no blocking rules referred to Section 5.2.5.3, although the transparency rule was broadened in 2015 to require broadband providers to disclose monthly service charges, other fees and data caps (if any) and information about the loss of information packets. However, small businesses, defined as providers with 100,000 or fewer subscriber lines, were exempt from these modifications. In addition, fixed and mobile broadband providers had to comply with the ‘no-​ throttling’, ‘no-​ paid prioritization’ and ‘no-​ u nreasonable interference/​ d isadvantage’ rules. The no-​t hrottling rule prohibited the impairment or degradation of lawful internet traffic on the basis of internet content, application, or service, or use of a non-​harmful device, subject to reasonable network management. The ‘no-​paid prioritization’ rule prevented broadband providers from managing their networks in a manner that gave preference to some traffic over other traffic for consideration from a third party or to benefit an affiliated entity. Subject to reasonable network management, the no-​u nreasonable interference rule banned broadband providers from unreasonably interfering with or disadvantaging the ability of end-​ users to select, access, and use broadband internet access services or the lawful internet content, applications, services, and devices of their choice. It also prohibited broadband providers from unreasonably interfering with or disadvantaging the ability of ‘edge providers’—​providers of content, applications, or services over the internet and providers of devices used for accessing content, applications, or services over the internet—​to make lawful content, applications, services, or devices available to end-​users. As a result of the Commission’s December 2017 decision, the network neutrality framework consists of only a transparency rule, although the FCC also mandates that broadband providers must inform their customers about their blocking, throttling, paid prioritization, and affiliated prioritization practices.

5.11  UNIV ER S A L SERV IC E OBL IG ATIONS (US O s) 5.11.1  Policy and legislative background The concept of ‘universal service’ was coined by Theodore Vail, then Chairman of AT&T, in 1907.144 Vail first conceived the term to promote a public policy whereby

144   Stated by Garnham, N, ‘Universal Service’, in Telecom Reform (ed Melody) (Technical University of Denmark, 1997), at 207. See also Chapter 4, at Section 4.8.

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a telephone company would provide all who wanted service in an area in return for continued regulation as the sole service provider in a given area. Later, as universal service came to represent the policy that all Americans should have basic telephone access at a reasonable rate, the primary issues related to the subsidy of high-​cost users (such as rural and residential customers) by low-​cost users (such as urban and business customers). Some eighty years after the concept was first adopted, Congress finally wrote the principle of universal service into law by enacting the Telecommunications Act 1996 which added §254 to the 1934 Act. However, Congress declined specifically to define universal service, instead recognizing it as an ‘evolving level of telecommunications services’. When determining the services that should be provided universally under §254, the FCC is required to take into account ‘advances in telecommunications and information technologies and services’ and consider four factors, including, for example, whether a particular service is essential to education, public health, or public safety and a ‘substantial majority’ of residential customers have subscribed to the service. Universal service policy must also be informed by seven broad principles, such as that quality service should be available at just, reasonable, and affordable rates; that access to advanced telecommunications and information services should be provided in all regions of the US; and that low-​i ncome consumers and consumers in rural and other high-​cost areas should have access to telecommunications services of the same quality and at the same rates as those provided to consumers in urban areas. In addition, the 1996 Act expanded the concept of universal service to include the principle that health care providers in rural areas, schools, and libraries should have access to advanced telecommunications services, such as the internet and other broadband services. Following the adoption of the Act, the FCC developed four universal service programmes to implement §254:  (1) a programme for low-​income users; (2)  the high-​cost fund for rural communities; (3)  the schools and libraries programme; and (4) a programme for public and non-​profit rural health care providers. All four schemes were developed with the assistance of the Federal-​State Joint Board, a body comprised of FCC commissioners, PUCs, and a state-​appointed utility consumer advocate. The function of the Joint Board is to keep universal service policy and related mechanisms under review and make recommendations from time to time to the FCC. Until the adoption of the American Recovery and Reinvestment Act of 2009 (the Recovery Act), the principal focus of the FCC’s four universal service programmes was to ensure access to voice services. The schools and libraries programme (also known as the ‘e-​rate’ programme) and the rural health care programme supported access to the internet, but most universal service funding was spent on supporting voice services. Following the adoption of the Recovery Act, however,

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the focus of all four universal service programmes has shifted to ensuring access to broadband services. The Recovery Act required the FCC to develop a National Broadband Plan (NBP) that sought to ‘ensure that all people of the United States have access to broadband capability’. The term broadband was not defined in the Recovery Act, but the plan the FCC submitted to Congress in March 2010 set a target of ensuring all households and business had affordable broadband access with an actual download speed of at least 4 Mbps and actual upload speed of at least 1 Mbps by 2020. The NBP also included a number of recommendations to ensure that schools, libraries, and health care facilities had the high-​speed broadband services and facilities needed for the twenty-​fi rst century. Since submission of the NBP, the FCC has adopted ‘support for advanced services’ as a universal service principle which it must take into account when formulating universal service policy.145 Moreover, the FCC continues to revise its definition of advanced services. In 2016, for example, the Commission made universal service funding from the high-​cost programme available to certain carriers on the condition they offer broadband services with a minimum download speed of 25 Mbps and a minimum upload speed of 3 Mbps.146 The Commission has also adopted numerous measures to reform its universal service programmes, but many of the programmes are still in a state of transition. For the time being, they support voice; broadband services; and bundled voice and broadband services. However, the FCC intends to eliminate support for voice services in the future. The current programmes, each of which is administered by the Universal Service Administrative Company (USAC), an independent, not-​for-​profit corporation appointed by the FCC, in accordance with Part 54 of the Commission’s rules, are discussed below.147

5.11.2  Existing programmes and proposed reforms 5.11.2.1  The low-​income scheme Lifeline is the principal programme to assist low-​income subscribers. Eligible subscribers are entitled to discounts on communications services specified by the FCC. Until 2012, these services were limited to switched telephony, but they now 145   See Connect America Fund, Report and Order and Further Notice of Proposed Rulemaking, WC Docket Nos 10-​9 0, 07-​135, 05-​337, 03-​109, GN Docket No 09-​51, CC Docket No 01-​92, 96-​45, WT Docket No 10-​208, FCC No 11-​161, 26 FCC Rcd 17663 (2011). Under §254(b)(7), the FCC may adopt other universal service principles to protect ‘the public, convenience and necessity’. 146   See Connect America Fund, Report and Order, Order and Order on Reconsideration, and Further Notice of Proposed Rulemaking, WC Docket Nos 10-​9 0, 14-​58; CC Docket No 01-​92, FCC No 16-​33, 31 FCC Rcd 3086 (2016). 147   For a summary of the programmes prior to the adoption of the NBP and the reforms needed to them as a result of the NBP, see c­ hapter 5 of the previous edition of this book.

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comprise all voice telephony services (fixed and mobile) and, since 2016, broadband services (fixed and mobile) and bundled voice and broadband services. Current rules dictate that from 2021, Lifeline services will consist only of broadband services (fixed and mobile) and bundled voice and broadband services that meet minimum service standards.148 It appears that these rules will be unaffected by the FCC’s 2017 decision to reclassify broadband services as information services. The FCC has stated that it will continue (and has the legal authority under §254(e) of the 1934 Act149) to maintain support for broadband services in the Lifeline programme.150 All Lifeline services are supplied by ‘eligible telecommunications carriers’ (ETCs). Voice providers are designated as ETCs by PUCs. At the time of writing, broadband providers are designated as ETCs by the FCC, but it is intended that they will be designated by PUCs in the future.151 ETCs must provide the specified services in accordance with standards set by the FCC. At the time of writing, fixed broadband services must have a minimum download speed of 10 Mbps and a minimum upload speed of 1 Mps; mobile broadband services must have speeds of 3G mobile technology or better. The minimum data usage for fixed broadband services is 150 GB per month. For mobile broadband services, it is 500 MB per month, but it will rise to 2 GB per month by December 2018. In addition to the Lifeline programme, there is the Link Up programme. It provides eligible low-​income subscribers living on Native American land with discounts on the installation costs associated with Lifeline services and allows them to defer payment on any remaining charges. Over the last few years, the FCC has been particularly concerned with stopping waste, fraud, and abuse of the low-​income scheme. To that end, it has required USAC to develop a National Lifeline Accountability Database. The database contains subscriber information provided by ETCs and is used to identify subscribers receiving Lifeline services from more than one ETC.152 The FCC has also adopted national eligibility criteria for subscribers. Until 2012, PUCs were permitted to adopt eligibility criteria. In 2016, the FCC directed USAC to establish a National Lifeline Eligibility Verifier, whose function is to determine if subscribers meet

148   Lifeline and Link Up Reform and Modernization, Third Report and Order, Further Report and Order, and Order on Reconsideration, WC Docket Nos 11-​42, 09-​197, 10-​9 0, FCC No 16-​38, 31 FCC Rcd 3962 (2016). 149   Section 254(e) states, ‘[a]‌carrier that receives such [universal service] support shall use that support only for the provision, maintenance, and upgrading of facilities and services for which the support is intended.’ 150   See Restoring Internet Freedom, above n 39, para 193. 151   Bridging the Digital Divide for Low-​I ncome Consumers, WC Docket Nos 17-​2 87, 11-​42, 09-​197, FCC No 17-​155, 32 FCC Rcd 10475 (2017). 152   Lifeline and Link Up Reform and Modernization, Report and Order and Further Notice of Proposed Rulemaking, WC Docket Nos 11-​42, 03-​109, 12-​2 3, CC Docket No 96-​45, FCC No 12-​11, 27 FCC Rcd 6656 (2012).

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eligibility criteria. Previously, ETCs assessed the eligibility of Lifeline applicants. These measures were taken following reports critical of previous versions of the Lifeline and Link Up schemes by the Government Accountability Office in 2008 and 2010. 5.11.2.2  Connect America Fund The Connect America Fund (CAF), also known as the high-​cost programme, is intended to ensure the provision of affordable voice and broadband services, fixed and mobile, to areas in the US where the cost of those services, absent subsidies, would be much higher than the national average. Funds are allocated to ETCs to help offset, for example, the cost of providing and maintaining local loops and deploying fixed and mobile broadband infrastructure in rural and other underserved areas. CAF is the most complex and costly of the four universal service programmes. Its annual budget is $4.5 billion. CAF consists of three components: the support programmes for price cap and rate-​of-​return carriers that support voice and broadband services, and the Mobility Fund (MF), which supports the provision of mobile broadband services in high-​ cost areas. Price cap carriers are dominant LECs, such as BOCs and other large and medium-​sized carriers, subject to price cap regulation. Rate-​of-​return carriers are ILECs subject to rate of return regulation. In 2011 when the FCC began the process of reforming the high-​cost programme by issuing its USF/​ICC Transformation Order,153 83 per cent of the people that had no broadband were living in high-​cost areas served by price cap carriers. Rate-​of-​return carriers served less than 5 per cent of all access lines in the US. Following submission of the NBP, a great deal of the FCC’s attention in this area has been directed towards ensuring broadband deployment. In 2012, the FCC awarded $115  million to price cap carriers to support the roll out of broadband infrastructure, as part of a programme called CAF Phase I, and $300  million to wireless carriers to support the deployment of 3G services in high-​cost areas, as part of a programme called MF Phase I.  In 2015, as part of a programme called CAF Phase II, ten price cap carriers accepted $9 billion from the FCC. In exchange, they agreed to provide broadband services with a minimum download speed of 10 Mbps and a minimum upload speed of 1 Mbps to 85 per cent of the high-​cost areas served within three years and 100 per cent of the high-​cost areas served within five years.154 The support each carrier received was calculated by reference to a

153   See n 145 above. The order was challenged but was eventually upheld by the Court of Appeals. See Direct Communications Cedar Valley v FCC, 753 F 3d 1015 (2014). 154   Connect America Fund, Report and Order, WC Dockets Nos 10-​9 0, 14-​58, 14-​192, FCC No 14-​190, 29 FCC Rcd 15644 (2014).

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forward-​looking cost model known as the Connect America Cost Model (CAM)155 and will be paid annually over six years. In 2016, the FCC announced a similar scheme for rate-​of-​return carriers, although they will be funded for ten years and their roll-​out obligations will differ.156 In 2017, the Commission launched MF Phase II during which the FCC will offer wireless carriers $453 million in financial support annually over a period of ten years. In exchange, wireless carriers must deploy 4G LTE services.157 The FCC continues to support price cap carriers who provide voice services in high-​cost areas, although the amount of money received by price cap carriers has been frozen since 2011 and will continue to be reduced over time. Rate-​of-​return carriers also remain eligible for CAF Broadband Loop Support (BLS) (formerly known as Interstate Common Line Support), provided there is no other unsubsidized competitor in the area served, and High Cost Loop Support (HCLS), which supports voice services. However, the FCC plans to abolish BLS and HCLS and develop a single CAF programme for rate-​of-​return carriers. A notable development across the high-​cost programmes has been the FCC’s use of reverse auctions to award available funding. In a reverse auction, carriers bid for the subsidy they need to provide services in specified areas. The winning bidder is the carrier that needs the smallest subsidy. Reverse auctions were first used in MF Phase I and will be used in MF Phase II. Moreover, the FCC is already planning the first CAF Phase II auction158 and intends that all available funds will be awarded by a competitive bidding process. 5.11.2.3  E-​rate With a budget of $3.9 billion, the ‘e-​r ate’ programme provides discounts of between 20 to 90 per cent on communications services specified by the FCC to schools and libraries. The precise discount a school or library receives depends on the household income levels of students in the community and whether the school or library is in an urban or rural area. The services that currently attract a discount include voice services, data transmission services, internet access, internal connection services and equipment necessary for high-​speed broadband connectivity, related maintenance and managed internal broadband

155   Connect America Fund, Report and Order, WC Dockets Nos 10-​9 0, 05-​337, DA No 14-​534, 29 FCC Rcd 3964 (2014). 156   See n 148 above. 157   Connect America Fund, Report and Order and Further Notice of Proposed Rulemaking, WC Docket No 10-​9 0, WT Docket No 10-​208, FCC No 17-​11, 32 FCC Rcd 2152 (2017). 158   Connect America Fund, Report and Order and Further Notice of Proposed Rulemaking, WC Dockets Nos 10-​9 0, 14-​58, 14-​259, FCC No 16-​6 4, 31 FCC Rcd 5949 (2016); Connect America Fund, Report and Order and Order on Reconsideration, WC Dockets Nos 10-​9 0, 14-​5, FCC No 17-​12, 32 FCC Rcd 1624 (2017).

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services, such as WiFi. However, the FCC plans to eliminate all support for voice services in the near future, so that all funding can be directed to achieving the programme’s principal goal: ensuring ‘affordable access to high-​speed broadband sufficient to support digital learning in schools and robust connectivity for libraries’.159 The FCC continues to work towards the high-​speed internet access and WAN connectivity targets it set for schools and libraries in July 2014. The Commission has, for example, amended its rules to permit schools and libraries to build their own broadband facilities in certain circumstances and has required recipients of high-​cost programme funding to offer high-​speed broadband services to schools and libraries.160 For schools, the high-​speed internet access target is 1 Gbps per 1,000 students and staff. Libraries serving fewer than 50,000 people must have internet access with speeds of at least 100 Mbps. For libraries serving more than 50,000 people, the internet access target is 1 Gbps. The WAN connectivity target for schools is 10 Gbps per 1,000 students and staff. 5.11.2.4  Rural health care programme The rural health care programme consists of two principal components:  the Healthcare Connect Fund (HCF), established in 2012,161 and the Telecommunications Program.162 HCF subsidises the provision of high-​speed broadband services and related equipment to individual public and non-​profit rural health care providers and to consortia of these providers; and the construction of high-​speed broadband networks by consortia of rural and non-​r ural health care providers. Health care providers include hospitals, community health centres, mobile clinics, local health departments and, following the passage of the Rural Health Care Connectivity Act in 2016, ‘skilled nursing facilities’. HCF was modelled on the FCC’s Rural Health Care Pilot Program, a programme designed in 2006 to increase use of the rural health care programme. The Telecommunications Program subsidises the provision of telecommunications services. HCF and the Telecommunications Program are administered in a similar fashion as the schools and libraries programme. The annual budget for rural health care programme has been capped at US$400 million.

159   Modernizing the E-​rate Program for Schools and Libraries, Report and Order and Further Notice of Proposed Rulemaking, WC Docket No 13-​184, FCC No 14-​99, 29 FCC Rcd 8870 (2014). 160   Modernizing the E-​rate Program for Schools and Libraries, Second Report and Order and Order on Reconsideration, WC Docket Nos 13-​184, 10-​9 0, FCC No 14-​189, 29 FCC Rcd 15538 (2014). 161   Rural Health Care Support Mechanism, Report and Order, WC Docket No 02-​6 0, FCC No 12-​150, 27 FCC Rcd 16678 (2012). 162   47 CFR §54, Subpart G.

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5.11.3 Funding Prior to the 1996 Act, universal service was paid for predominantly by AT&T and other large long-​d istance providers. Under the 1996 Act, all telecommunications carriers providing interstate and international telecommunications services to the public and other designated providers must pay towards the cost of universal service unless their contribution is less than US$10,000.163 The meaning of interstate and international services is broad and encompasses satellite, mobile, and payphone services. Telecommunications carriers and interconnected VoIP providers164 pay quarterly charges towards universal service provision to USAC, which in turn makes payments in support of the universal service fund programmes. Contributions are calculated by multiplying the projected revenues for interstate and international telecommunications services of a provider (less its projected universal service contribution) by a ‘contribution factor’.165 Quarterly, the FCC determines the contribution factor, which is the ratio of the total projected costs of the four universal service programmes for that period and the total projected revenue for all interstate and international telecommunications services offered by all providers who must contribute to the scheme less their total estimated universal service contributions.166 Providers are permitted to pass on some of these charges to their customers.167 Revenue from interstate and international telecommunications services has, however, been falling for years due to rigorous competition for long-​d istance services and the use of IP-​enabled technologies. The bundling of interstate and intrastate services and other products and the availability of wireless packages that enable users to make long-​d istance calls at no additional cost have also made it difficult to determine if all interstate revenue is being fully counted. As early as 2001 and 2002, the FCC considered alternatives to its current approach in an attempt to increase available funding and to ensure that telecommunications carriers contribute to the fund equally.168 All involved the imposition of a flat-​rate fee on providers, but the criterion used to impose the flat-​rate fee differed.   47 CFR §54.706(a).   Universal Service Contribution Methodology, Report and Order and Notice of Proposed Rulemaking, WC Docket No 06–​122, CC Docket Nos 96–​45, 98–​171, 90–​571, 92–​2 37, 99–​200, 95–​116, 98–​170, WC Docket Nos 06–​122, 04–​36, FCC No 06–​94, 21 FCC Rcd 7518 (2006) (upheld in Vonage Holdings Corp v FCC, 489 F 3d 1232 (DC Cir 2007)). 165 166 167   47 CFR §54.709(a) and (a)(1).   47 CFR §54.709(a)(2).   47 CFR §54.712(a). 168   Federal-​State Joint Board on Universal Service, Notice of Proposed Rulemaking, CC Docket Nos 96–​ 45, 98–​71, 90–​571, 92–​2 37, 99–​200, 95–​116, 98–​170, FCC No 01–​145, 16 FCC Rcd 9892 (2001); Further Notice of Proposed Rulemaking and Report and Order, CC Docket Nos 96–​45, 98–​71, 90–​571, 92–​2 37, 99–​200, 95–​116, 98–​170, FCC No 02–​43, 17 FCC Rcd 3752 (2002); and Report and Order and Second Further Notice of Proposed Rulemaking, CC Docket Nos 96–​45, 98–​71, 90–​571, 92–​2 37, 99–​200, 95–​116, 98–​170, FCC No 02–​329, 17 FCC Rcd 24952 (2002). 163

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Under the first approach, the fee would be imposed for each residential, single-​l ine business, payphone, mobile wireless, and pager connection. Contributions in the second approach were determined by the maximum capacity of a customer’s connection. The third approach imposed a fee for each telephone number assigned to a customer and the capacity of any connection for customers not allocated any numbers. In 2008, the FCC sought comment on two variations of these methods.169 In the first option, subject to certain exceptions, any provider (other than a wireless prepaid provider) who assigned a telephone number to a residential customer would pay US$1 per month for each number. Fees for wireless prepaid providers would be determined by an alternative formula that took into account the number of monthly minutes generated by the provider. All providers of business services would be required to pay a fee based on the number of businesses connected to the public network. In the second option, arrangements similar to those in the first option would apply for residential customers, although the amount contributed per number would be US$.85 per month. The contribution for providers of business services would be determined by the number and capacity of the dedicated access connections used by their business customers. Each connection with a capacity of up to 64 kbps would incur a charge of US$5; each connection in excess of 64 kbps would incur a charge of US$35. The NBP submitted to Congress in 2010 included a recommendation that the contribution base for universal service be broadened. In response, the FCC again sought comment on who should contribute to the universal service fund and how contributions should be assessed.170 It asked if providers of certain specified services, such as text messaging and broadband internet access services, should contribute; or if all providers of interstate information and telecommunications services, subject to some exclusions, should contribute. It also asked if contributions of providers should be assessed by reference to their revenue; the number of connections to communications networks they provide to customers; the amount of telephone numbers assigned to them; or by either of the two approaches on which it consulted in 2008. However, the FCC made no changes to its rules. In 2014, the FCC asked the Federal State Joint Board to make recommendations as to how it should modify its universal service contribution methodology by 7 April 2015.171 Shortly before the Joint Board’s report was due, broadband services were reclassified as telecommunications services. Consequently, pursuant to Title 169  High-​Cost Universal Service Support, n 114, Appendix A  paras 92–​156; Appendix B paras 39–​104; Appendix C paras 88–​151. Appendix A and Appendix C are in all material respects the same. 170   Universal Service Contribution Methodology, Further Notice of Proposed Rulemaking, WC Docket No 06-​122, GN Docket 09-​51, FCC No 12-​4 6, 27 FCC Rcd 5357 (2012). 171   Federal State Joint Board on Universal Service, Order, WC Docket Nos 96-​45, 06-​122 and GN Docket No 09-​51, FCC No 14-​116, 29 FCC Rcd 9784 (2014).

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II, the FCC could have required broadband providers to contribute to the universal service fund. However, the Commission decided to forbear from enforcing the contribution obligations and said it would revisit its decision following receipt of the Joint Board’s report. At the time of writing, the Joint Board has still not produced a report; broadband services have been reclassified as information services; and the complex issues surrounding how best to secure funding for the universal service programmes remain unresolved. In the absence of any decision to expand the contribution base, the quarterly contribution factor used to calculate contributions paid by telecommunications carriers continues to rise. In the first quarter of 2017, it was 16.7 per cent.

5.12  COMPE TITION L AW As discussed in Section 5.4.3, the Department of Justice (Telecommunications and Media Enforcement Section) (DoJ) is the federal body primarily responsible for the enforcement of US anti-​t rust law in the telecommunications sector. The Federal Trade Commission (FTC) looks after the cable and ISP sectors. The two key pieces of legislation they enforce are the Sherman Anti-​trust Act and the Clayton Act, both of which have been interpreted extensively by the courts. These Acts contain provisions which prohibit anti-​competitive agreements, market abuse by monopolists, and other restrictive practices. The Clayton Act (as amended by the Hart-​ Scott-​Rodino Antitrust Improvements Act of 1976172) and related regulations also require parties to mergers and other acquisitions to notify such transactions to the DoJ and the FTC and to obtain clearance from the relevant organization before their consummation. As a result, the DoJ and FTC have significant oversight of the structural changes occurring across the communications sector. Third parties damaged by anti-​competitive conduct also have rights to bring private actions against operators and others for alleged violations of anti-​t rust legislation, and a number of claims have been made against them.

5.12.1  Anti-​competitive agreements/​monopolies Section 1 of the Sherman Anti-​t rust Act mirrors the prohibitions of Article 101 of the EC Treaty.173 Section 1 declares all contracts, combinations, and conspiracies that restrain trade between the fifty states of the US and foreign countries to be illegal. The Supreme Court has ruled that there are two types

  Pub L No 94–​435, 90 Stat 1390 (codified at 15 USC §18a).

172

  See further Chapter 10.

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of conduct caught by §1:  conduct that is ‘per se illegal’ and conduct which violates the so-​c alled ‘rule of reason’. An example of conduct which is ‘per se illegal’ is price fixing. Conduct is contrary to the rule of reason when it is otherwise lawful but unreasonably restrains trade. Such conduct is reviewed on a case-​b y-​c ase basis and in light of its pro-​and anti-​c ompetitive effects on relevant market(s). In 2000, the DoJ and the FTC issued ‘Antitrust Guidelines for Collaborations among Competitors’ which sets out the general principles that both agencies will use when reviewing agreements between competitors and the potential competition concerns likely to arise from collaboration. Section 1 of the Sherman Anti-​t rust Act does not expressly permit either the DoJ or the FTC to exempt anti-​ competitive behaviour from the Act where it ‘contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit . . .’; nevertheless, in practice, the pro-​competitive effects of agreements will be taken into account by the courts, the DoJ, and the FTC when assessing whether or not an agreement unreasonably restrains trade. Section 2 of the Sherman Anti-​t rust Act makes it unlawful for natural persons and legal entities to monopolize any part of trade or commerce between the fifty states and foreign countries. Monopolies are not per se illegal but where a party has acquired or intends to acquire market power through anti-​competitive means then a violation of §2 of the Sherman Anti-​t rust Act will occur. Where trade with foreign countries is involved, §§1 and 2 of the Sherman Anti-​t rust Act are not violated unless the conduct has a direct, substantial, and reasonably foreseeable effect on domestic trade or commerce, or on export trade or commerce of a person engaged in such trade or commerce in the US. Of the two provisions, it is the application of §2 of the Sherman Act by the DoJ which has had greater effect on the telecommunications industry due to AT&T’s historical monopoly and the degree of market power ILECs hold in local access markets.

5.12.2  Price discrimination and other practices The provisions of the Sherman Anti-​t rust Act are supplemented by §§2 and 3 of the Clayton Act. These provisions make it unlawful for persons involved in commerce to discriminate in price between similarly situated purchasers of like products where the effect of such discrimination may be ‘substantially to lessen competition or tend to create a monopoly’. Discrimination is permissible, however, where price differences arise due to the cost of manufacture, sale, or delivery. Other provisions prohibit the payment or acceptance of bribes, discrimination in rebates,

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discounts or advertising services, and sales conditional on the non-​use of goods or services of a competitor.

5.12.3  Penalties for non-​compliance A breach of §1 of the Sherman Anti-​t rust Act renders the underlying agreement void. Both the DoJ and FTC may bring civil prosecutions in a federal court against offenders. Only the DoJ can prosecute criminal action. Persons who participate in unlawful restraints of trade face severe fines and/​or criminal penalties if convicted. Individuals may be fined up to US$1 million and be imprisoned for up to ten years. Corporations may be fined up to US$100 million for each offence. Similar penalties may be imposed by a court if §2 of the Sherman Anti-​t rust Act is violated. Violations of §§2 and 3 of the Clayton Act may result in fines but they carry no criminal penalties. The DoJ has adopted ‘leniency’ policies for corporations174 and individuals175 who report anti-​trust violations previously unknown to the DoJ. Corporations and individuals who confess their involvement, fully cooperate with the DoJ, and agree to other conditions will not be charged with criminal law violations. Individuals who are injured as the result of conduct in contravention of anti-​ trust law may also sue the offender(s) in a federal district court. If successful, they may recover three times the damages they suffered plus reasonable attorney’s fees.176 The possibility of treble damages provides a powerful incentive for private parties to enforce anti-​t rust legislation, and a number of competitors to and consumers of leading communications operators and providers in the US have sought to enforce anti-​t rust law directly through the courts. Over the years, individuals have filed suits alleging breaches of §§1 and 2 of the Sherman Anti-​t rust Act in a number of markets. Most lawsuits were unsuccessful. Nevertheless, the option remains available for those who believe that a competitor or a supplier has acted in contravention of anti-​t rust law.

5.12.4 Investigations The DoJ and FTC may initiate investigations into alleged anti-​competitive practices following internal reviews by in-​house economists and lawyers and complaints from industry participants, concerned citizens, informants, and other

174   Department of Justice, Corporate Leniency Policy, available at . 175   Department of Justice, Leniency Policy for Individuals, available at . 176   Clayton Act, §4(a), 15 USC §15.

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government agencies. Both may compel legal and natural persons to produce information and other documentation relevant to a civil investigation by serving a Civil Investigative Demand (CID). They may request in a CID for a witness to give oral testimony or to answer questions in writing. Evidence in relation to criminal investigations is gathered by the DoJ pursuant to subpoenas issued by a grand jury. Assistance from the Federal Bureau of Investigation and other federal agencies may also be requested during investigations.177

5.12.5  Regulatory double jeopardy? The behaviour of operators and service providers in the US is subject to anti-​t rust law as well as the regulatory requirements set out in the Communications Act of 1934 and enforced by the FCC. In theory, certain conduct could violate both anti-​trust law and regulatory rules. However, in Verizon Communications Inc v Law Offices of Curtis V Trinko, LLP, 540 US 398 (2004), a case where a violation of §2 of the Sherman Anti-​t rust Act was not sustained in part because the FCC had adopted rules pertaining to unbundled network elements and taken enforcement action against Verizon, the Supreme Court stated that where a regulatory structure is designed to deter and remedy anti-​competitive harm, it is less likely that anti-​ trust law requires any additional scrutiny. In other words, no anti-​t rust liability is likely to arise where regulation exists to prevent or remedy anti-​competitive harm. By implication, alleged behaviour that may violate anti-​t rust law and regulatory requirements is more expeditiously assessed and evaluated in accordance with regulatory law. Although more than a decade old, the case remains good law and continues to be cited and followed by federal courts.

5.12.6 Mergers Section 7 of the Clayton Act prohibits the acquisition of shares or capital in a natural or legal entity engaged in commerce or related activities affecting commerce where such acquisition may be ‘substantially to lessen competition, or to tend to create a monopoly’. This provision covers mergers, asset and share purchases, joint ventures, and other acquisitions. The DoJ is responsible for ensuring that mergers in the telecommunications sector comply with §7. Reviewing mergers of cable operators and ISPs is the duty of the FTC.

177   For further information about the procedural matters surrounding a DoJ investigation, see the DoJ’s Antitrust Division Manual available at . For a copy of the FTC’s manual, see .

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The DoJ and the FTC have issued a number of guidelines relating to horizontal and non-​horizontal mergers. The Horizontal Merger Guidelines were first issued in 1992 and were revised in 1997 and 2010. The Guidelines focus on market definition and concentration, the potential adverse competitive effects of mergers, the ability of new participants to enter the relevant market(s), efficiencies resulting from the merger, and the likelihood of either party to the merger failing if the merger does not take place. The Non-​Horizontal Merger Guidelines were issued in 1984. Non-​ horizontal or vertical mergers are less likely to give rise to competition concerns but the guidelines set out the principal theories under which either the DoJ or FTC would challenge non-​horizontal mergers. These include the elimination of actual or potential competition, the creation of barriers to entry, and the ability of vertical mergers to facilitate collusion at retail levels and in downstream markets. Since 1978, unless exempted by §7A(c) of the Clayton Act, mergers which meet specified criteria must be notified prior to the consummation of the transaction to both the DoJ and the FTC.178 As a general rule, the purchaser and the target of the acquisition must notify the DoJ and the FTC if the following conditions179 are satisfied: 1. if one person has sales or assets of at least US$100 million; the other person has sales or assets of at least US$10 million; and as a result of the transaction the acquiring person will hold an aggregate amount of stock and assets valued at more than US$50 million of the acquired person but less than US$200 million; or 2. as a result of the transaction, the acquiring person will hold an aggregate amount of stock or assets of the acquired person valued at more than US$200 million regardless of the sales or assets of the acquiring and acquired person. Failure to notify may result in civil penalties or a court order requiring the parties to divest any assets acquired in violation of the Clayton Act if the transaction is already consummated. Notifying parties must complete and have certified a Notification and Report Form, which requires the notifying parties to provide details about the transaction and information about acquisitions made in the last five years. The notifying parties must inform the DoJ and FTC if the acquiring person and acquired entity earn revenue from businesses that fall within any of the same industry and product codes in accordance with the North American Industry Classification System and, if so, the geographic areas in which they operate. They must also pay the appropriate filing fee which is determined by reference to the value of the transaction.

  See the Clayton Act §7A(a) and the Premerger Notification Rules found at 16 CFR Parts 801, 802, and 803.   Note the monetary thresholds are adjusted annually.

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Notifying parties may voluntarily submit additional information to facilitate review of the transaction. After a Notification and Report Form is submitted, both the DoJ and the FTC review the Form. The notifying parties must usually wait a minimum of thirty days (fifteen days in the case of a cash tender sale or bankruptcy sale) before they may consummate a transaction. Parties may request early termination of the waiting period; however, requests for early termination are granted only where the DoJ and the FTC have completed their preliminary reviews and have concluded they will not take any enforcement action against the parties. Complex mergers which raise substantial anti-​t rust concerns will usually not be eligible for early termination. If either agency believes or both agencies believe that a transaction involving the communications sector requires further analysis, then the body with responsibility for the relevant segment of the market affected by the merger becomes responsible for further investigation. If further information is necessary, additional information from the notifying parties may be requested. Such a request usually extends the waiting period for another thirty days (ten days in the case of a cash tender offer or a bankruptcy sale) from the date the parties comply with the request. Interested third parties may submit written comments or make a presentation about the effects of the proposed transaction to the DoJ or the FTC at any stage of the review process. If, at the end of its review, the responsible body concludes that the transaction does not substantially lessen competition, or does not tend to create a monopoly, then it recommends that no further action is taken. If it believes a transaction does raise concerns then it may discuss terms of settlement, such as divestiture of certain assets or businesses, with the notifying parties. Details of any negotiated settlements must be published in the Federal Register and third parties must be given time to comment on their proposed terms. Additional procedures apply if the DoJ negotiates the settlement. Alternatively, the DoJ and FTC may elect to commence injunction proceedings in a US district court to stop the acquisition. The DoJ has agreed the terms on which a number of mergers could proceed in the telecommunications sector, including, for example: Cingular Wireless’s acquisition of AT&T Wireless proposed in 2004; SBC Communications’ acquisition of AT&T in 2005; and Verizon’s acquisition of MCI in the same year. The DoJ has rarely sought to injunct an acquisition in the telecommunications sector but it did seek to enjoin MCI Worldcom’s acquisition of Sprint in 2000, AT&T’s merger with T-​Mobile USA in August 2011 and AT&T’s merger with Time Warner in 2017. Examples of mergers settled by the FTC include AOL/​Time Warner (2000), TCI/​Cablevision (1998), and TimeWarner/​Turner Broadcasting (1996). When it becomes clear an agency will oppose a transaction, the notifying parties usually abandon it.

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5.12.7  Mergers and the FCC The FCC also has a significant amount of oversight of structural changes occurring in the telecommunications sector brought about by mergers, corporate reorganizations, and other ownership transactions that result in the transfer of control or assignment of a 1934 Act licence. Under the 1934 Act, prior approval of the FCC is required before authorizations and licences relating to common carriers,180 radio (both public and private),181 satellite earth stations,182 and submarine cable landings183 may be transferred. Failure to obtain the FCC’s prior permission may result in fines and other enforcement action. In some cases, however, pro forma transactions (transactions that do not result in a change of ultimate ownership) are permitted without prior FCC approval. Licensees must notify the FCC within thirty days of completion of the transaction. In 2003, the FCC further streamlined its assignment and transfer of control procedures—​particularly with respect to spectrum leasing schemes—​ as part of a comprehensive initiative to encourage the development of secondary markets in spectrum usage rights.184 In all cases where prior approval is required, the FCC must be satisfied that the ‘public interest, convenience and necessity’ are served by the transfer of the relevant FCC authorization. The impact of the proposed licence transfer on competition in relevant markets is closely analysed by the FCC, although other factors, such as the potential effects of a transfer on universal service provision, national security, spectrum efficiency, and technical innovation, are also typically considered. Each licence transfer is assessed on a case-​by-​case basis, and the procedures followed vary depending on the specific licence. In all cases, the parties to a transaction are encouraged to discuss the merger with FCC staff in advance of submitting an application. The FCC tries to complete its review of major transactions within 180 days of the publication of the FCC’s notice about the transaction; however, the 180-​day timetable may be extended in light of the complexity of the transaction. Interested third parties are normally given thirty days in which to file comments. The FCC issues its decision in writing. Unsuccessful applicants may challenge an FCC decision by way of judicial review. Because FCC approval requires a majority vote of its commissioners, controversial and large-​scale mergers have often been approved with conditions that are either developed by the commissioners in order to reach consensus or proposed by the applicant in response to

181 182   47 CFR §§63.03, 63.04, and 63.24.   47 USC §310(d).   47 CFR §25.119.   47 CFR §1.767. 184   Promoting Efficient Use of Spectrum Through Elimination of Barriers to the Development of Secondary Markets, Second Report and Order, Order on Reconsideration, and Second Further Notice of Proposed Rulemaking, WT Docket No 00–​2 30, FCC No 04–​167, 19 FCC Rcd 17503 (2004). 180

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public opposition that might jeopardize the likelihood of receiving a majority vote. However, such practices have come under sharp criticism from some Republican members of the FCC, including now Chair Ajit Pai. They claim that these conditions do not relate to the merits of the transaction, but instead are designed to impose regulations that further the majority members’ policy goals. The FCC also has powers under §§7 and 11 of the Clayton Act to block acquisitions of common carriers engaged in fixed and radio communications where the effect of the acquisition would be to substantially lessen competition or create a monopoly. In practice, these powers are rarely used and any action taken by the FCC is based on its powers set out in the Communications Act of 1934.

5.13  CONSUMER PR IVAC Y ME A SUR E S 18 5 Federal communications privacy law seeks to protect individuals against unsolicited communications from business entities and telemarketers. It also imposes restrictions on the use of customer data acquired by telecommunications carriers. The law does not confer an absolute right of privacy on individuals. Rather, it seeks to balance the interests of individuals and the interests of commercial entities and telecommunications carriers, which enjoy constitutional protections of commercial speech. Communications privacy matters in the US are complicated by the distinction between telecommunications services and information services, because different regulatory bodies may become involved depending on the type of service at issue.

5.13.1  Legal constraints on regulation of telemarketers In the US, solicitation by telemarketers is a type of commercial speech, protected by the First Amendment of the Constitution. Congress may regulate commercial speech, however, provided such regulation meets the four-​part test set out in Central Hudson Gas & Elec Corp v Public Service Commission, 447 US 557 (1980). If the commercial speech concerns illegal activity or is misleading, then the government may freely regulate the speech. If, however, the speech is not illegal or misleading, then the government must be able to demonstrate that it has a substantial interest in regulating the speech, the regulation it seeks to impose directly and materially advances the government’s interest, and it is narrowly tailored. In Cincinnati v Discovery Network, Inc, 507 US 410 (1993), the Supreme Court held that a regulation is ‘narrowly tailored’ if it involves a careful calculation of the

185

  See further Chapter 13.

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costs and benefits associated with the regulation and the burden on commercial speech it imposes.

5.13.2  Unsolicited calls and texts Congress first addressed the problem of unsolicited calls by adopting the Telephone Consumer Protection Act of 1991 (TCPA).186 The TCPA gave the FCC authority to adopt regulations to stop unwanted telephone solicitations in order to protect the privacy rights of residential telephone subscribers. The TCPA also imposed restrictions, subject to certain exceptions adopted by the FCC, on the use of automated telephone equipment. When adopting regulations to implement the TCPA in 1992,187 the FCC mandated the use of company-​specific do-​not-​call lists (as opposed to a national do-​ not-​call list) that allowed subscribers to indicate whether or not they wished to receive pre-​recorded telemarketing calls to their fixed home numbers from solicitors on a company-​by-​company basis. Companies were expected to comply with subscriber requests, although companies that had established business relationships with subscribers on the list and tax-​exempt non-​profit organizations were exempt from the rules. Companies engaged in telemarketing were permitted to ring subscribers not on their do-​not-​call lists no earlier than 8 am and no later than 9 pm; and had to identify themselves to subscribers. Certain prohibitions against autodialled calls were also imposed. By 2002, it was the clear the FCC’s approach was not effectively balancing legitimate business interests and privacy concerns. The Commission had received thousands of complaints about an ever increasing amount of unsolicited calls, the use of new technologies, and practices by telemarketers to circumvent the requirements of the TCPA. In the absence of any action by the FCC, the Federal Trade Commission (FTC), which has powers to regulate some telemarketers under the Telemarketing Consumer Fraud and Abuse Prevention Act,188 adopted an order establishing a federal do-​not-​call list. Several state legislatures also established or were in the process of establishing statewide do-​not-​call lists. Faced with this situation, Congress enacted new legislation, the Do-​Not-​Call Implementation Act,189 in March 2003, that gave the FTC the authority to collect the funds necessary to implement its do-​not-​call list, required the FCC to finalize its TCPA rulemaking

  Pub L No 102–​2 43, 105 Stat 2394 (1991) (codified at 47 USC §227).   Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Report and Order, CC Docket No 92-​9 0, FCC No 03-​153, 7 FCC Rcd 8752 (1992). 188   15 USC §§ 6101-​0 8. See also the FTC’s Telemarketing Sales Rules at 16 CFR §310.1-​310.9. 189   Pub L No 108–​10, 117 Stat 557 (2003). 186 187

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proceeding maximizing consistency with the FTC’s rules, and called for annual reports from both the FTC and FCC. The FCC’s Report and Order of 26 June 2003 set out rules that supplemented the FTC’s own telemarketing rules. Collectively, the FCC and FTC rules established a single national database of fixed and mobile telephone numbers of subscribers who object to receiving telephone solicitations. The FCC’s 26 June 2003 Report and Order also adopted more stringent measures to combat the increased use of predictive diallers and required callers to display caller identification; and concluded that the TCPA protects wireless subscribers from receiving unwanted voice calls as well as text messages.190 It is worth noting that the FCC’s jurisdiction over telemarketers is broader than the FTC’s jurisdiction. The FTC has no oversight of common carriers,191 banks, credit unions, savings and loans, insurance providers, airlines, and intrastate telemarketing calls.192 The FCC rules apply to all of these entities as well as interstate and intrastate telemarketing calls. The FTC has effectively become the lead agency for administration and promotion of the registry, as well as the key source of public outreach and consumer support in this area. Because of the FCC’s more extensive jurisdiction in this area, however, the FCC, which has the power to impose fines on rule violators, has taken a strong enforcement role. As a result of the scheme, fixed and wireless subscribers now have three options to preserve their privacy by: 1. adding their numbers to the national do-​not-​call registry; 2. continuing to make do-​ not-​ call requests of companies on a case-​ by-​ case basis; or 3. registering on the national list and providing specific companies with permission to ring them. If telemarketers do not respect the wishes of subscribers, subscribers may complain to the FCC or sue the offending party in state court. The FCC has clarified and/​or modified its rules implementing the federal do-​not-​ call-​list and related TCPA provisions over time,193 although several modifications were adopted in response to changes made by the FTC to its own telemarketing rules. For example, the 26 June 2003 Report and Order exempted companies that

190   On the issue of unwanted text messages, see also Satterfield v Simon & Schuster, 569 F 3d 946 (9th Cir 2009) and Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Declaratory Ruling and Order, CG Docket Nos 02-​278, WC Docket No 07-​135, FCC No 15-​72, 30 FCC Rcd 7961 (2015). 191 192   See further Section 5.4.3.   15 USC §45(a)(2). 193  See, eg, Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, above n 190.

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had established business relationships with customers from respecting the do-​not-​ call list. However, this exemption was abolished in 2012 and replaced with a requirement that the express written consent of the called party has to be obtained prior to making a call. Moreover, since 2012, the FCC requires callers to provide called parties with an automated, interactive mechanism whereby they can opt out of receiving pre-​recorded messages. Similarly, telemarketers cannot abandon more than 3 per cent of calls answered by customers for the duration of any calling campaign.194 Federal legislation has also resulted in modifications to the do-​not-​call list and related TCPA provisions. When the Do-​Not-​Call Implementation Act was adopted, numbers could be kept on the list for only a limited period of time. However, in 2008, Congress decided numbers could be kept on the list indefinitely.195 In 2009, Congress passed the Truth in Caller ID Act. This legislation responded to concerns that it had become increasingly easy for parties to alter the phone number displayed with a call (the ‘Caller ID’) to make it appear that the call was coming from any number, and that such spoofing activity was being used to trick and defraud consumers. In implementing this legislation, the FCC prohibited persons from causing the display of inaccurate caller identification information for the purposes of defrauding, harming, or otherwise obtaining anything of value, and applied the rule to calls made using any telecommunications or interconnected VoIP service.196 Under these rules, callers may continue to choose to block their call information, although telemarketers must transmit and display a valid number in conjunction with their calls. In November 2017, the FCC adopted additional rules to combat the continuing problems of spoofing and unwanted telemarketing calls.197 In particular, it now expressly permits providers of voice services to block calls originating from any number at the request of a subscriber and calls originating from certain numbers specified by the FCC. The new rules follow requests for legal clarification from the ‘Robocall Strike Force’,198 a body established by and comprised of industry representatives to address the problems of spoofing and unwanted telemarketing calls.

194   See Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Report and Order, CG Docket No 02-​278, FCC No 12-​21, 27 FCC Rcd 1830 (2012). 195   Do-​Not-​Call Improvement Act of 2007, Pub L No 110-​187, 122 Stat 633 (2008). 196   Rules and Regulations Implementing the Truth in Caller ID Act of 2009, Report and Order, WC Docket No 11–​39, FCC No 11–​100, 26 FCC Rcd 9114 (2011). 197   Advanced Methods to Target and Eliminate Unlawful Robocalls, Report and Order and Further Notice of Proposed Rulemaking, CG Docket No 17-​59, FCC No 17-​151, 32 FCC Rcd 9706 (2017). 198  See, eg, Robocall Strike Force Report (26 October 2016)  available at .

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5.13.3  Unsolicited faxes The TCPA, as amended by the Junk Fax Prevention Act199 enacted in 2005, makes it unlawful for any person within the US, or any person outside the US if the recipient is within the US, to use a fax machine, computer, or other device to send unsolicited advertisements to a fax machine. The prohibition on sending unsolicited fax advertisements does not apply where recipients have given senders permission; or senders have an established business relationship and recipients voluntarily provide them with their fax numbers or have otherwise made their fax numbers publicly available in a directory, advertisement, or website. The Act requires any person sending an unsolicited fax advertisement under an exemption to include a notice that complies with any applicable rules mandated by the FCC. Current rules require senders to inform recipients of their ability to and the means by which they can avoid unsolicited faxes.200 In 2006, the FCC imposed similar opt-​out requirements for persons sending solicited fax advertisements, a decision it confirmed in 2014,201 but the requirements were found to be unlawful in March 2017.202 As is the case for unsolicited calls and texts, failure to comply with the relevant provisions of the TCPA may result in fines imposed by the FCC. Violations of the fax rules also give subscribers a right to sue the offending party in state court. Public dissatisfaction with junk faxes, additional Congressional oversight, and continued FCC interest in this area have resulted in a steady stream of FCC enforcement actions against violators. While forfeitures are often in the thousands of dollars, large-​scale violations have resulted in forfeitures as high as US$5 million against a single company.

5.13.4  Unsolicited email The provisions of the TCPA do not apply to unsolicited email that advertises or promotes commercial products and services. To address the loopholes in the legislation and consumer concerns about ‘spam’, Congress enacted the Controlling the Assault of Non-​Solicited Pornography and Marketing Act of 2003 or the CAN-​SPAM Act of 2003.203 The Act came into force on 1 January 2004 and makes it unlawful to send to a computer commercial email that contains deceptive or misleading subject headings or false information about the origin of an email. It

  Pub L No 109-​21, 119 Stat 359 (2005).   See Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Report and Order and Third Order on Reconsideration, CG Docket Nos 02-​278, 05-​338, FCC No 06-​42, 21 FCC Rcd 3787 (2006); 47 CFR §64.1200(a)(4). 201   Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Order, CG Docket Nos 02-​278, 05-​338, FCC No 14-​164, 29 FCC Rcd 13998 (2014). 202  See Bais Yaakov of Spring Valley v FCC, No. 14-​1234 (DC Cir 31 March 2017). 203   Pub L No 108–​187, 117 Stat 2699 (2003). 199

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requires senders of commercial emails to notify recipients that such emails are advertisements, to provide the sender’s physical postal address, and to give recipients an opportunity to ‘opt-​out’ of receiving commercial emails in the future. The opt-​out notice must contain a return email address or other internet-​based mechanism by which email recipients can indicate they do not wish to receive future emails. The opt-​out mechanism selected by a sender must remain active for thirty days. In addition, the Act prohibits senders and anyone acting on their behalf from sending commercial emails to a recipient who requests not to receive subsequent emails. The prohibition begins ten business days from the date of the recipient’s request. Violation of the civil provisions of the Act may lead to injunctive relief and/​or statutory fines. Breaches of criminal law may lead to imprisonment and fines up to US$6  million. The FTC has primary responsibility for implementing and enforcing the legislation. In addition, the FCC adopted rules that took effect in 2005 that prohibit the sending of unwanted commercial email messages to wireless devices without the prior permission of subscribers.204 To facilitate compliance with the rules, it also established a list of domain names typically used to send messages to wireless devices. The CAN-​SPAM Act of 2003 directed the FCC to issue regulations protecting consumers from ‘unwanted mobile service commercial messages’.

5.13.5  Customer proprietary information Federal legislation imposes duties on telecommunications carriers to respect the confidentiality of the ‘proprietary information’ of their customers. Section 222(c) of the 1934 Act, added by the Telecommunications Act of 1996 and amended by the Wireless Communications and Public Safety Act of 1999,205 also sets forth a framework regulating the use of ‘customer proprietary network information’ (CPNI) by telecommunications carriers. The term ‘telecommunications carrier’ means any provider of a telecommunications service. CPNI is defined in §222(h)(1) of the 1934 Act and includes any information, made available to a carrier by a customer by virtue of the carrier-​customer relationship, that relates to the quantity, technical configuration, type, destination, location, and amount of use of a telecommunications service subscribed to by any customer; and information contained in a customer’s bill. CPNI expressly excludes, however, ‘subscriber list information’—​ information identifying the names of subscribers, their telephone numbers, or addresses that are published in a directory. Under the Act, a telecommunications

204   Rules and Regulations Implementing the Controlling the Assault of Non-​Solicited Pornography and Marketing Act of 2002, Order, CG Docket Nos 04-​53, C02-​278, FCC 04-​194, 19 FCC Rcd 15927 (2004). 205   Pub L No 106–​81, 113 Stat 1286 (1999).

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carrier may use, disclose, or permit access to ‘individually identifiable’ CPNI only as required by law or with the approval of their customers. In addition, §222(c)(1) of the 1934 Act permits a carrier to use, disclose, or permit access to individually identifiable CPNI to provide the telecommunications service from which such information is derived; or to provide services necessary to, or used in, the provision of that telecommunications service. There are, however, a number of exceptions to the confidentiality obligations of telecommunications carriers. Use, disclosure, and access to CPNI is permissible by a carrier, either directly or indirectly through its agents, for such purposes as billing and debt collection, the protection of a carrier’s rights and property, the provision of telemarketing and referral services requested by subscribers, and the provision of call location information concerning users of commercial mobile services in specified emergency situations. Disclosure of CPNI upon the affirmative written request by a customer is permitted. CPNI that is ‘aggregated’ and does not contain individually identifiable CPNI may be disclosed to any party.206 Moreover, telecommunications carriers that provide telephone exchange services must disclose subscriber list information to any person upon request for the purpose of publishing telephone directories.207 The FCC has adopted and revised rules implementing these substantive confidentiality provisions on numerous occasions since 1996 to reflect changes in technology and market practices. In 2007, for example, the FCC extended its customer proprietary information rules to providers of interconnected VoIP services.208 The FCC also revisited the rules in 2016 following its decision to reclassify broadband services as telecommunications services.209 When broadband services were treated as information services, the FCC had no authority to regulate providers of these services under §222 of the 1934 Act, because its jurisdiction is limited to telecommunications carriers (as defined). The privacy practices of information service providers and other entities providing broadband services were instead regulated by the FTC. The FTC is responsible for enforcing §5 of the Federal Trade Commission Act, a provision that prohibits unfair and deceptive trade practices, and one that the FTC has actively used to promote online privacy as part of its broader mandate to protect consumer interests.210 When the FCC reclassified broadband services as telecommunications services, providers of broadband services became telecommunications carriers and the FTC lost its authority to 207   47 USC §222(d).   47 USC §222(e).  Implementation of the Telecommunications Act of 1996, Report and Order and Further Notice of Proposed Rulemaking, CC Docket No 96-​115, WC Docket No 04-​36, FCC No 07-​22, 22 FCC Rcd 6927 (2007). 209   See Section 5.2.5.2. 210   For more information, see, eg, Solove, DJ and Hartzog, W, ‘The FTC and the New Common Law of Privacy’, (2014) 114 Columbia Law Review 583. 206 208

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regulate the privacy practices of these entities. The FTC has no jurisdiction over common carriers or entities providing telecommunications services.211 The rules the Commission adopted in 2016, shortly before President Obama left office, harmonized the privacy rules applicable to all telecommunications carriers. They imposed notice, customer approval, data security, and data breach notification obligations on broadband providers. They also provided for protection of precise geo-​location information belonging to customers.212 However, the rules are no longer in effect. On 1 March 2017, following the inauguration of President Trump and the receipt of numerous petitions for reconsideration of the rules from industry, the Commission, operating with only three Commissioners, issued a temporary stay of the data security obligation, which required telecommunications carriers to take reasonable measures to protect customer proprietary information from unauthorized use, disclosure, and access.213 The stay was to remain in place until the Commission was able to reconsider the FCC’s rules in full, but on 3 April 2017, the Republican-​controlled House of Representatives and Senate adopted a joint resolution of disapproval under the Congressional Review Act that President Trump signed the same day. The resolution prevented the 2016 rules from taking effect.214 Adoption of the 2016 rules was so controversial because they were more onerous than the approach applied by the FTC to information service providers such as Google, Skype, and other so-​called ‘edge providers’, providers of websites, web-​ based email, applications, and search engines, even though it had been argued that these entities pose a greater threat to consumer privacy than broadband providers. In addition, the FTC had argued that the FCC’s rules resulted in two different privacy frameworks, which was likely to generate confusion for consumers. As a result of the Commission’s decision to reclassify broadband services as information services in December 2017, broadband service providers are again subject to the jurisdiction of the FTC and must therefore comply with §5 of the Federal Trade Commission Act and related case law. Telecommunications carriers providing telecommunications services remain subject to the jurisdiction of the FCC and must comply with the customer proprietary information rules adopted by the FCC prior to 2016 and codified in 47 CFR §§64.2001–​6 4.2012. However, there remains some concern that the FTC’s privacy framework is sufficiently robust to

  See also Section 5.4.3.   Protecting the Privacy of Customers of Broadband and Other Telecommunications Services, Report and Order, WC Docket No 16-​106, FCC 16-​148, 32 FCC Rcd 13911 (2016). 213  Protecting the Privacy of Customers of Broadband and Other Telecommunications Services, Order Granting Stay Petition in Part, WC Docket No 16-​106, FCC No 17-​19, 32 FCC Rcd 1793 (2017). 214   The resolution also prevents the FCC from reissuing the rules in substantially the same form unless specifically authorized by a law enacted after the date of the joint resolution. 211

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protect consumer data because it is not specifically tailored to the practices of broadband service providers.

5.14  CONC LUDING R EM A R K S It is difficult to predict how the US communications regulatory framework will evolve over the next few years. It is clear that the FCC has an important role in ensuring that robust communications services are made available throughout the US, and will face numerous regulatory challenges raised by the ongoing transition from a PSTN to a wholly IP environment, as well as other market developments that have been highlighted in this chapter. The rapid evolution of technology and changes to how communications services are used will undoubtedly present additional policy challenges that cannot be readily foreseen. It is also becoming increasingly clear that as a result of Ajit Pai’s appointment as chair of the Commission in January 2017 and the Republican commissioners’ acquisition of majority control of the FCC, there has been a move away from the more consumer-​ oriented approach that characterized the Commission during the presidency of President Obama. The Commission has shifted its emphasis to the free market, calling for evidence-​based decision-​making and more rigorous economic analysis before regulatory obligations are imposed. However, it is far too soon to determine the precise effect (positive or negative) this new approach is likely to have over the long term. In addition, the possibility of Congress intervening and rewriting the legislative framework that governs the US communications sector cannot be discounted. It has been more than twenty years since the last comprehensive communications-​related legislation, the 1996 Act, was enacted, and many aspects of the communications environment have changed dramatically in the intervening time.

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6 AUTHOR IZ ATION AND LICENSING Anne Flanagan

6.1 Introduction  6.2 Licences: Privileges and Necessities  6.3 International Law and Telecommunications Licensing Standards  6.4 The EU’s Licensing Regime  6.5 Concluding Remarks 

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6 .1 INTRODUC TION Licensing is a key aspect of telecommunications regulation. At a basic level, a licence permits a telecommunications provider to offer specified equipment, networks, and/​or services, and often conditions that permission on certain requirements. Licensing, however, can control market entry and, therefore, can be used to shape the market by limiting, or not, the number of players or the types of services. Licensing can create legal certainty for new entrants where the telecommunications regulatory or general legal framework is not comprehensive or otherwise adequate. Here, conditions and rights integrated into licences can substitute for such frameworks. Similarly, eg where private property rights might be uncertain, the licence can serve as a contract between governments and investors, a departure from the traditional legal nature of a licence. As a binding contract, it could guarantee exclusivity, ensure due process1 as well as impose performance obligations, eg market penetration or network roll-​out requirements. Investors

1   This is used here as shorthand for legal substantive and procedural requirements for fairness however they arise whether pursuant to statutory obligation or otherwise. A  contract can provide these, including remedies such as early termination payments and what procedures will be used to resolve disputes or adjudicate breaches, eg arbitration procedures and rules as well as limitations on the reasons it can be abrogated or breached.

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might otherwise be reluctant to commit the capital required to roll out new technologies and/​or networks to improve and update services. Without performance obligations, countries might be unwilling to involve private parties in running the state-​owned incumbent.2 Licensing can also foster competitive markets by imposing obligations on incumbents to level the playing field as well as ensure the continuation of socially desirable services or outcomes such as disabled access or universal service that competition will not. Licensing is, therefore, an important regulatory tool in both developing markets and competitive markets although the same considerations may not equally apply. For example, one of the most significant aspects of the current EU framework is that, generally, electronic communications providers need not obtain individual licences requiring approvals to provide networks or services.3 Since the 2002 Authorisation Directive, a scheme of general authorizations applies to all providers.4 EU Member States can subject these authorizations only to the defined and limited set of general conditions it permits. Individual conditions can be applied only in certain circumstances, explored below. Individual grants of rights may only be required for access to scarce resources, in the EU only radio spectrum and numbers. Licensing as a means to allocate, re-​a llocate, and manage radio spectrum for efficient telecommunications’ and other rapidly evolving, increasingly complex, and potentially shared uses is an important issue in light of the unabated demand and spectrum’s importance to an ever mobile, wireless, and digital society.5 Due to these considerations and the distinct policy and licensing attributes that spectrum involves, it is considered in a separate chapter.6 This chapter examines the current EU framework for authorization of electronic communications services and networks that, essentially, has been in place since 2002 albeit with some, more recent, harmonizing reforms intended to address ongoing Single Market and other concerns. It considers briefly the problems that the

  For an examination of issues arising in developing markets, see Chapter 17.   This focuses primarily on the nature and scope of approvals needed to provide communications networks and services. However, equipment intended to be attached to the network typically must also be ‘authorized’. In many countries, it must meet type and safety requirements via an established approval process. Although Chapter 4 (at Section 4.4.3) details the EU process and legislation governing this, the purpose of and legal justification for licences, inter alia, examined in this chapter, encompass public and consumer safety and extend, of necessity, to the regulation of equipment used to provide communications networks and services. The discussion in this regard will make reference where applicable to this aspect of ‘authorization’. 4   Directive 2002/​20/​EC on the authorization of electronic communications networks and services, OJ L 108/​21, 24 April 2002 (the Authorisation Directive). 5   See eg Report from Aspen Institute Roundtable on Spectrum Policy: ‘Revisiting Spectrum Policy: Seven Years After the National Broadband Plan’ (Bollier D, Rapporteur, The Aspen Institute 2016), . 6   See Chapter 7. 2 3

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2002 and the previous EU framework were designed to address, before discussing some currently proposed reforms to address substantially the same concerns. The chapter also explores the UK’s implementation of the EU regulatory scheme under the Communications Act 2003 with the ensuing amendments and refining regulation. The chapter will first, however, briefly examine the history and jurisprudential underpinnings of licensing as it has evolved in England and the United States and its use as a tool to both restrict markets and open them to competition.

6 . 2  L IC ENC E S: PR IV IL E G E S A ND NE C E SSITIE S Telecommunications licensing, generally, is a recent development. Most countries provided telecommunications as a public service, usually with posts, telegraph, and, sometimes, transport, via a government entity not subject to licensing. Licensing of telecommunications providers, however, did not emerge solely from the liberalization and privatization of state-​owned incumbents that has swept the globe since the 1980s. This ‘modern’ development has much earlier foundations7 and ties to historical events that are worth exploring to put a context and order to the study of today’s telecommunications licensing laws.

6.2.1  Meaning and history of economic restrictions ‘Licence’ comes from the Latin ‘licere’, meaning ‘to permit’.8 This sense of ‘permission’ to do an act or acts otherwise unlawful or comprising a trespass or tort appears to apply in all legal meanings or contexts of ‘licence’,9 such as a licence to enter onto land, to use a work protected by intellectual property, or to operate an automobile on public roads:  licences under real property law, contract law, and government regulation, respectively.10 This chapter deals primarily with licensing under government regulation,11 which can be defined as ‘authority to do some act 7   The focus here primarily on law and principles derived from English common law does not suggest a lack of comparable historical precedent within civil law systems. 8   See Bouvier’s Law Dictionary 711 (Baldwin WE, ed, Library Edition 1928). Accord, Black’s Law Dictionary 829–​8 30 (6th edn 1979). The other secondary sense is that of the document that embodies these permissions in writing. See, eg State ex rel Peterson v Martin, 180 Or 459, 474, 176 P 2d 636, 643 (1947); Mathias v Walling Enterprises, 609 So 2d 1323, 1332 (Fla App 1992); 53 Corpus Juris Secundum, Licenses §2 (1983) (CJS). In telecommunications licensing, the licensing document or certificate is often a complex writing with descriptions of grants, rights, networks, approved equipment, and schedules of conditions and definitions. The two senses are somewhat merged. 9   See eg Bouvier’s Law Dictionary, n 8.    10 Ibid. 11   Overlap exists with other contexts, eg in US communications licensing, some state and local franchise and licence requirements stem from the use of public lands by communications companies. See Quirk, WJ, ‘A Constitutional and Statutory History of the Telephone Business in South Carolina’, (2000) 51 South Carolina L Rev 290, 293. Use of public land is among the privileges suggested as underlying the rationale for imposing

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or carry on some trade or business, in its nature lawful but prohibited by statute except with the permission of the civil authority or which otherwise would be unlawful’.12 It examines this in the context of England and its derivative common law systems, primarily the US. Public regulation of private parties providing goods or services, such as telecommunications, stems partly from the common law’s imposition of greater duties and legal obligations on so-​called ‘public’ or ‘common’ callings.13 These selected trades or undertakings that changed over time according to their economic necessity14 and often scarcity, frequently comprising a monopoly,15 had a duty to serve all members of the public on reasonable terms and with reasonable care.16 Inns and carrier coaches that were essential17 to travel and travellers on the then few roads were soon included within this group that is today referenced primarily by the term ‘common carriers’, now far more limited.18 These are relevant here for several reasons. Inns were the first post offices in Britain and, innkeepers, the first postmasters in a system before that also ultimately governing telegraph and telecommunications in the UK. Further, licensing of inns and common houses serves to illustrate the nature and scope of licensing jurisdiction, generally, as exercised over time in the UK and US. Finally, the ‘common carrier’ classification continues

regulation on common callings and undertakings granted privileges. See Burdick, C, ‘The Origin of the Peculiar Duties of Public Service Companies’, (1911) 11 Colum L Rev 514, 616, 743.   Bouvier’s Law Dictionary, n 8.   See Wyman, B, ‘The Law of Public Callings as a Solution of the Trust Problem’ (1904) 17 Harv L Rev 156, 156–​159 (suggesting that akin to this common law theory, enhanced duties be placed on monopolies in light of their privileges and their economic necessity to society). 14   That the scarcity of inns and their importance to Britain’s emerging internal trade was a factor critical to their regulation is suggested by the fact that prior to their inclusion as a common calling, they could be indicted as a public nuisance ‘if it was set up where it was not needed’. Webb, S, and B, ‘The First Century of Licensing’ in The History of Liquor Licensing in England, at 5, n 1 (Longmans, Green & Co, 1903). 15   ‘The rule that one who pursued a common calling was obliged to serve all comers on reasonable terms seems to have been based on the fact that innkeepers, carriers, farriers, and the like, were few, and each had a virtual monopoly in his neighborhood.’ Wilson v Newspaper and Mail Deliverer’s Union of NY, 197 A 720, 722 (NJ Ch 1938) (citing Wyman, n 13). Another commentator notes that the doctrine emerged from the Statute of Labourers in 1349 to prevent unjust wage demands due to labour shortages created by the Black Death and eventually to those few tradesmen or professionals who worked outside the feudal domain. See Cherry, B, ‘Utilizing “Essentiality of Access” Analyses to Mitigate Risky, Costly and Untimely Government Interventions in Converging Telecommunications Technologies and Markets’, (2003) 11 Common L Conspectus 251, at n 31. 16   See Speta, JB, ‘A Common Carrier Approach to Internet Connection’, (2002) 54 Fed Comm LJ 225, 251–​256. 17   The concept of an ‘essential facility’ under US competition law whereby access is an economic necessity was noted by the court to have its roots in common carrier doctrine. See Munn v Illinois, 94 US 113, 125–​126 (1877) (citing extensively Hale, De Portibus Maris, 1 Harg, Tracts 78). 18   Since the nineteenth century, US courts have applied the ‘common carrier’ doctrine to undertakings related to infrastructure such as docks, roads, railroads, telegraph, and ultimately telephone, and constitutes a narrower group. See eg Candeub, A, ‘Network Interconnection and Takings’, (2004) 54 Syracuse L Rev 369, 381. 12 13

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to apply in the US today to telecommunications companies licensed19 as such by and called ‘carriers’ under the US Communications Act of 1934.20 Thus, the history and licensing of the inns within which the first postal system emerged evinces elements of law, economics, and social policy continuing to this day within regulation and licensing of electronic communications providers. The Tudors’ system of posts at regular intervals along key routes outside of London enhanced the reach and efficiency of the monarch’s messenger services.21 Largely established at the few inns along each route, the innkeepers became the first postmasters with each responsible for forwarding the monarch’s mail by horse dispatch to the next post. (This system evolved into the General Post Office, a government department later encompassing the telegraph and telephone systems as detailed in Chapter 3.) The Tudor postal system was based on a daily retainer fee and a monopoly grant to the innkeepers for the letting of horses for hire to all travellers on that road.22 The linking of a grant of monopoly with a public benefit or service seems a requirement 23 by medieval common law courts for legal recognition of restrictions on the freedom of any man to practise a trade even when

19   In the US, telecommunication common carriers are not granted a licence certificate but rather, where required, approval to enter a market is made via an order by the FCC under the Communications Act 1934, s 214. This individual approval process applies only to international service common carriers including facilities-​ based carriers, resellers, prepaid calling card providers, and various wireless service providers offering calling between the US and foreign points. Some of these are entitled to an expedited processing of 14 days. Here this comprises licensing since the regulator makes the decision to allow market entry on an individual basis. For US application and approval processes, see Crowe, TK, ‘FCC 214 Licensing’, (last updated 11 September 2012). Domestic, interstate services are subject to blanket approval pursuant to s 214 powers, with all individual scrutiny discontinued. This chapter will refer to this as a general authorization, in keeping with the EU’s classifications. The FCC imposes conditions and requirements for the performance of carriers’ service and network provision by further orders, regulations, and approval of filed tariffs. 20   47 USC 151 et seq. These businesses are also categorized as ‘public utilities’ both falling under a larger category of businesses ‘affected with a public interest’, a doctrine expounded by Lord Chief Justice Hale and utilized by US courts to justify economic regulation. See Munn v Illinois, 94 US 113, 125–​126 (1877) n 17. US courts in the early twentieth century struggled to pin the boundaries of this doctrine in various scenarios, including minimum wage statutes, ticket brokers, and employment agencies. They failed to do so with any real cohesive analysis and appear to have largely turned away from the doctrine as a source of power for economic regulation. See Candeub, n 18. 21   Postmaster General, ‘The Posts Before 1711’ Monarchs of All They Surveyed:  The Story of the Post Office Surveyors (London: HMSO, 1952) , at 6–​7. Those originally surveying distances between and establishing these posts later oversaw enforcement of the GPO’s monopoly and proper collection of its postage rates. See generally, ibid. Innkeepers remained postmasters under new systems by bidding for the contract to provide such services which then extended to private mail and for which these postmasters recouped their contract price and earnings from postage charged. 22  Ibid. 23   However, the ‘pretence d’un publike bien’ served as the basis for the grant of many privileges by the King. 4 Holdsworth, A History of English Law 344 at n 6 (2nd edn, 1938) (quoting YB Ed III Pasch pl 8).

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these restrictions arose as the result of a royal franchise or privilege.24 Other legal justifications were few. ‘Custom’ or ‘prescription’25 could legitimize royal privileges or franchises held since the time of memory that often had the result of restraining trade26 such as the grants of political and commercial self-​governance27 to guilds and local authorities.28 A national or public interest justified more recent grants. Beyond this, the principle of medieval common law, upheld by subsequent courts,29 was that ‘prima facie trade must be free, and that freedom could only be curtailed by definite restrictions known to and recognized by the common law’.30 The prerogative to restrict economic liberty via limitations on trade, grants of intellectual property, etc, was subsequently vested in Parliament, although the royal prerogative did not disappear quickly or readily.31 Hence, sources and kinds of lawful restrictions on trade, while limited by these legal principles, were still numerous and varied. Moreover, common law understanding of freedom to practise a trade without restriction was limited to the concept of freedom from arbitrary restriction not defensible by public policy.32

6.2.2  Licensing powers and historical purposes Defensible restrictions could vary according to the grant and circumstance. Application in the context of inns is worth examining as justifications for limitations on the economic liberty of innkeepers in the form of a licence requirement can be seen to apply more generally to licensing of other common callings or common carriers, including, subsequently, telecommunications carriers. Inns and other public houses selling alcohol were very early on subject to licence by

24   See 4 Holdsworth, n 23, at 344. This commentator notes, ibid at n 4, that grants of the King could be contrary to the common law and public policy as restraints on trade. Accord, Webb, S, and B, n 14 at 5, n 1 (quoting the King’s 1604 circular letter to the Privy Council that ‘By the law and statutes of this our realm, the keeping of alehouses and victualling houses is none of those trades which it is free and lawful for any subject to set up and exercise, but inhibited to all save such as are thereto licensed’). 25   Usage beyond the time of memory, defined as that before Richard I. 3 Blackstone’s Commentaries with Notes of Reference to the Constitution and Laws of the Federal Government of the United States and of the Commonwealth of Virginia, 36 at n 7 (St George Tucker, 1803) (reprinted Rothman Reprints, 1969). 26   Freedom from restraint according to common law standards was freedom from arbitrary restraints only, ie those not recognized by law. See Maitland, WH, The Domesday Book and Beyond: Three Essays on the Early History of England (CJ Holt, 1897), at 261–​264. 27   These numerous and varied grants often included not only the right to revenues collected in whatever undertaking it applied to but also jurisdiction over the persons and activities involved, or ‘soke’ and ‘sake’, respectively. See Maitland, WH, n 26, at 261–​264. Hence trade and governance were often intertwined. 28 29   4 Holdsworth, n 23, at 346.   See eg Darcy v Allin, (1602) Moore KB 671–​675. 30   4 Holdsworth, n 23, at 350. 31   See generally, ibid, at 344–​362. The English Statute of Monopolies of 1623, 21 Jac 1, ch 3, made void all privileges, commissions, and grants of monopoly not confirmed by statute. 32   4 Holdsworth, n 23, at 350–​352.

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the local justices of the peace who under ‘the statute of 5 and 6 Edward VI c 25 (1552) . . . were authorized to select from time to time, at their discretion, certain persons who were alone to exercise the trade of keeping a common alehouse’33 and inns when they became subject to the legal regimen of common callings.34 This regulation arose from a balancing of public interests: making available a then perceived necessity of life, the beer consumed at every meal, and control over the disorder and problems produced by excessive drinking.35 This strengthened their earlier powers to eliminate any alehouses that went beyond that number required to serve the needs of the market,36 perhaps an early example of natural monopoly theory that served to justify the virtually exclusive licensing of monopoly providers of telecommunications in the twentieth century.37 Parliament’s delegation to justices of the peace included ‘three distinct forms of control:  the power of selection, the power of withdrawal, and the power of imposing conditions’38 (controls which also describe accurately telecommunications licensing authority, until recently, in the EU). Purposes, broadly, for which licensing might be imposed, were described over 100 years ago as follows: The device of licensing—​that is, the requirement that any person desiring to pursue a particular occupation shall first obtain specific permission from a governing authority—​may be used to attain many different ends. The license may be merely an occasion for extracting a fee or levying a tax. It may be an instrument for registering all those who are following a particular occupation, in order, for some reason or another, to ensure their being brought under public notice. It may be a device for limiting the numbers of those so engaged, or for selecting them according to their possession of certain qualifications. Finally, the act of licensing may be the means of imposing special rules upon the occupation, or of more easily enforcing the fulfilment either of these special rules or of the general law of the land.39

These same purposes continue to apply to contemporary licensing as do some new ones, as examined below. However, the source of the authority underlying the purposes is important for their legitimacy and scope. For example, the exercise of

34 35 36   Webb, S, and B, n 14, at 5, n 1.   Ibid, at 5, n 1.   Ibid, at 2–​3.   Ibid, at 5–​6.   Civil law countries in Europe apparently had similar systems for authorizing and regulating transportation carriers as businesses affected with a public interest under a theory akin to that of common carriers and limiting their numbers within certain regions for reasons that seem premised on natural monopoly and public interest. See Fulda, CH, ‘The Regulation of Surface Transportation in the European Economic Community’, (1963) 12 Am J Comp L 303, 308–​313 (commenting that while Germany, Belgium, Italy, and others limited numbers of competitors in trucking and railroads operations to ensure continued availability and safe operation without threat of unlimited competition that here would cause more harm than in other economic sectors, the limiting of numbers of business units by the US seems generally to have been confined to the liquor industry). 38 39   Webb, S, and B, n 14, at 4–​5.   Ibid, at 4. 33 37

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the regulatory or the ‘police’ power of the state ordinarily comprises the primary foundation of licensing requirements considered necessary for the public interest or general welfare such as public health, morals, or safety.40 In the US, a significant number of states view licensing of legitimate businesses or occupations without such interests as outside the limits of their police power.41 The source of power underlying licence fees is less clear. While the sovereign’s power to tax has sometimes been considered to underlie the imposition of licence fees, it has also been held that a true ‘licence fee’ is imposed under the police power with application only to a type of business that is supervised or subject to regulation that does in fact occur, the expense of which is intended to be defrayed by the fees equated to the ‘probable cost’ of supervision.42 Fees unrelated to the cost of regulation have been considered a ‘tax’ on occupations in the nature of an excise under the power to raise revenue, and subject to review under different standards from licensing fees.43 It has been suggested that perhaps both powers can apply within the same fee and be valid. Licence fees for telecommunications providers appear to vary greatly within and across jurisdictions. However, since 2002, fees under the EU’s framework, other than those associated with scarce public resources, must not only be based on the costs of licence issuance and enforcement, but must also be demonstrably so or otherwise adjusted. They are then truly ‘licence fees’. The CJEU has, however, upheld, in contrast, a regional tax based on ‘establishment’ as applied to communications providers in light of the presence of their poles, pylons, and masts installed on private or public property in a province as distinct from any fee to install or operate that equipment under the Authorisation Directive.44

40  See Sharp v Wakefield [1891] AC 173, (Bramwell, LJ) (noting that the licensing of public houses was largely police rather than economic regulation). Accord, 53 CJS, n 8 at §5. 41   See 53 CJS, Licenses § 5. 42   National Biscuit Co v City of Philadelphia, 98 A 2d 182, 187–​188 (Pa 1953). Accord, Hunt v Cooper, 110 SW 2d 896, 899–​9 00 (Tex 1937). 43   See eg National Biscuit, n 42 at 187–​189; Hunt, 110 SW 2d at 899–​9 01. Where the licence requirement is seen as revenue-​raising rather than regulatory, it has been held that the licence is merely a receipt rather than a permission. See Royall v State of Virginia, 6 Sup Ct 510 (US 1886) (noting that a municipal occupation licence could not prevent an attorney licensed by the State to practise law in any part of the State from practising within the city limits, although a valid tax). Failure to obtain or comply with a licence that is seen as administrative or merely revenue producing may have lesser consequences at law than one which seeks to regulate skills or proficiency or is otherwise imposed for public safety or health. See eg Dubray v Horshaw, 884 P 2d 23, 28 (Wyo 2000) (where statutory requirement for licence transfer was merely administrative rather than intended to protect a class of persons from a particular harm, citing s 286 of the Restatement 2d of Torts, it created no duty of care on the plaintiff). 44   Joined Cases C-​256/​13, C-​264/​13, Provincie Antwerpen v Belgacom NV, Mobistar (2014).

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A different source of authority may underlie the privilege, licence, or franchise involving the grant of a valuable resource belonging to the public, such as land,45 or in the case of telecommunications, radio spectrum.46 These have long been considered to be administered by the state on behalf of the public under the doctrine of ‘public trust’, based on Roman law.47 Payment of a fee that reflects value of the resource unrelated to its regulation, and that ensures its effective and efficient use, is therefore considered appropriate to be levied, although not always done.48 These policies in connection with spectrum will be examined further in Chapter 7.

6.2.3  Purposes of contemporary telecommunications licensing The following explores how the historical purposes for licensing underlie communications licensing, tracing this in the few telecommunications markets where licensing existed before the last forty years’ liberalization, and in modern telecommunications licensing regimes since. 6.2.3.1  Licences as a control over market entry Licensing has been a common ‘device for limiting the numbers of those so engaged’ in telecommunications to control market structure. In both the UK and US, eg, this included the extreme aspect of protecting a monopoly. In the UK, the Telegraph Act 1869 established ‘exclusive privilege’ in the General Post Office to operate telegraph services in the UK but not itself subject to licence or regulation as a government department. While the Act exempted certain entities such as railroads, canals, and limited other undertakings, eg Lloyds of London, for their own use, other companies wishing to provide telegraph services had to obtain a licence granted by the Postmaster General.49 This protective legislation later was construed to encompass telephony50 that thereafter could no longer be provided

45  See Shively v Bowlby, 152 US 1 (1984) (noting that public lands were traditionally held by the king for the benefit of the nation under jus publicum, with such vesting in the federal and state governments of the US upon the American Revolution). 46   Corbett, K, Note ‘The Rise of Private Property Rights in Broadcast Spectrum’, (1996) 46 Duke LJ 611, 616–​619. 47   See Institutes of Justinian 2.1 (T Cooper trans. 2d edn 1841) positing that ‘Things common to mankind by the law of nature, are the air, running water, the sea, and consequently the shores of the sea . . .’ 48   See eg Corbett, K, n 46. 49  Events in Telecommunications History, BT Group Archives,  . 50   Attorney-​G eneral v The Edison Telephone Co of London, Ltd [1880–​81] LR 6 QBD 244. In upholding the Postmaster General’s monopoly, the court relied on the public interest of the Act’s grant of special powers to build networks/​i nstall equipment on public and private lands and related duties and its obligation not to divulge the content of a communication which would not apply to an unlicensed entity acting outside the scope of the Act. See ibid, 254–​255.

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by a private company without the granted licence, ensuing revenue sharing and liability to takeover.51 Historically in the US, except for some small, rural carriers, American Telephone & Telegraph (AT&T) was the exclusive ‘common carrier’ licensed under the Communications Act of 1934 pursuant to a natural monopoly theory and after AT&T had acquired most of the other carriers in the country.52 Licensing to limit the numbers of market entrants was neither exclusive to these two countries nor a mere historical curiosity. In 1999, the EU reported that the individual licences required by a majority of Member States with their ensuing complexities and, in some states, delay and expense, lack of transparency, and excessive regulatory discretion were barriers to market entry.53 EU licensing then had the effect, if not also the object, of limiting the number of market entrants and, therefore, of protecting the national incumbent and maintaining near-​monopoly market structures. The present EU framework has largely resolved concern about the authorization grant itself as a barrier to entry with its mandate for general authorizations without individual regulatory decisions or permissions, although associated market entry concerns remain.54 Licensing to control against market entry must be contrasted with licensing as a tool to introduce competition. This is done by requiring licensing of the incumbent that may or may not be still government-​owned and/​or granting licences to new entrant(s) that will offer services in competition with the incumbent. To level the playing field, asymmetric conditions are often imposed on the incumbent, usually via the licence, such as requiring it to interconnect on a non-​d iscriminatory basis and at regulated, sometimes cost-​ based rates and maintaining separate accounting to ascertain and verify such cost. Specific examples of a licence to open markets include the UK’s licensing of Mercury under the British Telecommunications Act 1981 to provide a second fixed network in competition with British Telecommunications (BT), therein granted an ‘exclusive privilege’55 and the 1969 licensing of MCI by the US Federal Communications Commission to

  See Events in Telecommunications History, n 49.   See Chapter 5 for a discussion of the early history of US telecommunications. For a further discussion of natural monopoly, see Chapter 2. 53   Commission Communication, ‘Toward a new framework for electronic communications infrastructure and associated services:  The 1999 Communications Review’ (1999 Communications Review), COM(1999) 539, 10 November 1999. Accord, Commission Communication, ‘5th Report on the implementation of the Telecommunications Regulatory Package’ (1999). 54   These include such issues as rights of way, fees, and cost transparency, see ECTA Regulatory Scorecard Report 2009, that continue in the Next Generation Access context. See also Allen, J and Arnell, A, Report for ECTA: ‘The digital single market and telecoms regulation going forward’ (18 September 2015). Both at: . 55   See Chapter 3. 51

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construct a microwave network and provide long-​d istance services over it to subscribers for interoffice communications.56 Both were merely first steps, requiring further intervention including additional legislation and court action to achieve what could be called a competitive market. Licensing can serve simultaneously to limit and open markets as evidenced with wireless communications. Limited spectrum availability and the need to protect revenue flows of a state-​owned or recently privatized monopoly incumbent (possibly operating in both fixed and wireless markets) have caused countries to delimit the number of wireless providers licensed in a market essential for its ability to penetrate geographically more broadly with lower infrastructure costs than was possible by installing new or upgrading aged fixed-​l ines infrastructure. Wireless telephony, therefore, in developing countries, leapfrogged the old technology to compete as an alternative infrastructure to fixed lines and enhanced greatly the historically poor telephony penetration rates. The leapfrogging has continued with developed countries now seeing a marked decline in fixed-​l ine subscriptions and mobile telephony penetration rates approaching 100 per cent in developing countries.57 In a hybrid of these dual licensing objectives, regulators have limited the number of 3G market entrants but then used licensing conditions to open further these limited markets. Hong Kong, eg, seeking to increase both competition and innovation, set ‘open network access’ conditions on the four 3G licensees, requiring them to make a minimum of 30 per cent of their capacity available to virtual mobile network operators (MVNO), effectively at least doubling the number of market entrants with access negotiated at market rates.58 In 2011, France, in awarding only four 4G licences, credited spectrum auction participants agreeing to enhanced MVNO access conditions with  a multiplier on their bid price, increasing their chance to win a licence.59 Limits on market entry can also be imposed via requirements for multiple licences, ie different licences for different types of networks and services. Providers might be required to have numerous licences based on the network operated or the type of service provided. For example, before the 1999 EU reforms, the UK had twenty-​two licence categories based on the network operated. Some countries

  See Chapter 5.   See ITU, ‘Key ICT indicators for developed and developing countries and the world’, 2017, . 58   Special Condition 12, Hong Kong Mobile Carrier Licence for 3G Networks, . (archived) 59   See Maxwell, W, ‘French 4G Auction Results Announced’, International Spectrum Rev (Hogan Lovells 23 December 2011), < https://​w ww.hoganlovells.com/​blogs/​h lspectrumreview/​f rench-​4g-​auction- ​results-​ announced>. 56 57

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may license providers of mobile voice telephony but limit licensing of fixed voice or international voice to the national incumbent for various reasons. For example, starting in 2006 and until recently, the UAE allowed a second provider in fixed line services to compete only in different geographic markets from the incumbent. The delayed duopoly in all fixed markets via mutual local loop unbundling, scheduled for the end of 2011, only occurred in late 2015 well after the competitors were already competing in mobile markets.60 This delayed liberalization is typical of Middle Eastern and African countries.61 Licensing with fixed network and services markets’ exclusivity for a defined period has been a common strategy to attract investors in newly privatized incumbents in order to ensure a return on their investment. Technologies using Voice over Internet Protocols (VoIP), such as Voice on the Net or peer-​to-​peer applications, however, have challenged such exclusivity with numerous countries limiting competing VoIP services. Wireless VoIP telephony poses licensing and other regulatory challenges with the growth of WiFi hot spots providing broadband internet access using unlicensed (possibly illegal) spectrum, and the growing availability of WiFi handsets and soft phone software to convert mobile internet access devices into phones. 6.2.3.2  Licensing to impose eligibility requirements Telecommunications licensing can be used to ensure professional and technical or other eligibility requirements, another historical ‘end’ justifying the ‘device of licensing’. Licensing processes to ensure applicants possess various qualifications are not uncommon, eg, to ensure that potential providers are solvent, able to deliver the services or complete the network they apply to provide, or will use scarce resources well. These can range from a ‘fit and proper’ standard applied to persons running the company 62 to the provision of an appropriate business plan63 evincing expertise or the proof of a specific experience, such as numbers of years of provision elsewhere. These are common in comparative licence award processes, often called ‘beauty contests’, where providers compete for the licence to be awarded

60   See Kapur, V, ‘UAE resident alert: You may now switch your Internet, fixed line provider’ (Emirates 24/​7 20 October 2015), . 61   Algeria only recently required LLU by its incumbent. See ‘Algerian government adopts new telecoms bill, report says’ (Telegeography 3 January 2017), . 62  See Carrier or Service Provider Licence, Form I, sec G, Jamaica Telecommunications Act 2000, Telecommunications (Forms) Regulations 2000, . 63   eg Japan requires the filing of a business plan for telecommunications licences and applies disqualifying fitness criteria. See Ministry of Internal Affairs and Communications, Manual for Market Entry into Japanese Telecommunications Business (2006).

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against identified arguably merit-​based criteria. Numerous countries around the world used beauty pageants to allocate 3G spectrum.64 Sometimes minimum qualifications serve as the threshold for entry to auctions for licences, a process frequently used with spectrum licences. Price or another criterion then becomes the deciding factor.65 6.2.3.3  Licensing as a means to impose special rules or operating controls Licensing as a ‘means of imposing special rules upon the occupation’ can readily be seen in modern telecommunications regulation. Licences impose all sorts of controls, usually via ‘conditions’ on the grant of permission especially regarding basic services.66 Licences often impose technical requirements for equipment attached to or interconnected with the network for its protection and that of employees of providers and users. Conditions can also attempt to ensure efficient use of numbers, spectrum, and other resources considered scarce by a jurisdiction. In the EU, such conditions premised on ‘non-​economic reasons in the general public interest’ called ‘essential requirements’, comprise a limited and harmonized set of conditions honed over time to ensure essentiality and remove barriers to entry.67 Their application can vary according to the nature of the equipment or service at issue. Conditions imposed for specific technologies or with different effect on a technology risk a costly or difficult regulatory burden on this technology not existing for others and possibly undermining its development and use. For this reason and in light of technological convergence, eg, the EU’s regulatory framework seeks to be technology neutral although this is not always achieved such as when regulation to address bottlenecks in a relevant market not considered substitutable for another (often due to the nature of the technology), imposes distinct requirements. Other non-​economic conditions imposed via licences are used to achieve social objectives, such as the funding/​provision of some services on a non-​competitive basis to ensure that all citizens, irrespective of location, have access to a minimum specified level of affordable service and/​or to ensure consumer protections unique to telecommunications, such as the provision of emergency service operators on a toll-​free basis. These and other mandated services, depending on the individual jurisdiction’s policies, can comprise the ‘universal service obligation’ (USO), ordinarily the monopolist’s quid pro quo to providing all services. In liberalized markets,

64   See ITU 3G License Table (2001) (11 of 49 countries used beauty contest), . 65   Ibid. This is discussed further in Chapter 7. 66   Enhanced, or information services, in contrast, may be unlicensed and not regulated, eg in the US. See Chapter 5. 67   See Chapter 4, European Union Communications Law at Section 4.4.2.

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imposing a USO obligation (or right to exploit this opportunity, as the EU now views such service provision) or a duty of USO financial contribution may require a licensing condition or right. These can be individual USO conditions imposed on specific providers, still often the former monopolist with its state-​revenue-​built networks and large market share. Contribution can be via a general condition imposed on all or a defined group of providers, such as providers of public telecommunications networks and services. As in the UK, these can exist but be untriggered, eg for potential future contributions to any USO fund that might be established if the cost to the former incumbent becomes unduly burdensome. This avoids the difficulty of amending the licence after issuance. 6.2.3.4  Licensing as a means of enforcement Licensing as a means ‘of more easily enforcing the fulfilment either of these special rules or of the general law of the land’ is, or has been, true for telecommunications. Many sector-​specific regulators rely on licensing powers as their primary means of enforcement. Powers to modify or revoke licences and/​or impose sanctions, even if subject to review, can ensure compliance with obligations. Conditions may encompass not only requirements under telecommunications legislation but also other laws. For example, the UK telecommunications regulator formerly imposed a duty to comply with competition law under a ‘fair trade’ condition in the licence, removed under the 2002 EU telecommunications licensing reforms precluding conditions for compliance with general laws.68 In the EU, therefore, this licensing purpose is delimited. EU law also further restricts the sector-​specific rules that can be applied via licence conditions. (See Sections 6.4.1, 6.4.2.4.) Enforcement of sector-​specific conditions does not preclude regulatory reliance on other laws if the sector enforcement power is too limited in scope or effectiveness. Thus, the UK telecommunications regulator, Ofcom, is further empowered under the UK Competition Act 1998 and the Enterprise Act 2002. It can choose, therefore, which avenue will be more effective for specific anti-​competitive behaviour. In 2005, it chose to address likely abuses of dominant behaviour in wholesale access and backhaul markets by British Telecommunications (BT), by means of the Enterprise Act. Pursuant to section 154 of that Act, Ofcom accepted a series of binding undertakings by BT to functionally separate its operations in order to provide access to its core network and to ensure product equivalence for downstream competitors, etc.69 Section 154 allows Ofcom, in lieu of a formal

  Authorisation Directive, Art 6(3).   See generally, Ofcom, ‘Notice under s 155 (1) of the Enterprise Act 2002 Consultation on undertakings offered by British Telecommunications plc in lieu of a reference under Part 4 of the Enterprise Act’, 2005, at . 68 69

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referral for full market investigation by the Competition and Markets Authority (and potential for the full structural separation of BT), to enter into binding undertakings to remedy, mitigate, or prevent any adverse effect on competition, or any detrimental effect on customers which has or may be expected to result from the adverse effect on competition. After a market review, in 2017, Ofcom varied the 2005 undertakings to provide for the legal separation of the unit running the network, Openreach, as the prior undertakings were found insufficient to address its bias in favour of BT’s retail business.70 Openreach will now operate as a limited private company wholly owned by BT with its own employees and a board that pursuant to governance commitments will oversee its own operating strategy and accountability.71 The ability to correct market abuses via sanctions under licence conditions remains a valuable tool, however. Arguably, this is especially true in emergent and developing markets where the need to control the former incumbents may be more acute than in more evolved competitive markets. The serious and repeated regulatory intervention required in the UK, one of the world’s most evolved markets, belies this, suggesting that control over the essential facility of the core telecommunications network always permits exclusionary behaviour. Recognizing the limitations of its sectoral conditions, the EU now requires national regulatory authorities (NRAs) to have the extraordinary sectoral power of functional separation for such persistent problems, the impetus for the UK’s sectoral provision.72 One scenario evidenced in contemporary telecommunications, if not historically, is licensing as a substitute for either and/​or both special rules and general laws of the land, eg, where the need exists to get outsiders to risk money and time either to invest in the incumbent or competitors, but where the general legal framework might not be developed sufficiently to protect that investment. It might also be helpful absent a general competition law framework that places duties on all players in the market or where authorities are without telecommunications expertise. Licences with clear obligations and rights can protect new entrants where no adequate sector-​specific regulations exist, such as for cost-​based interconnection which competition law is unlikely to require.

70   Although sector-​specific regulation now provides for this option, see Communications Act 2003, s 89A, with requisite notification to the Commission under s 89B, the legal basis for the revised undertakings does not appear to have changed, although Ofcom did notify the Commission as s 89B requires. 71  BT, ‘Proposals agree with Ofcom’, , accessed 10/​0 9/​2017. 72   See Chapter 4. Also see n 70.

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6.2.3.5  Licensing and fees Considering other historical purposes of licensing, it does not appear typically the case that telecommunications licensing is merely a device to extract a fee.73 However, licensing fees are very common and not usually de minimis sums, even where based on the cost of regulation. The former individual licences under the UK regime for public telecommunications operators were as much as £40,000 annually and purportedly cost-​based. Cost allocation and transparency issues exist even in the EU where fee regimes are required to be based on the cost of regulation other than for spectrum, scarce numbers, and possibly rights of way over land.74 There does, however, seem to be a trend of lower licensing fees in India, Zimbabwe, and other developing nations with the growing recognition that lowering such costs is key to more competitive markets and, ultimately, lower consumer costs.75 However, even where licences to provide services in a particular market are not formally limited numerically, prohibitively high licence fees have been used to limit entrants to a lucrative market that is de facto being reserved for the incumbent former monopolist. This can be found, for example, in the fees set by numerous African countries for the provision of private international gateways that would compete with the national champion in international services.76 6.2.3.6  Licensing and monitoring Returning to its historical justifications, licensing does help ensure that those providing electronic communications networks and services are on the radar screen of the public and regulators who can oversee their compliance with laws and ensure that the licensing fee and any required payments, such as contributions to a USO,

73   But see ‘Testimony of Barry M. Aarons et al before the US Senate Commerce, Science and Transportation Committee’ (7 March 2006) (stating that US municipality licence and franchise fees for telecommunications providers bear no relation to access to municipal rights of way (and therefore falling within the limited resource category) but are rather merely revenue raisers and ultimately a service tax on end users), . See eg Chapter 3.24, Midvale Municipal Telecommunications License Tax Code, Codification of General Ordinances of Midvale, Utah (1988 and as amended 2004)(3 ½ % tax rate based on gross receipts). 74   See ECTA Regulatory Scorecard Report 2009, n 54, at 10. Also see Pyddoke, R, ‘Transparency and accountability of telecommunications in Sweden’ (2013) (Koncurrensverket Projekt 2012/​310), at 16, 20–​22 (positing that even a regulator as effective as the Swedish PTS could be more accountable and transparent, eg failing to publish a 2013 annual work plan with budget), . 75  See ‘Zambia lowers international gateway license fee’ (Lusakatimes.com 16 June 2010)  (noting that Zambia was seeking to attract investment comparable to Uganda, Tanzania, and Kenya which had much lower license fees), . 76   See OECD Investment Policy Reviews:  Zambia (2012), at 145 (noting that $12.5  million gateway fee in Zambia limited competition to incumbent until it was lowered to $300,000).

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are made. In the EU, this historical licensing function is met by the Authorisation Directive’s permitted notification procedure or registry. Implementation is varied. For example, while the UK regulator has eschewed this general register, other more limited registers exist. The Electronic Communications Code registry allows persons to check if an undertaking has powers to install networks on public and private land and has completed its annual financial security filing. Premium rate providers (services and networks) must register with the Phone-​ paid Services Authority under a code of practice authorized by Ofcom under the Communications Act 2003. Ofcom also created a registry to allow it and other possible spectrum users to know how spectrum is being traded and reused, although seemingly unavailable on Ofcom’s site.77 6.2.3.7  Licensing as a binding agreement A final but contemporary licensing purpose is as a contract between the government and the provider.78 This is the case, for example, where private sector strategic investment and expertise is required to modernize large telecommunications infrastructure and provide new services or substantially improve services but where the government is not ready to or does not want to privatize or fully privatize the state-​owned provider and transfer ownership. The relationship between the government and the private undertaking(s)79 with allocation of risk, rights, and obligations from a continuum of possible options is often spelled out in complex agreements. Just one example is found in build-​operate-​t ransfer (BOT) agreements whereby the private undertakings are given a concession to operate for a fixed time (often fifteen to twenty-​five years) the infrastructure that they have built80 (eg new mobile network or an upgrading a fixed network) which is then turned over to the government at the end of the concession period. Beyond project financing provisions, the contract may also contain conditions under which the service will be provided as well as the nature of the service and roll-​out obligations. To ensure protection of the private parties’ investment, the BOT agreement may provide the concessionaire with exclusive authority to provide some or all services for specified periods. It may also limit the changes in national regulation that can affect the BOT operations and rights or apply a choice of law. Essentially,

77   Wireless Telegraphy (Register) Regulations 2004, SI 2004/​3155 as amended. See also Ofcom TNR, . 78   See Wellenius, B, and Neto, I, ‘The Radio Spectrum: Opportunities and Challenges for the Developing World’ (World Bank, 2008). 79   More than one can be involved, for example, in a joint-​venture type of public/​private partnership (PPP). 80   The financing may come from a variety of sources including the host government and/​or may, according to its nature as debt or equity, require sovereign obligations.

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the contract fulfils the purposes of licensing and may effectively serve as the licence. However, there may be a separate licence included or referenced within the BOT contract.

6.2.4  The legal nature of licences The licence that gives rise to contractual obligations is contrary, however, to the traditional legal nature of government licensing. While a licence ordinarily does confer a right or a power to engage in a certain occupation or economic activity, or a right to use property that does not exist without it, and subject to restrictions and revocation, a licence has not historically been considered a contract between the issuing authority and the licensee.81 Rather, US and UK courts have considered them privileges of an individual nature that created no property rights82 and could not, therefore, be conveyed to third parties. Renewals had the same status as the initial licence; both were within the discretion of the granting authority to issue and revoke, subject only to the jurisdictional limits of their authority.83 This would appear to be changing in telecommunications. In the EU, the Authorisation Directive makes the general authorization to provide electronic communications networks and services virtually automatic with its accompanying rights subject only to limited conditions and, perhaps, a notification. It is as well, perhaps, perpetual with revocation possible only in certain serious, limited circumstances. As this framework also requires that any decision that affects the interest of any party be subject to the right to comment and to appeal84 ultimately to a judicial body, the removal of an authorization is entitled to due process typically commensurate in democracies with property interests.85 The 2002 Framework took much of the discretion to grant and remove permissions to provide networks and services away from the granting authority (although the 2009 reforms restored a bit of balance with the enhanced sanction potential). The EU framework’s continued movement towards a system permitting spectrum licence transfers to third parties is a further development that signals recognition of the

  See CJS, n 8, at 3.   See eg Lap v Axelrod 95 A 2d 457 (NY App Div 3d Dept 1983), appeal denied, 460 NE 2d 1360. Also see Sharp v Wakefield [1891] AC 173 (‘The hardship of stopping the trade of a man who is getting an honest living in an honest trade, and has done so, perhaps, for years, with probably an expense at the outset, may well be taken into consideration; but it must be done so in conjunction with considerations the other way, and must be left to the discretion of the justices.’ Bramwell LJ, 182–​183). 83  See Sharp v Wakefield, n 82 (noting that, absent a provision in the enabling statute to the contrary, local justices had the same discretion to renew as to issue). 84   Directive 2002/​21/​02 EC on a common regulatory framework for electronic communications networks and services, L 108/​33, 24 April 2002, Art 4. 85   See n 1. 81

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great value of these rights of use and that the ability to trade or ‘resell’ spectrum rights may be important to their effective and efficient use, particularly with projected 5G characteristics suggesting a greater need for spectrum sharing.86 The nature of such greater rights seems a ‘propertization’, as one usually cannot trade or sell something without having some legally recognized property interest in it. This almost seems implicit in any creation of such secondary markets that need to make spectrum legally transferable. The US FCC implemented a legal framework for trading seemingly structured to avoid this legal effect. It originally only permitted non-​prior approval for spectrum leasing where the original licensee retained the full licence and remained responsible for compliance.87 For transfers or assignments, the licence had to be returned to the FCC and new licence(s) issued with regulatory obligations running to the new licensee (or to both licensees if the spectrum was merely partitioned).88 Clouding the prior legal distinction somewhat, the FCC has, under its power of regulatory forbearance, streamlined the process once described as ‘clumsy’,89 to allow certain transactions in both categories of leased and transferred/​assigned spectrum to receive an ‘instantaneous’ (overnight), expedited processing based on parties’ certification of compliance with various set criteria and has also created the concept of a ‘private commons’ where licensees can allow for device-​to-​device type communications not involving the full network infrastructure.90 Grant holder concerns about the nature of their interest and extent of their controls over other intangible interests granted via regulatory permissions, eg for numbers or rights of access, where a premium has been paid, are understandable. Efforts to make the status legally clearer can be seen, eg in Australia with ‘Smartnumbers’ (ie those arranged so as to be more memorable) that are auctioned by the Australian Communications and Media Authority. ACMA advises applicants that the auction creates only an enhanced ‘right of use’ in the number (ROU) but that they don’t become an ‘owner’ although the number ‘remains’ theirs unless inactive for three years and that they can sell or lease it.91 86  See eg Johnson, N, ‘Reality Check:  The need for new spectrum sharing and small cell strategies’ (RCR Wireless News 4 October 2016), . 87   See generally, FCC 03-​113, First Report and Order and Further Notice of Proposed Rulemaking that authorizes spectrum leasing in a broad array of Wireless Radio Services (FCC Washington, DC, 15 June 2003). 88  Ibid. 89   Judge, P, ‘Ofcom to throw radio spectrum wide open’ (Tech-​World, 23 November 2004). 90  See ‘Promoting Efficient Use of Spectrum Through Elimination of Barriers to the Development of Secondary Markets’, Second Report and Order, Order on Reconsideration, and Second Further Notice of Proposed Rulemaking, FCC 04-​167, 17529-​33, paras 53–​6 6 (FCC Washington, DC, 8 July 2004). Also see Sayle Carnell, W, ‘ “Private Commons” in Radio Spectrum: The FCC Avoids a Tragic Result’, (2004) 6(1) Engage, The Journal of the Federalist Society Practice Groups 150. 91   ACMA, ‘About Smartnumbers’, .

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6.2.5  Types of licences and licensing processes 6.2.5.1  Licence form Thousands of licence types are theoretically possible in telecommunications, globally. However, they can generally be distilled into three primary overarching categories:  individual provider/​operator/​carrier licences; general authorizations (or class licences); and no licence requirement. Individual licences require an approval or exercise of discretion by the regulator or some other entity, eg minister or possibly the incumbent, for a specific undertaking to provide specified services or approved networks. Many countries require such individual authorizations that may be called by other names. For example, Trinidad and Tobago requires all persons operating a public telecommunications network or providing a public telecommunications service or broadcast service to obtain a ‘concession’ from the minister responsible for telecommunications.92 Individual licences may be subject to conditions applying exclusively to a provider and possibly individually negotiated; or may all have the same conditions. This was the case with the UK’s former licensing scheme implemented under the EU’s Licensing Directive.93 Oftel harmonized licences and conditions by licence type, eg ‘Standard Fixed PTO (with Code Powers)’ and ‘Standard Fixed PTO (without Code Powers)’. Identical conditions were applicable to all those running that kind of network or telecommunications ‘system’. The running of that network or system was the triggering event for the UK licence requirement as opposed to providing services. In those harmonized licences, there were a few unique conditions: those limited to BT and another small incumbent system, then, Kingston-​on-​Hull (Kingston Communications), based on market power definitions. With individual provider/​operator/​carrier licensing, there is usually an application and decision process that may vary by country as to the information required to be provided by the potential provider, the length of time that such decision and process can take, and the fee to be paid. However, with the WTO’s transparency requirements for such information, evaluating the barrier that individual licensing represents in a specific country will be easier, if not ultimately lessened.94 General authorizations, formerly called ‘class licences’ in the UK, do not require individual decisions or the exercise of discretion. Rather, the undertaking meeting the conditions is authorized to operate the network and/​or services described by that authorization if it does so in conformity with its conditions. There

  Republic of Trinidad and Tobago Telecommunications Act, 2001, §21 (Act 4 of 2001).   Directive 97/​13/​EC of the European Parliament and of the Council of 10 April 1997 on a common framework for general authorizations and individual licences in the field of telecommunications services, OJ L 117, 7 May 1997. 94   See further Chapter 16, at Section 16.4. 92 93

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may be an information, registration, or notification requirement, and the payment of a fee, which may be annual or otherwise. The authorization may be for a specified period, as were the UK class licences, but that has little consequence if the entitlement is virtually automatic. The general authorization does not mean simplicity, however. For example, under the UK’s former system, there were twenty-​ three types of class licence, some of which had up to 115 pages of conditions in a template licence, although identical for each type. The general authorization, the foundation of the EU’s current framework, is intended to further harmonize and simplify the licensing system throughout the Member States. New Zealand does not require a licence for telecommunications or broadcast services. It therefore has what can be called ‘open entry’.95 A  provider of these services need not, but may, obtain an individual designation of ‘network operator’ upon application from the Minister of Communications where such rights are needed to provide the services.96 Such designation is an individual grant of rights of access to land, and in particular the road reserve,97 to lay or construct lines where this is required to commence and carry on a telecommunications or broadcast business.98 It also entitles the operator to approve all equipment connected to its network (s 106)  and grants rights to recover damages for contravention of this process (s 110). It is, therefore, the only ‘licensing’ of connected equipment (except that regarding electromagnetic interference) that is imposed by the NRA. Europe appears to have at least one free or ‘open entry’ jurisdiction. Denmark has no licence, authorization, or notification or declaration requirements for any providers; Germany has only a notification requirement.99 Open entry is not necessarily equivalent to unregulated as it is possible for statute or administrative orders, applicable to the sector, to impose industry obligations.100

95   NZ Ministry of Business, Innovation & Employment, ‘Telecommunications and Broadcasting Network Operator’ (ICT Policy & Programmes, Wellington 2017), . 96   NZ Telecommunications Act 2001, ss 102–​105, SI 2001/​103. 97   Term used in New Zealand and Australia to define that area of land between the front boundary of private property and the road. For purposes of rights of access, this entails the road plus this area, a boundary-​ to-​boundary concept. 98   This grant would be called ‘Code Powers’ in the UK. See Section 6.4.4. 99   See Sixth Report on the Implementation of the Telecommunications Regulatory Package, COM(2000) 814, 7 December 2000, at Annex 1, Licensing, n 3. 100   See ICT Regulation Toolkit, Module 3, Authorization of Telecommunications/​ICT Services, Section3.2 General Authorization and Open Entry Policies (infoDev ITU 2011), .

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6.2.5.2  Licensing procedures The processes for obtaining licences are probably almost as varied as licence types. Each country will have unique aspects even if the general process is like that of another country. This chapter has already touched on the primary procedures, such as an individual application with a review process and issuance. This can vary as to the information sought and the nature of the review, which may be done by a different person or body from the issuing entity. For example, in Trinidad and Tobago, the Minister of Public Administration grants ‘concessions’ to authorize the operation of a public telecommunications network and/​or the provision of any public telecommunications or broadcasting service. However, the application is made to the Telecommunications Authority (TATT) which must review and within ninety days of its receipt make recommendation to the Minister, who then has sixty days to approve, reject, or modify the recommendation.101 The review criteria and procedures are vague, however, since the TATT states that these include but may not be limited to: company information, industry track record and expertise, financial stability, and business plan viability, including specifics of the financial plan and risk analysis, the marketing and service plan, the technical plan and manpower.102 While of itself, this information might not be extraordinary, the specified evaluation criteria are somewhat subjective with the business plan viability worth up to 70 per cent of the total evaluation criteria used by the regulator whose own entrepreneurial expertise to evaluate ‘viable’ must be questioned.103 The process is also cumbersome and not fully transparent. Separate network and service concessions are sometimes required since a Type 1 network concession does not grant the right to provide services over that network.104 Also, the provision of virtual networks and services is a unique type of concession category (Type 3)105 which is closed rather than on a first come, first served basis as with other telecommunications service concessions. The key stated difference in this category is not that the service provider does not own the network, or that the service has characteristic of pure telecommunications services, but rather the provision of multiple services over the network used.106 If licences are to be limited such as with fixed-​l ine duopolies or where spectrum demand exceeds availability, there must be a process to determine who obtains the

101   See Telecommunications Act, 2001 as amended in 2004, at s 21. The Telecommunications Authority, in contrast, grants all licences for radio spectrum equipment or services pursuant to s 36 of the Act. 102   See Eligibility and Evaluation Criteria for Concessions, p 22 (TATT 15 October 2007), . 103 104   See ibid, at 23.   Ibid, at 11. 105   Stated to be a service concession in one place, see ibid, at 6, a network concession in another, see ibid, at 10, and a network/​service concession in another, see ibid, at 18, adding to the confusion. 106   Ibid, at 18.

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licence. This may comprise a comparative evaluative process such as the ‘beauty contests’ first used in the US. Of concern here, however, is that these may not be based on objective criteria and fair to all parties (discussed further in Chapter 7). A competitive auction process may also be used. However, to ensure that entrants have the expertise to utilize the spectrum effectively, a pre-​qualification procedure to enter the bidding has recently become a common approach. The same concerns arise as with comparative procedures. Competitive auctions can be used to award concessions with respect to any limited opportunity or resource, eg the operation of Singapore’s NGN,107 spectrum and unique number grants. Here, the monetary bid and additional criteria meeting economic or social objectives serve as the determinants. These can encompass such things as minority or local ownership minimums, tariffs to be charged, service obligations to be met, or geographical roll-​out of network and services. Multiple-​round auctions having a series of bidding rounds with all licences remaining open to further bidding for the entire process are those currently favoured by the US and other countries. The process can vary from country to country but: [t]‌y pical features of the rules governing such an auction include requirements that bidders make upfront payments; minimum opening bid requirements and increments for bid increases; activity rules to limit the ability of bidders to sit out rounds; rules regarding auction stages (points at which introduction of tighter activity rules may eliminate some bidders) and stage advancement designed to move the process along; stopping rules to determine when the auction closes; and rules and penalties for removal or withdrawal of bids.108

Many believe auctions to be the best way to allocate the use of public resources. They raise revenues for the state and are considered to ensure efficient and best use of the resource since only those most likely to do this will reflect this value in their bid price, assuming sufficient bidders for there to be true competition. The auction rules can also achieve social objectives as discussed. Since there are winners and losers based on the auction criteria that must be fairly clear, auctions are considered the most transparent means of allocation. Auctions are not, however, without their perceived flaws. A key concern is how highest-​price auctions can accommodate other public interests. This is especially the case where these are represented by non-​governmental organizations that individually could not

107   ITU, ‘Singapore: Towards a Next Generation Connected Nation’, 10 December 2010, . 108   Goodman, E, McCoy, S, and Kumar, D, ‘An overview of problems and prospects in US spectrum management’, in Telecommunications Convergence: Implications for the Industry & for the Practicing Lawyer, 698 PLI/​ Pat 341 (Practising Law Institute, New York, 1 May 2002).

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compete with for-​profit undertakings. For example, where pristine public land use is contemplated, consortia of environmental and other groups might wish to be allowed to bid against communications or associated facilities providers. Also, the effectiveness and efficiency of the use of the scarce resource is not typically further examined once the auction has concluded.

6 .3  INTER N ATION A L L AW A ND TEL E COMMUNIC ATIONS L IC ENSING S TA NDA R D S Telecommunications is an important industry in its own right as well as the platform for delivering other critical information society services. The effective opening of such service markets to trade is likely to depend on the modernization and upgrading of electronic communications networks, necessitating foreign direct investment and liberalization of communications markets for equipment, services, and networks.109 Despite the global variation in licensing procedures and permissions ultimately obtained, the importance of telecommunications licensing as the means of market access and the need for some minimum harmonization of regulatory standards for licensing is agreed to be a critical aspect of multilateral trade agreements. The most effective international accord for telecommunications regulation is the World Trade Organization’s General Agreement on Trade in Services (GATS)110 with its separate Annex on telecommunications, the Basic Agreement on Telecommunications, and the Reference Paper. Both the individually agreed, sector-​specific provisions and general conditions of the GATS framework applicable to all Members have relevance for licensing, as the following details. Under the overarching GATS framework: • the ‘Most-​Favoured-​Nation Treatment’ (MFN)111 general condition (Article II)112 requires a Member’s licensing regime to provide market access on terms and conditions ‘no less favourable’ than accorded to providers of another country for all services even where no specific commitment is included in the Schedules;

109   Issues surrounding the complexities of opening emerging markets to competition are discussed in Chapter 17. 110   TS 58(1996) Cm 3276; (1994) 33 ILM 44. See further Chapter 16. 111   There are limited circumstances for reservations to the MFN condition. See Chapter 16. 112   ‘With respect to any measure covered by this Agreement, each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than it accords to like services and suppliers of any other country.’ Art II (1), GATS.

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• the ‘Transparency’ general condition (Article III) requires all Members to publish their laws and regulations that affect trade in all services, scheduled or not. Licensing qualifications and conditions meet that criteria; • the ‘Domestic Regulation’ condition (Article VI) requires where service or sector commitments have been made, that licensing, qualifications, and standards be based on transparent and objective criteria (4(a)) and not more burdensome than is necessary to ensure quality (4(b)). Licensing procedures must not restrict service supply, (4(c)); Members must inform applicants of decisions within a reasonable time after the submission of completed application and, upon request, advise of the status of the application, without delay (3); • the ‘National Treatment’ condition (Article XVII) requires that there be no discrimination against a foreign service or suppliers of that service as compared to those domestic services or suppliers where the Member has included a scheduled commitment. Under the sector-​specific agreements: • the Annex on Telecommunications requires transparency for access to and use of public telecommunications,113 and that relevant information about conditions affecting access and use be made publicly available, including notification, registration, or licensing. Conditions imposed must be necessary to safeguard the obligation of public telecommunications network and services providers to supply the general public and to ensure network integrity (5(e)). Conditions meeting these criteria include: ◦ requirements for notification, registration, or licensing (5(f)(vi)), ◦ limitations on resale or shared use of services (5(f)(i)), ◦ use of interface or interoperability protocols (5(f)(ii), (iii)), ◦ type approval of equipment interconnecting with public telecommunications networks (5(f)(iv)), ◦ interconnection limitations for private leased or owned circuits (5(f)(v)); • the ‘Reference Paper’ requires public availability of all licensing criteria, the normal time for decisions on applications and the terms and conditions for an individual licence. Reasons for licence denial must be disclosed upon the applicant’s request (4, Reference Paper); • the ‘Reference Paper’ further requires transparency in procedures for allocating and using scarce resources which include spectrum, numbers, and rights of way, and that the procedures be timely, objective, and non-​d iscriminatory. The

113   This Annex is intended to encompass the provision of communications networks/​services only to the extent of Members’ scheduled commitments. See Annex on Telecommunications at s 2(c).

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current state of allocated frequency bands is to be made publicly available, except specific government frequency use (6, Reference Paper). The EU’s legal framework is one clearly compliant with WTO standards for licensing and authorizations as well as allocation of scarce resources. The following examines it at length.

6 .4  THE EU ’ S L IC ENSING R E G IME In 1999, the EU proposed a new framework to ensure equal regulation for converging markets and technologies. With respect to licensing, the new framework was to sweep under one scheme all public electronic communications and services, not merely those involving telecommunications networks.114 The ensuing 2002 Authorisation Directive115 does this but is not, however, radically different from the prior Licensing Directive116 as it was intended to work. Rather, the Authorisation Directive further refines the Licensing Directive with provisions to ensure implementation of its intended light-​touch regulatory scheme with individual grants of rights and conditions permitted only where justified. Examining the former scheme is helpful, therefore. A new framework with a consolidated, recast single Directive is now being considered that further emphasizes general authorizations over individual licence grants and obligations particularly for spectrum. It intends a lighter, more harmonized touch. Its key changes to the Authorisation Directive, are noted in the discussions below.

6.4.1  The Licensing Directive Under the Licensing Directive, if Member States made the provision of telecommunications services subject to any permission, the Directive’s default was for a general authorization requiring no explicit decision. Individual licences, in contrast, were to be limited only to: 1. public voice telephony where conditions had to be imposed, including USO; 2. the grant of rights to use of numbers and spectrum, both scarce resources; 3. where conditions had to be imposed on undertakings with significant market power (SMP) as previously defined by the EU; and 4. where rights of access to public or private land were granted (Article 7).

115   See Chapter 4.   Directive 2002/​20/​EC as amended by Directive 2009/​140/​EC.   Directive 97/​13/​EC, n 93.

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Member States could impose any of a limited set of conditions on all licences where justified and proportionate (but that comprised the ‘least onerous system possible’ for general authorizations) in the areas of:  essential requirements, information required to verify compliance, prevention of anti-​competitive behaviour and discriminatory tariffs, and efficient use of numbering capacity (Annex, 2). General authorization conditions encompassed a range of consumer protections, including billing and contract format (Annex, 3.1), provision of: emergency services, customer information needed for directory services and services for disabled people, compliance with interconnection, and contribution to universal services (Annex, 3.2–​3.6). Beyond these, Member States could further impose on individual licences only those conditions related to the circumstances justifying the requirement for an individual licence in the first place (Article 8). The permitted additional conditions, therefore, included those linked to allocation of numbering rights, efficient use of radio spectrum, specific environmental or local planning requirements, maximum duration to promote certainty and planning ability, provision of universal service, quality and permanence of service/​networks, mandatory provision of publicly available networks and services, and interconnection and leased lines obligations pursuant to other directives (Annex, 4). Individual licences were to be granted pursuant to objective, transparent, and time-​limited procedures that applied to all unless objectively justified, and that were published in an appropriate manner (Article 9). Licences for any service or infrastructure category could be limited in number only to the extent necessary to ensure efficient use of spectrum, or for the time needed to make available sufficient numbers, and only via a published decision detailing the reasons for the limitation (Article 10). Detailed, objective, transparent, non-​d iscriminatory, proportionate, and pre-​published criteria for awarding the limited licences were required, according due weight to promoting competition and maximizing user benefits (Article 10(3)). Procedures to permit interested parties to comment on the limitation were required, as were invitations to parties to apply. Appeal to an independent body from any licence denial was required as was Member State review of the limitations on licensing, at reasonable intervals (Article 10(2)). An undertaking complying with the conditions imposed on general authorizations could not be prevented from providing the relevant network or service, although there could be a requirement to notify the NRA of intent to provide these and to supply that information concerning the service needed to ensure compliance with applicable conditions (Article 5). A waiting period of four weeks could be imposed from receipt of this information prior to commencing service/​network provision (Article 5(2)). General authorization fees could be based solely on administrative costs of controlling, managing, and enforcing the general authorization scheme and were to

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be sufficiently detailed and published in an accessible way (Article 6). Fees for individual licences were to encompass only those administrative costs incurred in the issuance, management, control, and enforcement of the applicable individual licences. With spectrum or numbers, charges could reflect a value to ensure their optimal use (Article 11), permitting Member States to auction spectrum. The Directive suggested further that all imposed charges be based on objective, non-​ discriminatory, and transparent criteria (Recital 12). Where a general authorization holder failed to comply with any of its conditions, the NRA could notify it that it could no longer avail itself of the authorization ‘and/​ or’ impose specific measures to ensure compliance (Article 5(3)). Individual licensees failing to comply with their licence conditions could have the licences withdrawn, amended, or suspended, or have imposed measures to ensure compliance. The undertaking had the opportunity to state its views on the condition’s application and to remedy its breach within one month. The Directive imposed time limits for making and communicating that the decision had been confirmed, modified, or annulled, and procedures for appeal to an independent body (Articles 5(3), 9(4)). The Directive, to facilitate Community-​w ide services, established a ‘one-​stop shop’ for obtaining licences from the Member States via a single application point (Article 13)  and authorized the Commission to charge various European telecommunications regulatory groups, such as CEPT, with developing a harmonized regime for general authorizations (Article 12). Neither was very successful. The current EU regulatory framework including the Authorisation Directive proposed by the Commission soon pre-​empted this only two years after the Licensing Directive’s adoption. As the Authorisation Directive notes, there was a documented need for more harmonized and ‘less onerous’ regulation of market access (Recital 1, 2002/​20/​ EC). The problem was not with the legal framework as promulgated but rather as implemented and enforced in many Member States. Rather than limiting individual licences to those circumscribed circumstances necessary to impose conditions, the Licensing Directive’s flexibility was exploited. Individual licences were mandated for many situations and general authorizations were the exception rather than the rule as intended. Marked divergence among the Member States as to types of licences, time for decisions, costs, and information required, especially in connection with individual licences, meant that the EU licensing and authorization regime was a barrier not only to national market entry but to the Single Market.117 This was a significant problem. The EU premises its continued evolution

117   See Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee, and the Committee of the Regions, Towards a new framework for Electronic Communications infrastructure and associated services, COM(1990) 539, at vii.

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and economic development on the implementation of dynamic and competitive information society services, including pan-​European services, and infrastructure.118 The following examines the 2002 authorization framework that sought to and, generally, has significantly remediated the problems. It also addresses some subsequent amendments.

6.4.2  The Authorisation Directive The EU 2002 framework for electronic communications comprised five Directives and a Regulation. These were intended to reform, streamline, and replace existing regulation.119 The Authorisation Directive, still effective, sought to enforce what the Licensing Directive really intended by eliminating much of the discretion that the former Directive left to Member States. Although requiring further harmonization in 2009, this approach has been successful in many aspects. As a recent review indicates, the framework has largely ‘delivered on its main objectives’.120 Since 2002, EU most markets have become competitive with many new entrants and services, significant market investment with the build-​out of competitive alternative infrastructure in some Member States, and generally lower consumer prices.121 Yet, despite a higher level of competition in EU telecommunications markets based on opening access to networks, studies identify a persistent gap in investment in the EU telecoms sector compared to the US that may have contributed to EU sector revenue stagnation, lower average revenue per user, and its slower 4G development.122 Current reforms initiated by the Commission, via a proposed  Ibid.   See further Chapter 4. The 2002 regulatory framework was amended largely in 2007 and December 2009. The 2007 reforms generally comprised a regulation mandating a glide path of price caps for mobile roaming, Regulation (EC) No 717/​2007 (Roaming Regulation). The 2009 amendments were via two Directives, the so-​called ‘Better Regulation’ Directive (Directive 2009/​140/​EC) and the ‘Citizens’ rights’ Directives (Directive 2009/​136/​ EC), amending the various 2002 Directives. The Regulation establishing a body of European regulators for electronic communications, Regulation (EC) No 1211/​2009 (BEREC Regulation) also amended this. To understand the reform’s scope it’s helpful to read consolidated versions of the five Directives that can be found at and . 120   Executive Summary, ‘Support for Impact Assessment, Review of the regulatory framework for electronic communications’ (SMART 2015/​0 005), . 121   See Commission Communication ‘Progress Report on the Single European Electronic Communications Market 2007 (13th Report)’, COM(2008) 153, 19 March 2008. The 15th Report notes a slight drop in investment by 1.5% from 2007, possibly attributable to the economic slowdown, but still significant at €46 billion. 122   See Fourneron, K, and Ciriani, S, ‘Investments in Telecommunications Services higher in the US than in the EU: a robust, enduring and increasing gap observed whatever the source’, at Sec 4 (Orange 2015) (noting other recent comparable study findings), . 118

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Directive for a new Electronic Communications Code (‘proposed EECC’), focus on enhancing EU levels of very high-​speed connectivity. They also seek to address market and technological developments and to simplify and remove redundant or inefficient regulation such as outmoded universal service obligations, eg, public call boxes or consumer protections duplicated in horizontal laws. The proposed EECC intends a lighter touch to encourage investment, more harmonized and legally certain approaches to spectrum, and equivalent regulation for over the top players where appropriate, as well as greater roles for the Commission and BEREC to address remaining pan-​EU weaknesses but which are as controversial as prior attempts to limit Member State sovereignty over spectrum. Changes to the Authorisation Directive would encompass both form and substance. This chapter will discuss these proposals in the context of the current Authorisation Directive that it now examines. A good starting point is its application and scope. The Directive applies to the authorization of all electronic communications networks and electronic communication services. The Framework Directive definitions control with ‘electronic communication services’ encompassing those: normally provided for remuneration which consists wholly or mainly in the conveyance of signals on electronic communications networks, including telecommunications services and transmission services in networks used for broadcasting, but exclude services providing, or exercising editorial control over, content transmitted using electronic communications networks and services; it does not include information society services, as defined in Article 1 of Directive 98/​3 4/​EC,123 which do not consist wholly or mainly in the conveyance of signals on electronic communications networks. (Article 2(b), 2002/​21/​EC)

The electronic communications framework generally carves out information society services to the extent they do not comprise primarily carriage of signal services.124 The Framework Directive parallels that of the E-​commerce Directive (2000/​31/​EC) which governs ‘information society services’ provision, intended to encompass those content services provided in the layers above network provision and transmission services. In both Directives, the other layer of services is defined and excluded by reference to that which it is not. The language ‘normally provided for remuneration’ qualifying the framework’s regulatory scope for electronic communications services, derives from Article 60,

  OJ L 204/​37 (21 June 1998) as amended by Directive 98/​4 8/​EC, OJ L 217/​18 (5 August 1998).   eg email conveyance posited by the Framework Directive as a communications service rather than an information society service. See Recital 10. 123

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EC Treaty (Article 50 as amended; now Article 56 TFEU)125 regarding freedom of movement of services in the Single Market and is considered to encompass an ‘economic’ activity. Where this line is drawn is not absolutely clear. Private networks are intended to be included under the Authorisation Directive, according to its Recitals and without mention of the ‘normally provided for remuneration’ requirement. As self-​services may not be provided for remuneration, they could be beyond the Directive’s reach, although a clear link between the service and other economic/​commercial activity could suffice.126 If, however, provided over a private network, an authorization for the network appears required. The Directive also applies to ‘electronic communications networks’ which is defined in the Framework Directive as those: transmission systems, and where applicable switching and routing equipment and other resources, including network elements which are not active,127 which permit the conveyance of signals by wire, by radio, optical or other electromagnetic means, including satellite networks, fixed (circuit-​and packet-​switched, including Internet) and mobile terrestrial networks, electricity cable systems to the extent that they are used for the purpose of transmitting signals, networks used for radio and television broadcasting, and cable television networks, irrespective of the type of information conveyed. (Article 2(a), 2002/​21/​EC) (italics indicate 2009 changes)

The framework intends a horizontal approach to authorization that governs irrespective of the technology used. The Commission’s proposed EECC,128 if agreed, would repeal the current framework’s directives (Framework, Authorisation, Access, Universal Service) and

125   See Recital 2, Directive 98/​4 8/​EC, n 123. Accord, Europarl Ref E-​0 969/​0 9, Answer by M Barrot on behalf of Commission (16 April 2009) (noting further the linkage between Article 50 and the Article 95 basis of the Framework Directive), . 126   See eg Europarl Ref E-​4364/​0 9, Answer by Mrs Reding on behalf of the Commission (16 September 2009), . 127   Added by Directive 2009/​140/​EC; UK implementation at Communications Act 2003, s 32(1) as amended by para 9, Sch 1, The Electronic Communications And Wireless Telegraphy Regulations 2011. That this intends a wide range of physical structures can be seen from the legislative history as this wording appears to derive from the EU Parliament’s proposed additions to Article 12, Access Directive on first reading which provided in part: ‘including entries to buildings, building wiring, masts, antennae, towers and other supporting constructions, ducts, conduits, manholes, cabinets and all other network elements which are not active’. European Parliament legislative resolution of 24 Sept 2008 on the proposal for a directive of the European Parliament and of the Council amending Directive 2002/​21/​EC on a common regulatory framework for electronic communications networks and services, Directive 2002/​19/​EC on access to, and interconnection of, electronic communications networks and associated facilities, and Directive 2002/​20/​EC on the authorization of electronic communications networks and services (COM(2007)0697, C6-​0 427/​2007, 2007/​0247(COD)). 128   COM(2016) 590 final, Proposal for a Directive of the European Parliament and of the Council establishing the European Electronic Communications Code (Recast) (‘EECC’).

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recast their revised content as a single directive governing providers of electronic communications networks (ECN) as previously defined and of three categories of electronic communications services (ECS):  internet access services (IAS), interpersonal communications services (ICS)129 characterized as either number-​based or number independent (to encompass over the top communications) and, the conveyance of signals, including broadcasting and machine-​to-​machine (M2M) communications.130 6.4.2.1  General authorization: procedures and rights The Authorisation Directive directs Member States to ‘ensure the freedom’ to provide electronic communications networks and services (Article 3(1)) limited only by its permitted conditions.131 Member States may only subject their provision to a general authorization requirement (Article 3(2)) that does not require an explicit decision or other administrative act (Recital 8). The proposed EECC emphasizes preference for general authorizations, including for spectrum, which is not different from that intended under the current framework. While specifically including them as a distinct form of ICS, the proposed EECC then specifically excludes number-​i ndependent ICS from the general authorization regime as unwarranted due to their not benefiting from the numbering resources or participating in a ‘publicly assured interoperable ecosystem’.132 Member States may now require a notification before the provider can enter the market. This encompasses only a declaration of intent to provide networks or services and provision of information to enable the NRA to maintain a register of providers (Article 3(2)). The information is restricted to that needed to identify the provider, such as company registration numbers, location, contact details, and a brief description of the services and when they commence (Article 3(3)). Notification by cross-​border providers of services to undertakings in several Member States are limited to only one notification per Member State concerned (Article 3(2)). The information requirement remains unchanged under the EECC proposal but notification would be made to BEREC (transformed into an EU

129  Defined as services usually provided for remuneration that enable ‘direct interpersonal and interactive exchange of information via electronic communications networks between a finite number of persons, whereby the persons initiating or participating in the communication determine its recipient(s)’. See proposed EECC, Art 2. 130  Ibid. 131   This freedom is also subject to restrictions pursuant to Member States’ power to legislate in defined areas under EU Treaty, Art 46 (1), including public health, policy, and security. See Authorisation Directive, 2002/​ 20/​EC, at Art 3(1); Recital 3. 132   See Recital 42, proposed EECC.

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agency, a proposal encountering great resistance)133 that would in turn notify the relevant Member State authority. These Authorisation Directive mandates limit Member States’ discretion and arguably remove the possibility of delaying the provider’s entry into the market. This ‘least onerous’ system was viewed necessary to stimulate development of new electronic communications services, including pan-​European services, a significant focus of the 2002 regulatory framework, and to permit persons to benefit from EU Single Market economies of scale (Recital 7), not possible under the Licensing Directive’s implementation.134 Cross-​border focus also partly underlies the Authorisation Directive’s requirement that rights of undertakings providing networks and services be included within the authorization itself (see Recital 9). Such harmonization creates greater certainty about the ability to enter a new national market and, as Recitals note, ensure a level playing field throughout the Community. Specifically, the Directive requires Member States to ensure at least the right to: • provide electronic communication networks and service (Article 4(1)a); • apply for rights of way to install facilities on/​over/​u nder private and public land: ◦ to a competent authority structurally separate from any provider of public networks and publicly available services which it controls or owns, ◦ pursuant to procedures that are simple, efficient, transparent, publicly available, and applied in a non-​d iscriminatory way and without delay, but in any event within six months of the application, ◦ but that can differ for public and private communications networks, and which impose conditions only pursuant to principles of transparency and non-​d iscrimination, ◦ with an effective appeal mechanism to an independent body (Article 4(1)(b)); Framework Directive, Article 11), including for undue delay. The Recitals to Directive 2009/​140/​EC indicate that the NRA should be able to coordinate acquisition of rights of way and make information available on their websites. Beyond the requirement for simple, efficient processes by the relevant authority, this does not require NRA power to grant the rights of way or over local or other authorities that may control them. The general authorization must further grant those providing communications networks and services to the public the right to:

133  See Teffer, P, ‘EU telecom watchdog plan dead on arrival’ (EU Observer, 27 April 2017), . 134   As to its continued relevance, see Recitals 26, 33, Art 9, Directive 2009/​140/​EC.

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• negotiate and obtain interconnection with and access to other publicly available networks covered by a general authorization anywhere in the EU under conditions set by the Access Directive (Article 4 (2)(a));135 • be given the opportunity to provide elements of universal service (Article 4 (2) (b)).136 With the same right to negotiate and obtain interconnection and access essentially guaranteed in each Member State to those providing public networks and/​ or services, cross-​border entry and the possibility for pan-​European services is facilitated. There is no longer the need for an individual designation as an operator entitled to obtain such rights, as was the case under the early regime. Here again, Member State discretion has been limited. Those providing networks and services to other than the public are to negotiate interconnection on commercial terms (Recital 10). Member States are to provide declarations, either automatically upon entry notification or request, that confirm rights under the general authorization to interconnection and rights of way in order to facilitate interconnection or negotiations with other authorities (Article 9). Such declarations, however, do not create or condition the exercise of rights. As with the current framework, only the specified conditions (whether to the general authorization or individually) can be imposed. These cannot duplicate other obligations or national law. The proposed EECC reform leaves the above rights unchanged but adds two new rights:  to use spectrum as specified and to have applications for numbers considered pursuant to provisions that are not generally dissimilar from the current regime,137 discussed below. BEREC, as the body to be notified of market entry if required, would make the necessary facilitation declarations.138 6.4.2.2  Individual rights The current framework mandates that the only exceptions to the ‘general authorization’ requirement concern individual grants of rights to use spectrum and numbers. This discretion, however, is not unlimited.139 Grants of individual rights for the use of spectrum and numbers must follow certain substantive and procedural safeguards, addressed below in the context of numbers.140 Member

  See further Chapter 8.   See further Chapter 9. 137   See proposed Art 2, EECC. That is once you get beyond the proposed enhanced roles of the Commission and BEREC in numbering and spectrum conditions that are likely controversial. 138   See proposed Art 12 (3), EECC. 139   The requirements for making spectrum available are discussed in Chapter 7. 140   See also Recital 11. An amendment to Art 5, however, makes clear that these apply to both rights to use numbers and spectrum. See Directive 2009/​140/​EC, Art 3. 135 136

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States must make available such individual rights of use to any undertaking for the provision of networks and services, irrespective of whether granted to the network/​service provider or their users (Article 5(2)).141 Addressing an inconsistency142 the proposed EECC makes clear that numbers may be awarded to other than providers as long as they are capable of managing them and there are sufficient numbering resources available.143 6.4.2.3  Procedures for granting individual rights to use numbers To the extent that individual rights of use of numbers are necessary, Member States must grant them via open, objective, transparent, non-​d iscriminatory, and proportionate procedures.144 They must inform the grantees of their ability, if any, to transfer such rights to third parties and under what conditions (Article 5(2)). The time period allocated to grants of rights of use must be appropriate to the specific service if granted for a limited time (Article 5(2)). Decisions should be made, communicated, and made public as soon as possible. This is no more than three weeks from receipt of a completed application for numbers from the national plan allocated to specific uses (Article 5(3)). A further period of up to three weeks applies where rights to use numbers of unique economic value (eg 1 800 FLOWERS) are granted by competitive or comparative procedures (Article 5(4)). This can only be done after a consultation that complies with Article 6 of the Framework Directive (Article 5(4)). The Framework requires that any measures that have a ‘significant impact on the relevant market’ can be taken only after interested parties have an opportunity to comment within a reasonable period. The consultation must be done pursuant to published procedures; all current consultations must be available through a single accessible point with the result publicly available except that involving confidential information according to either national or Community law (Article 6, 2002/​21/​EC). These provisions are largely unchanged by the proposed EECC. Also unchanged is that time-​limited grant of rights to numbers must be appropriate for the nature of the service in view of the ‘objective pursued taking due

  Italics reflect amendments by Directive 2009/​140/​EC.   Authorisation Directive, Recital 12 does not mention numbering in stating that it is irrelevant whether the grantee is the provider or the user. Art 5(2) indicates that where an individual grant of rights to use numbers is made, that Member States ‘shall grant such rights, upon request, to any undertaking for the provision of network or services under the general authorisation’, indicating that it is not a matter of discretion. In contrast, however, Recital 14 states that Member States are ‘neither obligated to grant nor prevented from granting rights to use numbers from the national numbering plan . . . to undertakings other than providers of electronic communications networks or services’, suggesting that it is totally a matter of discretion. 143   Although PECN/​PECS are not subject to capability criteria, this might be justified for other parties not subject to conditions. 144   Italics reflect amendments by Directive 2009/​140/​EC. 141

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account of the need to allow for an appropriate period for investment amortization’ (Article 5(2)).145 The ‘objective pursued’ appears to refer to the regulatory objective underlying the need for an individual grant and its time-​limitation, although clearly there could be more than one. Investment recovery is also a concern to ensure a balance of incentive with regulatory objectives. In the context of numbers, it is possible that £ millions could be invested not only in procuring a particular number but also in marketing and development costs. With an auction procedure, however, the market’s valuation and shortened amortization of up-​front time limitations should be reflected in a lower price. If the period were too short, there would be no takers or only those gambling on a future renewal right. The Authorisation Directive itself does not specify an appeal right from the decision regarding the granting of individual rights of use.146 The Framework Directive, however, requires Member States to ensure effective mechanisms for any provider or user affected by any NRA decision to appeal its merits to an independent body with appropriate expertise147 that must issue its decision in writing, if not a judicial body (Article 4, 2002/​21/​EC). In this case, further review to a court or judicial tribunal must exist.148 These requirements are unchanged in the proposed EECC. 6.4.2.4 Conditions EU network and service providers may have only three types of conditions imposed on them:  (i) those under the general authorization, (ii) individual obligations that attach to the granting of rights of use of numbers and spectrum, and (iii) specific conditions to impose obligations under the Access and Universal Service Directives (Article 6). Any condition imposed under any of these categories, however, must be proportionate, transparent, and non-​d iscriminatory149 with further procedures and limitations for the last two categories as per the Framework and applicable specific Directive. The following examines each category in turn. Conditions under the general authorization  The Authorisation Directive limits conditions to a general authorization to those falling with the Annex, Part A’s

  Italics reflect amendments by Directive 2009/​140/​EC.   This is in contrast to Art 10, which requires an appeal procedure from the imposition of conditions. See Section 6.4.2.7. 147   A 2009 wording refinement makes clear that the appeal body must itself have appropriate expertise for effective review rather than merely having such expertise available to it. See Directive 2009/​140/​EC, Art 1. 148   Ibid, at Art 4(2). 149   The 2009 reforms removed a requirement that NRAs objectively justify a condition under the general authorization in light of the network/​service concerned. Although theoretically lessening the NRA’s burden to trigger or include a specific condition within Part A of the Annex’s permitted categories that may apply to all providers or merely certain ones, after ten years in effect, such rationalizing on a per-​service basis had likely already taken place. 145

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maximum list of nineteen categories, including a 2009 transparency condition about limitations/​degradations in service150 if permitted by a Member State.151 NRAs may impose conditions on all providers of electronic communications networks and services under the general authorization, if justified. However, as the Directive cautions, for networks and services not provided to the public, it ‘is appropriate to impose fewer and lighter conditions’ than are justified for public networks and services (Recital 16). The maximum list includes conditions or obligations including as detailed in other Directives as noted, regarding: 1. administrative charges (Article 12, Authorisation Directive); 2. information requirements (Articles 3(3), 11, Authorisation Directive); 3. general access obligations (Access Directive); 4. interoperability of services, interconnection of networks (Access Directive); 5. end-​user accessibility to numbers under national plans, from the European Numbering Space,152 the Universal International Freephone Numbers, and where technically/​economically feasible, other Member States numbering plans (Universal Service Directive); 6. conditions for spectrum use not under individual grant (Radio and Telecommunications Terminal Equipment Directive 99/​5/​EC153); 7. contributions to universal service obligations (Universal Service Directive);154 8. ‘must carry’ TV and radio broadcast obligations (Universal Service Directive); 9. use during major disasters to ensure emergency services’ and authorities’ communications and public broadcasts;155

150   Authorisation Directive, Art 6.  See also Part A, Annex’s maximum list of subject areas that a general condition may govern. 151   Until 2016, the Universal Service Directive allowed Member States to determine whether to require ‘net neutrality’, ie the ability of a provider to restrict access to content or provide unequal treatment to different traffic for other than technical reasons, limiting itself to the above transparency. See Directive 2002/​22/​EC, Art 1(3) as amended by Directive 2009/​136/​EC. Now, non-​d iscriminatory access to content of choice is required by Regulation 2015/​2120/​E U laying down measures concerning open internet access and amending Directive 2002/​22/​EC on universal service and users’ rights relating to electronic communications networks and services and Regulation 531/​2012/​E U on roaming on public mobile communications networks within the Union. The proposed EECC removes the related condition area.

  Bold text indicates proposed EECC’s redactions.   Repealed and replaced by Directive 2014/​53/​E U on the harmonisation of the laws of the Member States relating to the making available on the market of radio equipment, OJ L 153/​62, 22 May 2014. 154   This condition would be unnecessary under the proposed EECC that would require payment for any unfairly burdensome USO from public revenues. 155   A further s (11a) clarifies that conditions regarding use for public communications can encompass electronic communications beyond broadcast and encompasses the warning of imminent threats and the mitigation of a major disaster. See Annex A. 152

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10. personal data/​ privacy protection (Electronic Communications Privacy 156 Directive); 11. security of public networks against unauthorized use (Electronic Commun­ ications Privacy Directive); 12. enabling lawful interception (Data Protection Directive (95/​46/​EC), Electronic Communications Privacy Directive); 13. sector-​specific consumer protection rules and access conditions for disabled users (Universal Service Directive);157 14. illegal content restrictions (Electronic Commerce Directive (2000/​ 31/​ EC), Audiovisual Media Services Directive (2010/​13/​EU)); 15. standards and specifications conformity (Article 17, Framework Directive); 16. limiting public exposure to electromagnetic fields (Community Law); 17. maintenance of public communications network integrity, prevention of electromagnetic interference (Universal Service and Access Directives, Harmonized Standards for Electromagnetic Compatibility Directives (89/​336/​ EEC)); 18. environmental, planning, and other requirements for access to public/​ private land, conditions for co-​location, facilities sharing (Framework Directive), financial and technical guarantees to ensure proper execution of installation;158 19. transparency obligations on network providers providing communications services to the public to ensure end-​to-​e nd connectivity, disclosure with respect to any (provider) conditions limiting access to/​u se of services and application where these are allowed by a Member State and proportional information obligations by providers necessary to verify disclosure accuracy. General authorization conditions must be sector-​specific and not duplicate requirements applicable under national law.159 Arguably, the Authorisation Directive largely legislated away flexibility for Member State divergence, at least de jure but not reflecting the differences possible under any ‘margin of appreciation’.

  See further Chapter 13.   Italics denote 2009 amendments; bold text, proposed EECC redactions. The referenced access as required by Art 6, is equivalent access and affordability of public telephony service (voice supporting local, national and international calling and data at functional internet levels), Universal Service Directive. 158   Bold indicates text redacted in proposed EECC. This condition duplicates national law that applies otherwise. 159   Art 6(3). 156 157

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The proposed EECC would further reduce flexibility. While it does not greatly change the substance of conditions under the general authorization,160 it divides them into three groupings with different potential applicability: 1. those applicable generally to any provider161 2. those applicable to providers of networks162 3. those applicable to providers of electronic communications services, except number-​i ndependent services.163 Conditions and individual grants of  rights Individual obligations can be attached to the grant of rights to use of numbers and spectrum. Conditions for numbers are limited to those regarding: • service designation for a number, requirements linked to its provision, tariffing principles/​maximum prices that can apply in the specific number range for the purposes of ensuring consumer protection;164 • usage fees;165 • efficient and effective use; • providing public directory services; • number portability;166 • the grant’s duration and transfer; • international obligations regarding agreed use of numbers; and • commitments made during competitive/​comparative selection procedures.167

  The bold text above indicates the proposed EECC’s redactions.   Administrative charges, information, general access, use in major disasters, privacy/​data protection, conformity to standards and specifications, transparency obligations. See proposed EECC, Part A, Annex I, General conditions which may be attached to a general authorization. 162  Service interoperability/​network interconnection, spectrum use, ‘must carry’, limiting electromagnetic field exposure, network integrity and electromagnetic interference prevention, transparency. Proposed EECC, Part B, Annex I, Specific conditions which may be attached to a general authorisation for the provision of electronic communications networks. 163  Service interoperability/​network interconnection, end-​u ser access to numbers, sector-​specific consumer protection rules and illegal content restrictions. Proposed EECC, Part C, Annex I, Specific conditions which may be attached to a general authorisation for the provision of electronic communications services. 164   The full import of this amendment is not clear. While it suggests merely a transparency obligation for charging consumers, eg premium rate services, the only other use of the phrase is in connection with the justifications for the Commission’s authority to issue a decision or recommendation in the area. See Framework Directive, Art 19. 165   Ofcom after consulting on charging for the use of geographic numbers due to their growing scarcity set a pilot programme to charge CPs for geographic numbers. On review in 2016, Ofcom determined that the charging resulted in a significant one-​off return in number blocks, delaying scarcity and is proposing to charge providers for numbers in areas where scarcity threatens. 166   See Sections 6.4.3 and 6.4.4.3 regarding number portability requirements. 167   Annex, Part C, s 6(1). 160 161

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These individual obligations must be objectively justified with respect to the service, proportionate, transparent, and non-​discriminatory. They may not duplicate the general conditions. The proposed EECC requires NRAs to ensure compliance with other Member States’ consumer laws and rules on number use for numbers used extraterritorially. A new number condition would permit obligations to ensure this, effectively importing those requirements into the individual grant.168 SMP and access-​related individual conditions  Specific conditions under the Access and Universal Service Directives can only be imposed on network and service providers for a limited number of reasons.169 These can be divided into two overarching categories: (a) those imposed on undertakings found to have significant market power (SMP), joint or otherwise, in relevant markets and according to the Framework Directive’s requirements; and (b) those imposed for other public interest reasons on non-​SMP undertakings. With respect to the first, under the Access Directive, the NRA must impose appropriate conditions on SMP operators where, after a market analysis (complying with Article 16 of the Framework Directive), it concludes that there is not effective competition in the relevant market.170 The ordinary SMP obligations specifically contemplated by the Access Directive govern transparency,171 non-​d iscrimination,172 accounting separation,173 access and interconnection,174 and price controls and cost accounting.175 Member States must publish the specific conditions imposed on undertakings pursuant to these Articles, identifying the specific product/​s ervice. Current and easily accessible, non-​c onfidential information must be made available to all interested parties.176 Conditions beyond this specific list are possible if allowed by the Commission, which must take utmost account of the opinion of the Body of European Regulators for Electronic Communications (BEREC) that was created under 2009 reforms.177 The Universal Service Directive requires that where these specific Access SMP conditions will not achieve the Framework Directive’s objectives178 in retail markets

  See proposed Art 88(6), Annex II E (10), EECC. 170   Art 6(2).   Directive 2002/​19/​EC, at Art 8. See further Chapter 8. 171  Ibid, at Art 9 (revised to include technologically neutral wholesale reference offers under Art 12. Additional transparency obligations regarding the impact on quality of services from traffic management measures are imposed by Regulation (EU) 2015/​2120 discussed at n 151). 172 173 174 175   Ibid, at Art 10.   Ibid, at Art 11.   Ibid, at Art 12.   Ibid, Art 13. 176   Ibid, at Art 15. 177  See ibid, at Art 8(3) (via the cross-​reference to Art 14(2), this decision also requires adherence to comitology procedures set forth in Arts 5 and 6 of Decision 1999/​4 68/​EC). 178   Framework Directive, Art 8 states the objectives of promoting competition and the interests of EU citizens and contributing to the internal market’s development. 168 169

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that are not effectively competitive, NRAs must impose appropriate regulatory obligations on entities with SMP in related markets179 to prevent leveraging in the retail markets.180 These may include bans on: excessive and predatory pricing, undue preferential treatment, or unreasonable bundling of products/​services.181 These must meet the Framework Directive’s requirements for transparency, objectivity, proportionality, and consultation as with other conditions. NRAs can also apply appropriate retail price caps to control individual tariffs or other measures to steer pricing towards cost-​based or that of other comparable markets.182 In the 2009 reforms, the Commission sought a killer solution for residual bottlenecks in access markets despite on-​ going regulatory intervention. The Access Directive requires NRAs to be empowered to impose the further extraordinary SMP remedy of functional separation of wholesale access provision on vertically integrated entities with SMP in relevant access markets, where persistent and important market failures exist despite appropriate conditions.183 This approach was essentially a page from Ofcom’s playbook in forcing BT to agree to restructure its operations with the core network in a separate operating unit under UK competition law powers, as previously noted. Under this EU sectoral remedy, the separate unit would have to supply such services to all undertakings including the parent, on equivalent terms and over the same systems.184 The NRA must justify the need for and suitability of this extraordinary remedy to the Commission with particulars of the transaction proposed and its regulatory oversight;185 as with all SMP conditions under the Access Directive, following the notification procedures under Article 6 of the Framework Directive.186 The new business unit could also be subject to other Access Directive conditions as above.187 The proposed EECC seeks in the access regime to address concerns that access policies have promoted service-​based over infrastructure-​based competition with an ensuing lag in the build-​out of very high capacity networks throughout the EU. Specific SMP access conditions at the wholesale level could be imposed only where and when necessary to address retail market failures, in

179   Universal Service Directive, Art 17(1); also see Framework Directive, Art 14(3) as amended by Directive 2009/​140/​EC. 180   Framework Directive, Art 14(3). 181   See 2002/​22/​EC, Art 16 as amended by Directive 2009/​136/​EC (deleting specific retail price controls, minimum leased lines, and carrier selection obligations). 182   Ibid, at (2). 183   See Access Directive, Art 13a. The Directive also provides for voluntary separation at Art 13b. 184 185   Ibid, at Art 13a(1).   Ibid, at Art 13a(2), (3). 186   See also Commission Recommendation 2008/​850/​EC on notifications, time limits, and consultations provided for in Article 6 of Directive 2002/​21/​EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services (15 October 2008). 187   Art 13a(5). See further Chapter 8.

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light of end-​u ser outcomes and via what might be considered a least-​restrictive alternative approach that considers eg whether access to civil engineering infrastructure alone might be more conducive to sustained competition than other ex ante controls. This would be only after a modified market review process evaluating, on a forward-​looking basis, emerging commercial trends (eg co-​i nvestment or access agreements) and the potential impact of regulation on these and applying previously only recommended criteria for evaluating markets amenable to continuing ex ante regulation (that would be codified under the EECC).188 A lighter touch access regime based only on fair, reasonable, and non-​d iscriminatory (FRAND) terms and dispute resolution obligations would apply to wholesale-​ only SMP network providers.189 Retail price regulation would be eliminated. The second category of specific conditions under the current Access Directive concerns those NRAs may impose on non-​SMP providers to ensure end-​to-​end connectivity or to make services interoperable where they control access to end-​users (eg via unique numbering or addresses).190 These may include mandated interconnection if commercial negotiations pursuant to general authorization conditions fail191 as well as conditions imposing access to electric programme guides (EPGs) and application programme interfaces (APIs) by providers of these associated facilities on FRAND terms where needed to ensure end-​user accessibility to digital TV and radio services.192 The Directive also requires conditions on providers of conditional access services necessary for end-​user access to digital TV and effective competition in such services.193 The proposed EECC would continue such non-​SMP access conditions, adding the additional requirement of being subject to a general authorization. In justified cases where access to emergency services or end-​to-​end connectivity between end-​users is at risk from lack of interoperability, conditions necessary to address this, including adherence to standards, could be imposed on number-​independent ICS providers but only after the Commission determines that national regulatory intervention is needed following a report from BEREC under the rules for delegated acts.194 The proposed framework would also allow, where no other viable alternative is offered on fair terms, obligations for reasonable access to non-​SMP owned network elements not readily replicable (economically or physically) such as wiring/​cables within a

189   Art 65 (1), proposed EECC.   Art 77, proposed EECC.   Non-​SMP providers can also be required to share specific facilities where it will increase structural-​ based competition and lower rollout costs for new networks. See Framework Directive, Art 12(1). 191 192 193   2002/​19/​EC, Art 5(1)(a).   Ibid, at Art 5(1)(b).   Ibid, at Art 6; see Chapter 8. 194   See Arts 59 (1), 110, proposed EECC. 188

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building, to the first concentration/​distribution point outside the building and further where ‘strictly necessary’ or ‘insurmountable’ barriers exist.195 These may include rules governing access, transparency, non-​discrimination, and cost allocation in light of risk. Universal Service Conditions  The 2009 reforms via the ‘Citizens’ Rights Directive’ made some changes to the Universal Service and Users’ Rights Directive but did not really change the defined EU-​w ide universal service level, itself. This remains as access to a communications network at a fixed location and service that supports voice, data, and ‘functional’ internet access defined as dial-​up modem, or ‘narrowband’ connection.196 The proposed EECC would upgrade the level to functional internet access reflecting that used by most end-​users but capable of supporting a minimum list of services197 enabling civil society participation and voice communications services at a nationally specified quality, at least at a fixed location.198 Universal service would, however, no longer encompass access to directory enquiry services or directories or provision of public pay phones unless a national need for these is demonstrated.199 The requirement that Member States ensure equivalence of access and choice for disabled end-​users, a significant 2009 reform,200 continues in the proposed EECC, although seemingly only via a specific designation as the proposed EECC deletes the relevant wording of the condition under the General Authorisation.201 Currently the specific US conditions that can be imposed on designated US providers, including non-​SMP, are: 1. universal connection to the public communications network and access to a defined, minimum set of publicly available telephone services (PATS)202 at a fixed location (Article 4, 2002/​22/​EC as amended);   See Art 59 (2), proposed EECC.   Member States can change this to reflect a level of function in keeping with the majority trend in a national market but pay for it with public funds. Recital 5, Citizens’ Rights Directive. See also, Case C-​1/​14, Base Co. NV v Ministerraad (2015), paras 38–​42. The Commission’s proposed reform would mandate both the majority measure of functionality and the public funding obligation. See Art 79, proposed EECC. 197   Annex V, proposed EECC details these as voice and video calls, email, search engines, online education/​t raining, news services, goods and services purchase, professional networking, online banking, use of eGovernment services, social media and instant message, refinable at the national level. 198   Also at an affordable price in light of national conditions. See Art 79, proposed EECC. Member States can, if needed, include mobile. 199   Art 82, proposed EECC. 200   Art 23a, Universal Service Directive (as amended by Directive 2009/​136/​EC). 201   Annex V (B)(3), proposed EECC. 202   The Universal Service Directive amended the definition of ‘PATS’ to remove the provision of ‘emergency services’ from its defining criteria and a list of other possibly relevant specific services such as directory enquiry eliminating the possibility that service providers otherwise meeting the definition are not excluded from 195

196

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2. provision of public pay phones and other voice telephony access points (Article 6, 2002/​22/​EC as amended); 3. provision of a printed or electronic directory, as required, comprising all PATS subscribers and directory enquiry services accessible to all end-​users (Article 5, 2002/​22/​EC); 4. measures for disabled persons to ensure equivalent access to PATS, emergency services, directory enquiry (Article 7, 2002/​22EC);203 and 5. affordable tariffing for such services where necessary to provide specified access to persons with low income or having special needs. The proposed EECC would modify or eliminate most of these. Although SMP providers are most likely to be designated USO providers, others may seek to be considered for all or part of USO provision, as described above. The Authorisation Directive, therefore, allows Member States to impose universal service obligations on non-​SMP providers via specific conditions imposed concerning their provision and tariffing. Any specific USO condition must also comply with the substantive and procedural requirements for imposing conditions of the Framework Directive and Universal Service Directives204 that here would include Commission reporting. Any specific condition must constitute a separate legal obligation from those in the general authorization. To ensure transparency, the criteria for imposing such obligations on individuals must, however, be referred to in the general authorization (Article 6(3)). These requirements would be unchanged. A provider with USO obligations must notify the NRA, in advance, of its intention to dispose of a substantial part of its local access networks to another legal entity under different legal ownership.205 This allows the NRA to assess how this impacts the fixed access obligation and to impose, amend, or withdraw specific obligations, considered below. This obligation would remain.206

obligations because they don’t provide emergency services. PATS is now defined under the Directive (and in the UK General Conditions of entitlement) as ‘a service made available to the public for originating and receiving, directly or indirectly, national or national and international calls through a number or numbers in a national or international telephone numbering plan’ (Art 2(c); Definitions, Revised UK General Conditions of Entitlement). 203   See Art 7(1), suggesting that such USO obligations might be obviated where equivalence of access to services and choice of providers enjoyed by the majority of end-​u sers is provided for in consumer contracts. 204   The Access Directive imposes the requirement that such specific conditions comply with Arts 6 and 6a of the Framework Directive (Arts 5(3), 6(3)), governing transparency, consistency and consultation, as above described in connection with the granting of individual rights of use, see Section 6.4.2.3, and the reporting requirements for certain NRA actions. The Universal Service Directive, in contrast, refers only to its own requirements for consultation (Art 33) and Commission notification (Art 36), although it is likely, that Art 6 of the Framework Directive governs too, with Art 33, USD, a refinement to include manufacturers and end-​u ser groups within interested parties. 205   Universal Service Directive as amended by Directive 2009/​136/​EC, at Art 8(3). 206   Art 81(5), proposed EECC.

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6.4.2.5  Amendments and modifications of rights and conditions Rights, conditions, and procedures concerning general authorizations, rights of use, and rights to install facilities can be modified only in objectively justified cases and in a proportionate manner (Article 14(1)). Unless these are minor and agreed with rights or general authorization holders, appropriate notice must be given and interested parties must have at least four weeks to comment, except in exceptional circumstances (Article 14(1)). These requirements would remain unchanged. Rights cannot be withdrawn or restricted before the grant period except where justified. Where applicable, compensation must be made pursuant to national law. These requirements would remain but the proposed EECC adds a formal consultation requirement for any intent to withdraw or restrict authorization/​r ights to use numbers with at least a thirty-​day period for comment.207 6.4.2.6  Reporting obligations Information reporting to regulators can be a costly and burdensome process. The Authorisation Directive limits the information undertakings must provide. To permit monitoring of compliance with conditions under the general authorization, for rights of use or specific obligations, NRAs may request, without additional justification, proportionate and objectively justified information necessary to verify systemic or case-​by-​case compliance with: 1. payment obligations for USO contributions, administrative fees under the general authorization, and usage fees; 2. those specific conditions permitted to be imposed under Article 6(2) of the Authorisation Directive (see Section 6.4.2.4) (Article 11(a)). These information requirements would remain, modified only to conform to the revised conditions as above208 as would the ability of NRAs to require proportionate, objectively justified information necessary to verify compliance with applicable conditions on a case-​by-​case basis where a complaint has been received, or investigation or other reasons suggest problems with compliance as currently under Article 11(b)).209 Such information can also be required for: • • • •

procedures for and assessment of rights of use (Article 11(c)); comparative quality/​price reports for consumers (Article 11(d)); clearly defined statistical purposes (Article 11(e)); market analyses for effective competition pursuant to the Access and Universal Service Directives (Article 11(f));

207

  Arts 19 (4) and 23, proposed EECC.   

  Art 21, proposed EECC.   

208

 Ibid.

209

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• evaluating network or service developments with an impact on future wholesale provision to competitors (Article 11(h)). The proposed EECC retains these, adding other competent national authorities as possible overseers,210 and adds an ability for NRAs to require information on electronic communications networks and associated facilities disaggregated at a local level so as to be able to conduct a geographical survey of the reach of broadband networks for planning purposes and designating digital exclusion zones wherein the NRA can make calls for interest in deploying networks.211 The EEEC would authorize NRAs to sanction the deliberate provision of misleading, erroneous, or inaccurate information, including the failure to respond to a call, the latter of which seems controversial as possible future plans for network deployment would seem to be confidential business data.212 6.4.2.7  Compliance and enforcement After the 2002 Authorisation Directive tempered the consequences for failing to comply with general authorization conditions under the former Licensing Directive, concerns about lack of enforcement and inadequate enforcement powers led to 2009 modifications of the Directive. These included the: • NRA obligation to monitor and supervise compliance with conditions of the general authorization or rights of use and those non-​SMP specific access or universal service conditions as discussed above (Article 10 (1)); • Mandated power rather than a discretionary potential to require provision of information necessary to verify compliance with such obligations (Article 10(1)); • Mandated NRA power to impose dissuasive financial penalties (Article 10(3)(a)); • NRA power to require the cessation of a breach, including immediately (Article 10(3)); and • Ability to order the delay or cessation of a service or service bundle likely to cause significant harm to competition pending SMP compliance with a specified access obligation (Article 10(3)(b)).213 The proposed EECC would not change these.214 The Authorisation Directive requires that sanctions be dissuasive, effective, and proportionate and can be applied retroactively, including where the breach is

210   Under the proposed EECC, Member States must ensure that a minimum list of tasks defined at Art 5(1) are assigned to NRAs only, eg implementing ex ante regulation such as access and interconnection obligations, granting general authorizations, ensuring dispute resolution, etc. See Art 5. Beyond that, Member States have flexibility to designate roles either to NRAs or other competent authorities, but must ensure the independence of these other authorities. 211 212   Arts 20 (1), 22 (3), proposed EECC.   Art 22 (4). 213 214   Directive 2002/​20/​EC, as amended by Directive 2009/​140/​EC.   Art 30, proposed EECC.

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corrected (Article 10(5)). In exceptional circumstances where serious or repeated215 breaches are not remedied despite financial and/​or other proportionate sanctions, an NRA can preclude an undertaking from providing electronic communications networks and services and/​or withdraw or suspend rights of use. These provisions remain under the proposed EECC. Where an NRA finds that the provider is not complying with any condition of the general authorization, rights of use, or specific conditions imposed under Article 6.2 of the Authorisation Directive, the NRA shall notify the undertaking and give it the opportunity to state its views within a reasonable period (Article 10(2)).216 Where evidence of a breach indicates a serious and immediate threat to public health, safety, or security, or poses operational or economic problems for users or other providers, the NRA may impose an interim, immediate measure as a remedy. The undertaking must then have a reasonable opportunity to be heard and propose other remedies prior to a final decision. NRAs may confirm the interim solution where it is appropriate for up to three months with one such further extension possible where enforcement measures are not completed (Article 10(6)).217 The Authorisation Directive requires undertakings to have the right to appeal all measures to sanction or remedy breach of conditions under procedures mandated by Article 4 of the Framework Directive. This requires that all network/​service providers or users ‘affected by a decision’ of the authority have an effective means of appeal to a body independent from the parties and with the appropriate expertise to enable it to carry out its functions effectively.218 These provisions would remain but require the body to have ‘complete’ independence both from the parties and from ‘external intervention or political pressure liable to jeopardise its independent assessment of matters’.219 The 2009 Authorisation Directive reforms tightened its somewhat flaccid enforcement regime. They seemed also to provide for a more streamlined enforcement process although ‘reasonable’ may give rise to wiggle room and delays. They clearly required that NRAs have more decisive and deterrent enforcement powers of fine and sanction that should allow NRAs, previously identified by Commission

215   Art 10(5), Directive 2002/​20/​EC as amended by Art 3(6)(c), Directive 2009/​140/​EC (substituting ‘or’ for ‘and’). Italics indicate the 2009 amendments. 216   This would remain unchanged. Art 30(2), proposed EECC. 217   Italics indicate 2009 amendments. This would remain unchanged in Art 30(2), proposed EECC. 218   The body must itself have the expertise rather than merely have it available to it. Directive 2002/​21/​EC, Art 4(1) as amended by Directive 2009/​140/​EC. The revised Directive clarifies that interim measures may substitute for the NRA’s decision where granted in accordance with national law. Ibid. 219   Art 31, proposed EECC.

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market implementation reports as not having adequate powers,220 to effect change. The proposed EECC, basically, does not change this. 6.4.2.8 Fees The 2002 Authorisation Directive, like its predecessor, mandates that administrative charges imposed under the general authorization be only those incurred in its ‘management, control and enforcement’ (Article 12 (1)). This includes charges for activities connected with rights of use and specific conditions imposed under Article 6(2) (see Section 6.4.2.4). It also details as permissible chargeable activities those incurred for international cooperation (eg radio frequencies, numbering schemes), harmonization and standardization, market analysis, monitoring compliance and other market control, as well as regulatory work involving preparation and enforcement of secondary legislation and administrative decisions, such as decisions on access and interconnection (Article 12(1)). It requires administrative fees or charges to be imposed in an objective, transparent, and non-​discriminatory manner but, also, one that minimizes additional costs (Article 12(b)). The Authorisation Directive further provides not only that the charges be published annually but that regulators provide an annual overview of their administrative costs for the permitted activities. This effectively requires accounting separation. It also requires an appropriate adjustment to be made when there is a difference between costs and charges (Article 12(2)). While accounting separation and cost justification are tools previously used in EU telecommunications regulation, they were controls imposed on former monopolist incumbents that enjoyed special or exclusive rights and privileges and, subsequently, on SMP operators. The proposed EECC would maintain these requirements, extending them to any other competent authorities imposing administrative charges.221 Finally, the Authorisation Directive anticipates that non-​cost related fees may be imposed for ensuring optimal use of numbers, spectrum, and rights to install facilities on public or private land (Article 13). In doing so these must be objectively justified, transparent, and non-​discriminatory, as well as proportionate to their intended use. This, with other Articles in the Directive that permit a comparative/​competitive procedure for granting individual rights of use, contemplates the possibility of usage fees determined by auction. The proposed EECC does not substantively change this but deals with numbers separately from the other individual rights,222 authorizing other ‘competent’ authorities to impose the charges in this latter group.223

220   See eg Commission ‘15th Progress Report on the Single European Electronic Communications Market’, COM(2010)253 final, 25 August 2010. 221 222 223   Art 16, proposed EECC.   Art 89, proposed EECC.   Art 42, proposed EECC.

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6.4.3  The EU Authorisation Directive—​recent developments The 2009 changes intended a further EU-​w ide harmonization and measurably greater regulatory ability to address persistently weak enforcement in some countries, including milquetoast remedies. While some were potentially transformative of serious competition impediments such as the potential recourse to structural separation, this remedy has not been implemented by any EU Member State other than the recent further infrastructure/​legal separation of BT beyond the original functional/​governance separation ‘agreement’ imposed on it in 2006 under UK law and before the 2009 reform.224 Some 2009 changes to existing regulatory practice such as the mandatory three-​year market review for imposing, modifying, or removing individual conditions appear to have been too onerous. Complaints that this did not allow enough time for markets to adjust to regulatory changes sufficiently before they were reviewed anew for SMP has resulted in a proposed EECC return to a review every five years, if adopted.225 Others, such as the provisions for encouraging more extensive infrastructure sharing, were not only welcome by the market as cost-​saving and market enabling,226 but were enhanced via a new 2014 Directive on measures to reduce the cost of deploying high-​speed electronic communications networks in light of the very limited Member State implementation of the earlier provisions, seen as delaying the roll-​out of high speed networks.227 As noted, the proposed EECC attempts further incentives to accelerate such networks but they are not tied to any governmental financial incentives, even in the ‘exclusion’ areas. There are also concerns about the required planning information sharing. Some 2009 reforms, such as the Article 6a notification and Commission ‘approval’ processes for remedies were largely repackaging. Most had no element of discretion, so were fairly straightforward enactments. Others were more complex, eg determining what comprises ‘dissuasive’ sanctions, with the much greater potential financial penalties viewed as an effective deterrent, and implemented accordingly, at least in the UK.228

224   Ofcom, ‘BT agrees to legal separation of Openreach’, 10 March 2017. It is to be noted that in 2015 O2 Czech Republic chose to avail itself of a 2009 reform (Art 13b, Framework Directive) and spun off its infrastructure into a separate company as a measure to enhance shareholder value, a measure it hailed as the ‘world’s first voluntary’ structural separation. ‘O2 Czech Republic Investor Presentation’, September 2015. 225   Art 65(5)(a), proposed EECC. 226   See generally ‘Mobile Infrastructure Sharing’ (GSMA 2012) (although noting that it is technologically challenging and involves different considerations for different market players according to their status). 227   Recital 10, Directive 2014/​61/​EC. 228   See Ofcom, ‘Penalty Guidelines:  Section 392 Communications Act, (2003)’, 14 September 2017, at 1–​2 (noting deterrence as the primary purpose and the need for sanctions to be appropriately high to have an impact).

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The 2009 changes intended a further EU-​w ide harmonization of competences and measurably greater ability to address persistently weak enforcement in some countries. The proposed EECC, however, is partly driven by a continuing and marked lack of uniform competences across the Member States229 despite nearly thirty years of stipulated requirements and the continuing inability to address cross-​border issues.230 To address the former, the proposed EECC specifies a list of functions, including authorizations, that the NRA alone must perform as well as a requirement of independence for and the application of the framework by other ‘competent’ authorities. The proposed reforms arguably continue an ongoing rebalancing of regulation to incent competition according to EU market conditions while promoting the roll-​out of evolving technologies, crucially the 5G networks anticipated in another year or so. The continued removal of markets from the list of relevant markets to be reviewed for SMP since the 2009 reforms, with only four wholesale markets remaining as of 2014 from the original 2002 list of eighteen, marks the ongoing development of competition and relevance of these frameworks, including the Authorisation Directive, as there are fewer markets for which SMP conditions can be attached. However, the prospect that cross-​border regulation will be markedly improved is not optimal. The Commission has already twice sought enhanced competences and been rejected, a result that seems quite possible with the proposed EECC.231 A similar fate is likely for BEREC’s proposed transformation into an EU agency with enhanced powers rather than a collaborative, advisory body. Thus, the proposed reform to harmonize market entry information requirements and create a kind of one-​stop shop via BEREC may not survive tri-​partite negotiations. The proposed amendments to the definition of electronic communications services to extend telecoms regulation to over-the-top providers are somewhat light touch, for number-​independent interpersonal communications services, as likely limited to security and other possible requirements necessary in the public interest for end-​to-​end connectivity, emergency services, or interoperability. The obligations for services using numbers would certainly impose additional requirements232 and clarify others such as the extent to which access to emergency services must be provided that now is vague. However, some governments are concerned

  Explanatory Memorandum, proposed EECC, at 2.   Ibid, at 3 (noting only ‘modest’ Single Market results). 231   Report, ‘House of Commons Select Committee on European Scrutiny, Digital Single Market: Connectivity (Telecoms) Package’ (UK Parliament, 25 April 2017), . 232   These would encompass the range of end-​u ser protections under the conditions to the general authorization such as transparency and minimum service quality requirements, minimum contract requirements, and restrictions case. 229

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about the impact on innovation and national/​EU start-​ups and are urging caution in imposing equivalent regulation on OTT providers absent evidence of market failure or consumer harm. As nothing is agreed until all is agreed, the proposed reforms remain uncertain. The Council has set a deadline of June 2018 for negotiation agreement.

6.4.4  The UK implementation of the 2002 Authorisation Framework as amended The UK has implemented the EU framework for permissions to provide electronic communications networks and services in the Communications Act 2003233 and its ensuing secondary legislation. The following examines the Act as well as its implementation and enforcement by Ofcom. 6.4.4.1  The Communications Act 2003 The Act, Part 2, Chapter 1 ‘Electronic Communications Networks and Services’ governs the provision of electronic communications networks and services. Lengthy and complex, it put in place the Directive’s general authorization scheme by: 1. repealing provisions of the Telecommunications Act 1984 that governed powers and requirements for licences, their modification and enforcement, public telecommunications operator designations, and rights to access public and private land associated with these (s 147); and 2. empowering Ofcom to set certain general and specific conditions (s 45) on specified persons providing electronic communications networks and services (s 46). There is no ‘general authorization’ document or grant per se needed to provide electronic communications networks and services in the UK. Providers are merely subject to a set of General Conditions of Entitlement 234 notified and promulgated by the former regulator, the Director-​General of Telecommunications, and continued with effect and as modified by Ofcom, the converged regulator for all electronic communications including broadcast. Ofcom recently completed a series of consultations in review of the General Conditions of Entitlement, which it has revised with effect from 1 October 2018, although Ofcom has urged earlier compliance.235 The General Conditions of Entitlement comprise over eighty pages of

  2003, Chapter 21.   Ofcom, ‘Original Notification setting general conditions under section 45 of the Communications Act 2003’, 22 July 2003, . 235  Ofcom, ‘Statement and Consultation:  Review of the General Conditions of Entitlement, Executive Summary’, 19 September 2017. ‘Consolidated version of General Conditions as at 13 September 2014 (including annotations)’, . 233

234

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rights, obligations, and definitions, implementing sections 51–​6 4 of the Act. These specify the permissible content and scope of general conditions which the Act permits to be applied ‘generally’ to every person providing an electronic communications network or service (s 46(2)(a)), or to every person providing those networks or services of a particular description as defined in the condition (s 46(2)(b)). These will be examined, as recently revised subsequently. 6.4.4.2  Notification procedure The Communications Act 2003 requires that a person not provide a designated electronic communication network or service without advance notification to Ofcom of the intent to do so (s 33(1)(2)). It also requires that any person ‘making available a designated associated facility’ similarly notify its intent (s 33(3)). 236 The Act also requires that Ofcom create a public register of notifying providers (s 44), and authorizes sanctions for failure to notify (ss 35–​37). This notification requirement is premised on being a ‘designated’ network for which a notification is required (s 33(2)). Ofcom, however, has not ‘designated’ any networks, services, or facilities for mandatory notification under these sections. Rather, while it originally planned a voluntary register for Public Electronic Communications Networks (PECNs) to facilitate negotiation of interconnection pursuant to their rights under the general authorization, Ofcom determined that this was not in keeping with the permissive nature of the general authorization and decided not to proceed.237 This would have implemented certificates under the Authorisation Directive to facilitate interconnection and to obtain rights to access public and private land. Ofcom believed that this was unnecessary in light of sufficient guidance as to who comprised a provider of PECN in the 2003 Interconnection Guidelines238

236   This separate listing of associated facilities in the Communications Act 2003 addressed a gap in the EU framework. The Framework Directive defines its scope and aim at Art 1(1) as a ‘harmonized framework for the regulation of electronic communication services, electronic communications networks, associated facilities and associated services’. It then proceeds to define these latter categories as ‘facilities associated with an electronic communications network and/​or an electronic communications service which enable and/​or support the provision of services via that network and/​or service. It includes conditional access systems and electronic programme guides’ (Art 2(e)). The Authorisation Directive’s aim and scope, however, states only that it applies to ‘authorisations for the provision of electronic communications networks and services’ and carves out as unnecessary conditional access system/​services authorizations at Recital 6, provisions having previously been made for the free movement of conditional access services in Directive 98/​8 4/​EC on the legal protection of services based on, or consisting of conditional access. It appears implicit in this, therefore, that associated facilities are services other than conditional access, while defined separately, are intended to fall within electronic communications networks and services authorizations. 237  See Ofcom Consultation, ‘Proposal that all provisions continued from licences made under the Telecommunications Act 1984 and all continued interconnection directions will cease to have effect except for specific provisions in specific markets listed in this document as exceptions’, 9 September 2004, . 238   Oftel, Statement of DGT, ‘Guidelines for the interconnection of public electronic communications networks’, 23 May 2003.

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and that the register added nothing since it did not itself create or condition the exercise of rights.239 If the BEREC notification procedure under the proposed EECC remains to foster cross-​border market entry, these requirements may need to be revisited. 6.4.4.3 Conditions Section 45 of the Act authorizes Ofcom to set the general conditions of entitlement (s 45(2)(a)) and specified individual conditions comprising:  (i) universal service conditions; (ii) access-​related conditions; and (iii) significant market power conditions (s 45(2)(b)).240 Each is considered in turn below. General conditions  ‘General conditions’ address topics that can be grouped under headings of ‘consumer protection’, ‘access and interconnection-​related’, ‘essential requirements’, ‘universal service-​ related’, and ‘scarce resources’ (s 45).241 Section 51(1)(b) provides for appropriate conditions governing service interoperability and network access and interconnection. Conditions governing ‘essential requirements’ under the Act encompass: • proper and effective functioning of public networks (s 51(1)(c)); • prevention or avoidance of the exposure of individuals to electro-​magnetic fields created in connection with the operation of electronic communications networks (s 51(1)(f)); • compliance with relevant international standards (s 51(1)(g)). The Act’s provisions concerning ‘universal service’ relate to: • assessment, collection, and distribution of financial contributions to any universal service obligation (s 51(1)(d)); • the provision, availability, and use, in the event of a disaster, of electronic communications networks, services, and associated facilities (s 51(1)(e)); • the provision of equivalent services to disabled users (s 51(2)(c));242 • the broadcast or other transmission of ‘must carry’ services by electronic communications networks, including, but not limited to, a service enabling access for disabled end-​users (s 64).

  See Consultation, n 237.   Section 45 also authorizes conditions on providers with exclusive and special privileges from other industries where relevant communications revenues exceed £50 million. None have been designated. 241   Ofcom recently grouped these into three main categories of ‘network functioning’ (Part A); ‘numbering and technical conditions’ (Part B), and ‘consumer protection’ (Part C) in its consultation and revision of the General Conditions of Entitlement, Statement and Consultation, n 235, at 2.2. 242   Italics represent implementation of the 2009 EU amendments. 239

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Finally, the Act’s permitted general conditions for ‘scarce resources’ concern: • access for end-​users to numbers under the national numbering plan (s 57); • the allocation to and adoption of numbers by providers and non-​providers (s 58); and • the conditions for limiting any transfers of allocated numbers to another party (s 56A).243 Falling within ‘consumer protection’ are those conditions under the Act regarding: • protection of ‘end-​users’ of public services (s 51(1)(a)); • provision of specified information free of charge to end-​users (s 51(2)(d));244 • minimum quality requirements for public electronic networks to prevent degradation of service and the hindering or slowing of traffic over them (s 51(2)(e));245 • requirements to block access to telephone numbers or services to prevent fraud or misuse and to allow withholding of fees to another provider (s 51(2)(f)); • limitations on duration of contracts between end-​users and communications providers (s 51(2)(g)); • requirements to ensure contract termination conditions and procedures are not disincentives to an end-​user to change providers (s 51(2)(h));246 • standards and policies concerning transparent, easy to use, and non-​ discriminatory procedures regarding: ◦ handling of complaints from domestic and small business customers related to contract conditions or performance of supply of a network or service; ◦ resolution of disputes related to contract conditions or performance of supply of a network or service; ◦ remedies and redress for such complaints/​d isputes; • compensation for delay or abuse of process in porting a number to another service provider; • making information about service standards and rights available to these customers (s 52). The Digital Economy Act 2017247 amended section 51(2) of the Act by adding a new subsection (da) that specifies Ofcom’s power to set conditions requiring a 243   This section also details the obligation to justify any time limitations on number allocation as discussed previously at Section 6.4.2.3. 244   This obligation together with the right granted under new s 146A of the Act to third parties to use any published information for provision of an interactive guide or other technique to evaluate alternative service usage costs implements Art 23, Universal Service Directive as amended by Directive 2009/​136/​EC. 245   Requiring Ofcom’s notification to the Commission and BEREC and that it take ‘due account’ of the Commission’s comments and recommendations (s 52(2A)). 246  The italicized text indicates changes based on the 2009 reforms, implemented via The Electronic Communications and Wireless Telegraphy Regulations 2011. 247   Digital Economy Act 2017, ch 30 (27 April 2017).

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communications provider to pay automatic compensation to an end-​user where it fails to meet a specified standard or obligation. These sections of the Act largely track the permitted general conditions under Annex A of the Authorisation Directive. 248 Currently implementing these sections are twenty-​four General Conditions of Entitlement. These have been modified in a somewhat piecemeal approach over the years since 2003 when they were first promulgated to implement the then new EU regime with the general authorization default reforms. Ofcom has added to and otherwise amended the Conditions to address evolutions in markets and market conduct, technology, fall-​out from competition, as well as further EU reforms, notably in 2009 that required: • providers to offer users a contract of a maximum duration of twelve months and consumers a contract with a maximum initial term of twenty-​four months as well as the provision of additional information regarding the length of contracts and conditions for termination (GC 9); • equivalent access to emergency services by provision of emergency SMS to speech and hearing impaired users (GC 15); • porting of numbers, both fixed and mobile within one business day as defined and porting delay/​abuse compensation (GC 18). Sections 46–​49C reflect the Act’s implementation of the EU procedural and substantive requirements for publication, consultation, approval of domestic conditions and those with EU significance requiring Commission notification, and modification and revocation of conditions, in light of the 2009 reforms.249 Following on from its 2015 Digital Communications Review, Ofcom conducted a review and revision of the General Conditions (GCs) of Entitlement. One of its primary goals going forward from the Review was to ensure ‘a step change in quality of service’ and the ‘empowering and protecting’ of consumers.250 Revisions to the General Conditions, that will be reduced to seventeen with effect from October 2018, to address these include: • broadening the complaint process requirements to include general customer service and strengthening it to ensure more prompt and efficient handling with progress reports to complainants and earlier access to alternative dispute resolution where the provider does not intend to take further action;

  See Section 6.4.2.4.   See Communications Act 2003, ss 48(A)–​49(C) regarding notification to the Commission of imposition, modification of universal service conditions. 250   Ofcom, ‘Initial conclusions from the Strategic Review of Digital Communications’, 25 February 2016, at 22. 248 249

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• enhancing protections from nuisance calls by requiring all providers of PATS and PECNs over which PATS is provided to make available without additional charge calling line identification facilities with information that uniquely identifies the caller, to identify and block non-​valid/​non-​d ialable numbers as well as enhanced power for Ofcom to remove numbers used abusively; • protecting vulnerable consumers via requirements for providers to develop, publish, and implement policies for their fair and appropriate treatment; • requiring all communications providers (now including broadband) to provide priority fault repair for the disabled, third-​party bill management, and accessible bill formats; • the extension of billing and metering schemes to ensure billing accuracy to  data; • greater obligations for transparency re: compensation schemes for consumers, small business customers and service level guarantees, if any, for SMEs. In addition, the review intended to remove redundant, unused, and unnecessary provisions, the latter in compliance with Ofcom’s section 6 duties under the Communications Act 2003 to review regulatory burdens. It also set out to simplify and clarify the text of the GCs including by removing unnecessary words, directly inserting requirements into conditions instead of mere cross-​references or via codes of practices, consolidating overlapping conditions (eg GCs 8 and 19) and assembling definitions into a single section with any modifications needed in a specific condition. Additionally, it has added a recital to each condition to clarify its scope and purpose. Comprising only the second authoritative, comprehensive version since the 2003 original notice (consolidating any applicable post-​2003 amendments),251 Ofcom has reorganized the revised GCs into three parts:  Part A. Network Functioning Conditions; Part B. Numbering and Technical Conditions; and Part C. Consumer Protection Conditions. The revisions removed, as unnecessary, conditions regarding: • obligations to ensure end-​user access to operator assistance, directory enquiry services in GCs 6.1(b), 8.1 (a) and (b) and the obligation for ‘reasonable’ fees for directory enquiry service in GC 8.4 (market conditions make it likely these will be provided); • the derogation to allow providers to share confidential information with OFCOM (redundant of OFCOM powers);

251   That being said, the September 2017 publication of the revised, consolidated Conditions is already no longer complete in light of the November 2017 addition of GC 24 requiring enhanced transparency for SMEs regarding service levels that was simultaneously revised as C2.16–​2 .19. See Table 6.1.

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• requirements for public pay phone accessibility design, removal, or detailed pricing information in GC 6 (market developments, adequate USO conditions on BT and KCOM make these unnecessary); • requirements that provider access conditions ensure fullest availability of public electronic communications network (PECN) during catastrophic network failure or force majeure be proportionate, non-​d iscriminatory, and based on pre-​determined objective criteria in GC 3.2 (addressable by Ofcom powers for wholesale conditions under Access Directive); • Ofcom’s powers to determine minimum itemization requirements for billing in GC 12.3 (never exercised); • itemization exemption for pre-​paid services in GC 12.5 (redundant of new requirement on all communications providers to provide access to sufficient billing information); • Ofcom’s powers to set standards and related conditions in GC 2.3–​2.6 (never exercised); • requirement under GC 14.1 for basic code of practice setting out where domestic/​small business customers can find the information CPs are required to publish under GC 10.2 (unnecessary in light of new direct publication/​i nformation obligations); • publication of and compliance with a code of practice for premium rate services regarding information, complaints and dispute resolution in GC 14.2 (unnecessary in light of new direct obligation in C.2); • obligation to provide tone dialling in GC 16.1 (market developments make obligation unnecessary); • requirements for European Numbering Space in GC 20.4 (no longer operational). The revised General Conditions are outlined in Table 6.1. These are worth reviewing, as they will comprise the bulk of the regulatory framework for many providers of networks and services. As with the prior GCs, the revised scheme generally distinguishes among three different categories of providers: providers of electronic communications networks (ECN) or services (ECS), providers of public electronic communications services (PECS) and networks (PECN), and providers of publicly available telephone services (PATS)252 as well as PECN networks over which PATS are provided (a seeming substitute for the PTN/​ PCN previously used by Ofcom in particular conditions referencing telephony).

252   While it previously did so, the definition of ‘Publicly Available Telephone Service’ (PATS) no longer encompasses access to emergency services as a defining criteria and references only a service for originating and receiving, directly or indirectly, national or national and international calls through a number or numbers in a national or international telephone numbering plan. There are also provisions applicable to public internet access services (PAIS). See C 3.

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Table 6.1  General Conditions of Entitlement 253 Part A: Network Functioning Conditions A1: General Network Access and Interconnection Obligations • PECN providers to negotiate interconnection on request by any PECN in EU with view to concluding interconnection agreement within reasonable time (A1.2)254 • All ECN providers to keep confidential information obtained in confidence in connection with access negotiations; use only for purpose provided and not passed on to any party (eg, department/​subsidiary) to whom it could provide competitive advantage (A1.3).255 A2: Standardization and specified interfaces • All communications providers to: ◦ comply with existing compulsory European standards/​specifications published in EU Official Journal (A2.2); ◦ take account of: ▪ non-​c ompulsory European standards/​specifications adopted by CEN, ETSI, CENELEC (A2.3a); ▪ any relevant international standards/​specifications adopted by ISO, IEC, ITU and CEPT where no European (A2.3b).256 A3: Availability of services and access to services • Providers of PATS or PECNs over which PATS provided 257 to take all necessary measures to ensure: ◦ fullest possible availability to PATS provided by them in catastrophic network breakdown or force majeure, ◦ uninterrupted access to any emergency organization (EOs) provided as part of PATS (A3.2).258 • Providers of VoIP Outbound Call Services to notify Domestic/​Small Business customers in plain English and easily accessible manner that access to EOs using VoIP Outbound Call Services may cease in a power cut/​failure, or failure of internet connection on which service relies ◦ During sales process, in terms and conditions of use and in any user guide provided (A3.3).259 • Provider of end-​user ECS or access via pay telephones, for originating calls to a number in national numbering plan (not ‘click to call’ services) to: ◦ ensure end-​user access to EOs via ‘112’ or ‘999’ without charge and without coins or cards for pay phones and for mobile communications, end-​user access to EOs by eCalls (A3.4). ◦ make available, at the time the call is made, to extent technically feasible, accurate and reliable caller location information to EOs called on ‘112’ or ‘999’ without charge to the EOs handling calls (A3.5).260 253   As noted by Ofcom, the definitions relating to Conditions reflect the change from ‘Public Telephone Network’ to ‘Public Communications Network’ (PCN), and the amendments to PATS and telephone number under the 2009 EU framework. See Consolidated Version of General Conditions of Entitlement as at 13 September 2011, at n 2. These continue but there are further divisions, eg Public Internet Access Service (PAIS) in C 3.4. 254   Very minor revision of GC 1.1. 255   Largely replicates GC 1.2; omits Ofcom disclosure exemption. 256   Replicates GC 2.1, 2.2; omits 2.3–​2 .6, Ofcom powers re: standards. 257   Removes limitation to fixed networks. 258   Minor revision of GC 3.1. 259   Transposes para 11(a), former Annex 3, GC 14. 260   Replicates GC 4.2.

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▪

If at fixed location, caller location information must at least include terminal equipment location and full postal address (A3.6 (a)).261 ▪ For mobile services, the cell identification of the cell from where the call is made and radius of cell coverage where available ◆ zone code, exceptionally, if cell identification temporarily unavailable for technical reasons (A3.6 (b)).262 ▪ For VoIP Outbound Call Services at fixed location, providers to recommend that domestic/​ small business users register address prior to service, keep updated (A3.6 (c)(i)).263 ▪ Where VoIP Outbound Call Service reasonably expected to be accessed from multiple locations, provider to recommend domestic/​small business users register location data associated with it update whenever accessed from new location (A3.6 (c)(ii)).264 A4: Emergency Planning • Providers of PATS or PECNs over which PATS provided: ◦ to make arrangements to provide/​restore rapidly reasonable and practicable services in a disaster on request of/​i n consultation with central and local government and EOs. ◦ to implement arrangements as requested by any designated person as is reasonable/​practicable ◦ may seek compensation and be conditioned on indemnification.265 A5: Must carry obligation • Regulated providers (designated broadcast network providers) to: ◦ comply with direction from Ofcom to transmit service from must-​carry list under Section 64 of the Act. ◦ comply with any order of Secretary of State under Section 64 re: terms on which services must be broadcast or otherwise transmitted.266 Part B: Numbering and Technical Conditions B1: Allocation, adoption and use of telephone numbers267 • Provider of ECN, ECS: ◦ not to adopt, use or transfer numbers from national numbering plan unless allocated to it or to another person who authorizes adoption, use. ◦ to comply with applicable restrictions, requirements of National Numbering Plan or in Ofcom notifications recording specific number allocations to it. ◦ to ensure effective, efficient adoption/​other use of allocated/​t ransferred numbers; take all reasonably practicable steps to secure that its customers’ use of numbers comply with Condition, National Numbering Plan and Non-​provider Numbering Condition.268   Replicates GC 4.3, in part.   Minor revision of GC 4.3, in part. 263   Essentially transposes 12(a), Annex 3, GC 14. 264   Essentially transposes 12(b), Annex 3, GC 14. 265   Largely transposes GC 5.1–​5.3; adds specification of radioactive/​toxic/​other events with significant impact on general public as disasters. 266   Transposes GC 7.1, 7.2. 267   Largely replicates GC 17; omits GC 17.11, 17.12 (allocation/​w ithdrawal of numbers for limited period), 17. 20, 17.21 (pre-​2015 application). 268   A 2013 transparency condition that requires that calls to non-​geographic numbers be divided into their component parts, the access charge by their communications providers and the service charge by company being called, which must show the applicable service charges on all advertising and promotional material that includes the non-​ geographic number using Ofcom mandated wording: ‘This call will cost you X pence per minute plus your phone company’s access charge.’ Ofcom, ‘Telephone call chargers to be made simpler’, 12 December 2013, . 261

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◦ not unduly discriminate in other provider’s adoption/​use of numbers. ◦ pay Annual Number Charge within 14 days of Ofcom invoicing for allocated geographic numbers in areas specified in Annex 269 whether used or not, billed in arrears and calculated as specified. • Ofcom’s withdrawal of numbers where: ◦ not adopted by provider within 6 months or other designated period as Ofcom may direct from date of allocation ◦ provider unable to demonstrate that numbers are or were assigned to Subscriber in last 12 months and withdrawal is for assuring best and most efficient use of numbers (new, B1.18). • Compliance with tariffing principles for unbundled tariff numbers and the requirements for and calculation of access and service charges and price points B2: Directory Information 270 • PATS providers assigning telephone numbers to subscribers: ◦ to meet all reasonable requests to make directory information available on fair, objective, cost-​oriented and non-​d iscriminatory terms, in agreed format, to enable directory/​enquiry service provision. ◦ to provide subscribers, on request, a directory or directories for any specified area of the UK of subscribers choosing to be in that directory. ◦ to ensure any directory produced is updated once a year. ◦ may charge reasonable fees for directory and inclusion of subscriber information in directory. B3: Number portability 271 • ECN Provider or provider of ECS to subscribers with number(s) from the National Numbering Plan ◦ to provide number portability to any requesting subscriber, within shortest possible time, including subsequent activation, on reasonable terms/​conditions, including charges, including (B3.3). ▪ for mobile, within 1 business day from subscriber’s request; recipient provider (RP) to request porting from donor provider (DP) as soon as reasonably practicable ▪ where mobile porting and fewer than 25 requests, DP to allow customer to request porting authorization code (PAC) by phone to be provided immediately, where possible, or sent via SMS within 2 hours of phone request or by other means agreed by subscriber/​DP (B 3.4).272 ▪ for mobile, porting of numbers and activation to be completed by RP within one business of subscriber request ▪ for all others (fixed), within 1 business day of necessary validations, network readiness and recipient provider’s (RP) request for porting activation to donor provider (DP) (B3.5).273 ▪ RP to request porting from DP as soon as reasonably practicable after customer request (B3.6).274 269   Places where Ofcom has identified a likely potential number shortage in its consultation on the General Conditions of Entitlement. 270  Omits obligation to provide directory enquiry/​operator access but otherwise largely replicates GC 8.2–​8.6, GC 19. 271   Replicates GC 18 with minor edit re: plain English. 272   Transposes GC 18.2. 273   Transposes GC 18.3. 274   Transposes GC 18.4.

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porting by DP to be done as soon as reasonably practicable, at cost-​based, incremental charges with no DP charges for porting system set-​up, additional conveyance costs or, if mobile, ongoing costs for registration of ported number. any direct charges to subscribers not to be disincentive to change providers (B3.7).275 subscribers to be reasonably compensated for porting delay beyond one business day or abuse as soon as reasonably practicable (B3.11).276 subscribers to be informed of portability date, how to access compensation for porting delay/​abuse in plain English, easily accessible manner (B3.12).277 provide Ofcom with record of each ported number with RP in each case (B3.9).278

B4: Access to numbers and services279 • Providers of ECN, ECS to ensure: ◦ EU end-​users can access, use non-​geographic numbers adopted by provider, where technically, economically feasible, subject to Condition C6.6 (requiring blocking of invalid/​non-​d ialable calling line information) and access all EU telephone numbers, regardless of technological device used. ◦ limited end-​user access to geographical areas as the subscriber chooses for commercial reasons. ◦ blocked access to numbers/​PECS as Ofcom requests to prevent fraud, misuse and withheld associated revenues. • Providers of ECS to end-​users or of access to ECS by means of a pay telephone, for originating calls to a number or numbers in the National Telephone Numbering Plan (excluding any click to call service) to provide end-​user access to missing child hotline at ‘116000’. Part C: Consumer Protection Conditions C1: Contract requirements280 • Providers of PECN/​PECS to offer consumers and, on request, other end-​users, contracts specifying at least the following minimum requirements in clear, comprehensive, easily accessible form: ◦ name, registered address of provider. ◦ description of services provided, whether access to Emergency Organisations and caller location information are provided and whether any limitation on access to Emergency Organisations. ◦ conditions limiting access to/​use of services/​applications, if permitted by national law. ◦ details on minimum service quality levels including initial connection time. ◦ any procedures to manage (‘shape’) traffic to avoid network congestion and how could affect service quality ◦ types of maintenance, customer support services offered; how to contact.   Transposes GC 18.5.   Transposes GC 18.9. 277   Transposes GC 18.10. 278   Transposes GC 18.7. 279   Replicates GC 20 but removes GC 20.4 re: no longer existing EU Telephony Space. 280   Replicates GC 9.2–​9.6, 9.7; adds provisions re: details of pricing information and material changes to core pricing (in bold) (at C1.2 (i) and C1.7–​C1.9, respectively) and; substitutes ‘fixed’ commitment periods for initial commitment periods. 275 276

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◦ any restrictions on type of terminal equipment. ◦ options for inclusion or not of personal data in directory and data involved. ◦ pricing, tariff particulars (indicating services provided and content of each tariff element with regard to charges for access, usage and/​or maintenance and including details of any standard discounts applied, any special and targeted tariff schemes, other additional charges); payment methods offered with any cost difference and how to obtain current pricing/​charging information. ◦ duration, conditions for renewal and termination including: ▪ minimum usage/​duration for promotional benefits. ▪ charges for number/​identifier portability. ▪ contract termination charges, including terminal equipment cost recovery. ◦ applicable compensation/​a rrangements, if any, for quality level failures.281 ◦ provider’s possible actions for security/​i ntegrity threats or incidents and vulnerabilities. ◦ dispute resolution means. Providers to ensure that contract termination procedures/​conditions are not end-​user disincentives to change provider, particularly that: ◦ express consumer and small business (not more than 10 employees, volunteers) consent 282 is obtained for renewal of further commitment periods for public electronic communications services Providers not to include provision stipulating fixed commitment period of more than 24 months Providers to ensure that all users can subscribe to a maximum 12-​month contract Providers shall ensure any contract modifications materially detrimental to that subscriber are made only on at least 1-​month notice with right of cancellation without penalty and notice of ability to withdraw if change unacceptable. During fixed commitment period, increase to core subscription price considered material detrimental, including: ◦ reduction in any service that provider is bound to provide for core subscription price; ◦ exercise of discretion resulting in increase; ◦ any modification of term/​condition for Subscriber to pay provider that results in increase; ◦ providers to pass on any reduction in VAT or other applicable tax or regulatory levy; ▪ Does not include: ◆ requirement to pay different price during fixed commitment period that is made sufficiently prominent and transparent so that subscriber can be said to have agreed to different payments at different times. ◆ pass through of compulsory VAT increase or other tax or regulatory levy.

281   The service quality failure transparency condition is in addition to a voluntary Industry Scheme for automatic compensation recently approved by Ofcom for 18  months as a trial in lieu of a regulatorily imposed scheme. See Ofcom, ‘Statement: Automatic compensation—​protecting consumers from service quality problems’, 10 November 2017. 282  Must be distinct for each commitment period and in a manner allowing for informed choice. See Definitions, Revised General Conditions of Entitlement.

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C2: Information publication and transparency requirements283 • All PECN/​PECS providers to publish clear, current information on prices, tariffs, standard terms, and conditions for access to and use of services by end-​users containing: ◦ name, registered office of provider ◦ description of services offered ◦ standard tariff details concerning access, usages and maintenance; standard discounts applied, special and targeted tariff schemes; any additional charges ◦ standard contract provisions, including any fixed commitment period, termination of the contract, and procedures and direct charges related to Number Portability ◦ available dispute resolution mechanisms ◦ any compensation and/​or refund policies, including specific details of compensation and/​ or refund schemes offered (C2.2–​C2.3).284 • For unbundled tariff numbers, providers to publish access charges payable for tariffs they make available to consumers with same prominence in terms of location, format on provider’s website, price lists and call pricing advertising as charges for geographic, call packages including bundles, and calls to mobiles (C2.4).285 • Provider to ensure particular prominence to: ◦ access charges payable for each package of tariffs ◦ whether calls to Unbundled Tariff Numbers included in bundles of inclusive calls/​call minutes, specifying in particular: ▪ unbundled tariff numbers to which bundle terms apply; ▪ if relevant, number of call minutes included; ▪ if relevant, whether included calls conditional upon time/​day of call; and ◦ whether special offers, discount schemes or call bundling arrangements apply to service charges payable for call minutes/​calls to included unbundled tariff numbers (C2.5). • For personal number tariffs available to consumers, providers to publish: ◦ on websites/​price lists, usage charges including any variation by time/​day with same prominence in terms of location, format as charges for geographic, call packages including bundles, calls to mobiles ◦ in advertising/​promotional material, call pricing, maximum charges applying to Personal Numbers (C2.6). • Provider to ensure particular prominence to: ◦ whether personal numbers included within bundles of inclusive calls/​call minutes purchased by consumers specifying, and if relevant: ▪ number of call minutes included ▪ whether conditioned on time/​day (C2.7). ▪ Where provider promotes/​advertises unbundled tariff numbers in connection with service provision to consumer by means of that number, must: ◆ include applicable service charge for consumer calls to number ◆ ensure prominently displayed in close proximity to number in any advertisement/​ promotion of unbundled tariff number (C2.8).

  Minor clarification re: pricing details.   Largely transposes GC 10.1–​10.2. 285   C2.4–​C2.8 essentially transpose GC 14.8–​14.12. 283

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• Where different tariffs applied to small business customers, provider to ensure pricing is transparent; inform if a business tariff (C2.9).286 • For controlled premium rate services (CPRS), providers to provide domestic/​small business customers, on request and free of charge, advice and information about: ◦ UK CPRS mechanisms, such as operator billing, premium rate Short Message Service (PSMS) payments, CPRS number service, voice shortcode charges, and how applied to the customer’s phone bill; ◦ Provider’s role regarding: ▪ general CPRS enquiries, requests for number checks via number-​checker facilities provided by Phone-​paid Services Authority on its website; and ▪ dealing with formal complaints about service content abuses, non-​c ompliance with Phone-​paid Services Authority’s code of practice, other alleged unlawful operation of services/​numbers (C2.10).287 • Provider to include information about: ◦ basics of CPRS, including whether routed to service providers hosted on own network or different network; how revenue shared ◦ applicable tariffs for calls to any CPRS number range; any access charge ◦ individual service provider or hosting communications provider’s contact details; where info available ◦ service providers’ customer service contact details; where consumers can get info about services provided on CPRS numbers found on their bills ◦ Phone-​paid Services Authority’s role in complaints; how to make formal complaint via their website/​helpline or in writing ◦ alternative dispute resolution schemes’ role in resolving CPRS-​related disputes ◦ how consumers can bar access to all/​specific range of CPRS numbers for cost/​content reasons ◦ consumer refund options for scams/​abuses (C2.11).288 • Required information publication to be effected by: ◦ sending a copy to any end-​user reasonably requesting it, free of charge ◦ placing plain English copy prominently/​easily accessible, on provider’s website or as Ofcom directs if no website (C2.12).289 • Providers to have: ◦ procedures to ensure enquiry/​helpdesk staff aware of above requirements to respond to complaint/​enquiries and monitor compliance with requirements (C2.13). ◦ fully documented procedures ensuring customers, advice agencies aware of requirements’ existence, eg, by referring to them in sales/​marketing materials (C2.14).290

286   New condition, requiring general transparency as to fact of business tariff but not detailed contrast with consumer prices. 287   Transposes s 3.2 of Annex 1, GC 14 as direct information obligations. In light of these, the requirement for Code of Practice regarding provision of information to consumers is removed as discussed above. (Removes GC Condition 14.6.) 288   Transposes s 3.3, Annex 1, GC 14 as direct obligation. 289   Largely transposes GC 10.3, removes requirement for posting at major offices. 290   C2.13 and 14 transpose ss 4.1–​4.2, Annex 1, GC 14 as direct obligations.

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• PECN/​PECS providers providing public pay phones to display/​take reasonable steps to keep displayed on/​a round all public pay phones, notice of: ◦ minimum charge for call connection ◦ location info sufficient to enable EO’s swift location ◦ emergency calls to ‘112’ or ‘999’ are free with no coins/​cards needed ◦ whether phone able to receive calls, and, if so, the phone number (C2.15).291 • PECN/​PECS providers to publish, in plain English and reasonably prominent/​easily accessible on its website or other place as per Ofcom direction, information re: standard fixed voice/​other fixed services/​broadband contracts for SMEs that includes: ◦ service level agreements, if any, regarding: ▪ activating the service on a confirmed date and for failing to do so; ▪ the event of a loss of service; ▪ keeping a pre-​agreed appointment to the SME’s premises and for failing to do so. ◦ service level guarantees, if any of the above. ◦ whether no agreement/​g uarantees exist. ◦ whether may be available on individual negotiation (C2.16–C2.17).292 • Where SME enters into an agreement for such services whether standard or bespoke, provider to provide the above information with respect to the contract in a durable medium distinct from the contract (C2.18–2.19). C3: Billing requirements • PECS providers not to charge/​bill end-​user for PECS provision unless every charge represents true extent of provided service (C3.2).293 • PECS providers, subject to data protection requirements, to maintain records for at least 12 mos. to establish compliance (C3.3). 294 • Providers of PATS/​P ublicly Available Internet Access (PAIS) with revenues not less than £55 million to: ◦ comply with direction that Ofcom may issue on process/​standards for approval of total metering and billing systems (C3.4).295 ◦ apply to approval body for approval of total metering/​billing systems according to Ofcom directed process, obtaining approval as soon as practicable and complying with approval body direction for approval (C3.5).296 ◦ take approval body recommended action where approval withdrawn/​not granted or cease use of system; inform Ofcom of either date (C3.6).297

291   Transposes GC 6.2; omits other payphone provision, accessibility, design requirements as either redundant of general law (Equality Act 2010) or unnecessary in light of market developments (NGT Lite app on smartphones obviating need for text payphones). 292   Transposes the new GC 24 that Ofcom recently set with effect from the period of 1 June 2018 to 1 October 2018 when the Revised Conditions are effective. See Ofcom, ‘Statement:  Automatic Compensation—​protecting consumers from service quality problems’, 10 November 2017, at Annex 2. 293   Transposes GC 11.1. 294   Transposes GG 11.2, directly specifies the minimum period. 295   Effectively transposes GC 11.7(e), extends metering and billing system obligations to data via inclusion of PAIS in scope. 296   Transposes GC 11.4. 297   Transposes GC 11.5.

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• All PATS/​PAIS providers to provide, on request, at no extra charge, access to billing information adequate to enable subscriber to: ◦ verify/​control charges and monitor usage/​expenditures and control bills (C3.7).298 • For consumer subscribers, billing information to include access charge applied to enable calculation of amounts payable for calls to unbundled tariff numbers as per condition B.1 (C3.8).299 • If by request for a printed bill, PATS/​PAIS providers may charge reasonable fee (C3.9).300 • PATS/​PAIS providers to ensure that calls/​SMS to ‘999’ or ‘112’ or any other ‘free’ call/​SMS including to helplines are not identified on itemised bills/​other records available to subscriber (C3.10).301 • Where bill for PATS/​PAIS not paid, measures to effect payment or disconnection to: ◦ be proportionate and not unduly discriminatory. ◦ give due warning of possible interruption/​d isconnection to subscribers ◦ confine interruption to concerned service if technically feasible, except in fraud/​chronic non-​payment (C3.11).302 • PATS/​PAIS providers to publish details of possible measures to disconnect/​i nterrupt service by sending copy to requesting subscriber without charge or accessible, prominent post on provider website in plain English; other means on Ofcom direction, if no website (C3.12).303 C4: Complaints handling and dispute resolution304 • PECS providers to domestic and small business customers have/​comply with handling procedures for small business/​domestic customer complaints (all expressions of dissatisfaction with products/​services, including customer services/​complaint handling where a response explicitly or implicitly expected) and customer complaints code conforming to Ofcom approved complaints code;305 maintain written records to show compliance (C4.2). • Providers to join and comply with approved alternative dispute resolution scheme, abide by its final decisions within specified time; ensure small business/​domestic customers can use ADR scheme for free and; provide information about scheme in bills as per Ofcom approved complaints code306 (C4.3)

  Largely transposes GC 12.1, in part.   Largely transposes GC 12.2. 300   Transposes GC 12.1’s ability to charge reasonable fees but limits to written bills. 301   Transposes GC 12.4, details ‘999’ and ‘112’ as free calls, specifies ‘SMS’. 302   Transposes GC 13.1, includes PAIS. 303   Transposes GC 13.2, specifies without charge, publication attributes. 304   Effectively transposes GC 14.4, 14.5, and Annex 4 to GC 14. 305   Annex, Condition C4 encompasses the Ofcom code for consumer service and complaints handling setting out high-​level minimum standards for accessible processing procedures (Section 1) and consumer complaint codes (Section 2), including information provision requirements and standards, as well as obligations to retain for at least 12 months from resolution/​closing, accessible written records re: complaint, handling and resolution for compliance monitoring purposes as well as complaint metadata (eg monthly complaints, resolutions, ADR letters, etc.) (Section 3). 306   Contained in Annex to C3.4 requiring: timely complaints processing procedures with prompt handling until resolved (where after 28 days after consumer advised of outcome, does not indicate dissatisfaction); accessibility by disabled, vulnerable customers; ability to make complaints by mail, email/​webpage form free/​ geographic phone numbers:  staff training and posted procedures; prompt issuance of ADR letter in plain English, durable medium where customer indicates not satisfied with outcome of provider’s investigation and with details about independent ADR scheme contact info, and right to pursue without cost. Consumer bills also to inform of rights to no-​cost, independent ADR access for unresolved complaints ordinarily after 8 weeks, contact details, existence, location of Complaints Code (Section 4, Annex). 298

299

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• Providers to monitor compliance with requirements of condition/​Ofcom approved code, including customer service/​complaint staff’s compliance; take appropriate steps to prevent recurrence (C4.4). C5: Measures to meet needs of vulnerable, consumers and end-​users with disabilities307 • PECS providers to: ◦ establish, publish and comply with clear, effective policies to ensure that needs of vulnerable308 consumers are met and that include: ▪ fair and appropriate treatment practices when informed/​otherwise reasonably aware of vulnerability ▪ how information about needs to be recorded ▪ different channels for contacting/​receiving information from the provider ▪ how effectiveness/​i mpact to be monitored/​e valuated (C5.2, C5.3). ◦ provide Ofcom with information needed to verify compliance (C5.4). ◦ ensure staff aware of policies/​appropriately trained including how to refer to specialists/​ further trained staff (C5.5). • To meet the needs of end-​users with disabilities, providers to take measures to: ◦ provide disabled end users of PATS unable easily to use printed directory with free of charge access to appropriate alternative directory information and enquiry facilities with call connection service (C5.7).309 ◦ ensure access to text relay services where needed, at equivalent pricing (C.8).310 ◦ ensure mobile SMS access to ‘999’, ‘112’ for hearing/​speech impaired end-​users at no charge ◦ provide urgent fault repair services to any fixed-​l ine telecommunications service where genuinely needed at standard charge (C5.11).311 ◦ permit a nominee to safeguard service where user dependent on service, extended to all ECS (C5.12).312 ◦ provide bills/​contracts in accessible format suitable for blind/​v isually impaired, extended to all ECS (C5.13).313 ◦ publish/​d isseminate widely information about disabled services in appropriate formats and channels (C5.6).314 • Providers to consult with consumer panel on such interests/​requirements for vulnerable/​ disabled users on request (C5.14).315

  Enhances GC 15 to include requirements to consider and adequately address the needs of the vulnerable.   Includes circumstances such as age, physical or learning disability, physical or mental illness, low literacy, communications difficulties or changes in circumstances such as bereavement. See C5.3. 309   Largely transposes GC 15.2, adds ‘easily’ to unable to use. 310   Transposes GC 15.3–​15.5. 311   Transposes GC 15.6. 312   Transposes GC 15.7. 313   Transposes GC 15.9. 314   Transposes GC 15.10. 315   Transposes GC 15.1. 307

308

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C6: Calling line identification facilities • Provider of PATS, networks over which PATS provided to: ◦ make available calling line identification facilities, enable them by default, unless demonstrably not technically feasible/​economically viable (C6.2). ◦ inform subscribers where not available for service (C6.3). ◦ ensure that any CLI data provided/​associated with a call includes valid, dialable telephone number uniquely identifying the caller ◦ where identified, prevent calls from invalid/​non-​d ialable CL numbers from being connected ◦ respect privacy choices by not displaying CLI where caller opts not to C7: Switching • Any gaining fixed line/​broadband services communications providers providing services to switching customers where a service provider migration on KCOM or Openreach occurs, must ensure in marketing and selling services, that: ◦ it does not engage in slamming ◦ information it provides to switching customers is accurate, not misleading, including about: ▪ its relevant services ▪ the impact of buying its services on any other services the customer is currently receiving ▪ the impact of buying its services on any of the customer’s existing contractual obligations ◦ it enquires whether the customer also wants the information in a durable form; if so, provide that (C.7.3).316 ◦ before contract entered, the customer requesting a service provider migration: ▪ is authorised to do so ▪ intends to enter into a contract ▪ is provided, in a clear, comprehensible, accurate and prominent manner and in a durable medium or by telephone if a sales call: ◆ identity of contracting legal entity, website/​email, telephone contact details ◆ requested services’ description, key charges (including minimum contract/​early termination charges, payment terms, any termination rights/​procedures, access charges for calls to unbundled tariff numbers), right to cancel at no cost until transfer, the order process, provision date, fixed commitment period (C7.4).317 • Gaining provider to: ◦ permit switching customer to terminate contract at no cost from point of sale until end of transfer period ◦ have procedures to enable this without unreasonable effort by email, telephone, post (C7.5).318 ◦ create, retain records of sales for not less than 6 months, that contain time, date, place, means switching contracted entered into, allowing subsequent identification of salesperson and to assist any query (C7.6).319

  Transposes, enhances GC 22.3.   Transposes GC 22. 4. 318   Transposes GC 22.5, 22.6. 319   Transposes GC 22.7. 316 317

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• For each contract entered into with switching customer, gaining provider, to create, keep for not less than 12 months (irrespective of whether terminated before then): ◦ individually retrievable, direct record of consent to migrate services/​begin acquiring services via the target line. ◦ record of explanation that customer consent record required ◦ switching customer name, address ◦ time, means, place of consent ◦ salesperson, if applicable ◦ target address ◦ calling line information of target line (C7.7, C7.8)320 • Gaining provider to send to switching customer letter that clearly, intelligibly sets out: date, fact that transferring services and relevant services to be transferred, estimated date of migration, contract details, the calling line identification of all relevant transferred communications services, right to terminate as above with specific applicable dates (C7.10)321 • Losing provider to send letter, on paper or other durable medium and by post unless otherwise explicitly agreed, advising clearly, intelligibly, in neutral terms that migration to be effected without need for further contact to cancel existing services, date of migration, bill to be sent after transfer, whether any contract early termination charges and relevant explanation and estimate as of migration date, how to be paid, and the transfer’s impact on any remaining services (C7.11, C7.12).322 • Where transfer of broadband and fixed line telecommunications services over same line, gaining provider order to Openreach/​KCom for simultaneous transfer to minimise loss of service (C 7.13).323 • Where gaining provider elects to coordinate the CP migration on behalf of switching customer and not involving a change of location,324 ◦ Both GP and LP to adhere to Annex 1, (C7.14 (a)), requiring: ▪ GP to place transfer order in reasonable time ▪ LP not to issue ‘cancel other’ unless: ◆ verified slamming has occurred ◆ GP has failed to cancel transfer order at switching customer’s request as verified ◆ telephone line to be ceased in transfer period ◆ Ofcom directed circumstances ◆ industry forum agreed reasons unrelated to switching customer’s request to cancel, agreed by Ofcom. ▪ LP to confirm order cancellation by durable medium to switching customer unless not appropriate/​possible ▪ LP to record reason in each case with appropriate code as approved by Ofcom for such as: ◆ switching customer never had contact with GP or authorised a transfer

  Transposes GC 22.8, 22.9.   Transposes GC 22.11. 322   Transposes GC 22.12, GC 22.13. 323   Transposes GC 22.14. 324   Essentially transposes GC 22.16–​22.20. 320 321

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◆ GP ordered transfer for wrong service/​product not agreed by customer ◆ customer agreed to transfer but misled as to identity of service provider (Annex 1, C7).325 ◦ Both GP and LP to ensure that switching customer does not have to contact LP for CP migration to be effected (C7.14 (b)). ◦ LP not to require consent or information from switching customer to effect migration (C7.14(c)). • For broadband migrations not falling within C7.14 (ie, those not using Openreach/​KCom platforms (eg, Virgin Media), providers to ensure migration carried out fairly, reasonably, timely and with minimum service loss (C7.16).326 • Where GP elects to carry out line takeover for home move request, to comply with Annex 2 (C7.15),327 requiring: ◦ GP to ensure that working line takeover order is placed and only for matched line ◦ GP to take reasonable steps to identify target line ◦ Incumbent provider to send incumbent switching customer letter on paper or other durable medium, by post or electronically if otherwise agreed, containing: ◆ letter date ◆ notification that inbound switching customer wants to take over the target line ◆ all relevant communications services affected and their calling line identification ◆ expected migration date ◆ that incumbent switching customer should contact the incumbent provider if not moving or moving later than migration date ◆ relevant contact details (Annex 2, C7).328 • Providers to: ◦ ensure any agents/​representatives comply (C7.17). ◦ ensure staff/​agents trained appropriately (C7.18). ◦ monitor compliance, including audits; take steps to prevent recurrence of identified problems (C7.19). ◦ publish copy of condition on website, easily accessible and prominently or where ordered by Ofcom if none; provide free of charge copy to switching customer on request (C7.20).329 C8: Sales and marketing of mobile communications services • Providers of mobile communications services, including SMS, to domestic, small business customers when selling and marketing to ensure: ◦ any information they provide to customers is accurate and not misleading ▪ that they ask if customers want information in durable medium and provide it, if so (C8.2).330

  Transposes Annex 1, GC 22.   Transposes GC 22.25. 327   Essentially transposes GC 22.22. 328   Transposes Annex 2, GC 22. 329   Transposes GC 22.26–​22.29. 330   Essentially transposes GC 23.2 but with focus on accuracy of information. 325 326

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•

•

• •

• •

•

355

if acting as retailer, it creates, keep sales records for six months and related sales incentives for 90 days after redemption date, but not less than 6 months with date, means and place of contract (if available); not applicable to pre-​paid or SIM only (C8.7); Providers to publish summary of C8 obligations on website, easily accessible and in prominent manner, or other manner as Ofcom may order; provide free of charge copy to customer on request (C8.3).331 Providers to monitor, ensure own retailers aware, comply with condition; make reasonable efforts to ensure third-​p arty retailer compliance, sanction non-​c ompliance (C8.4). 332 Providers to ensure retailers (not of prepaid/​SIM only) appropriately trained (C8.8).333 Before entering, amending contract (except for pre-​paid, SIM only), providers to reasonably endeavour to ensure customers authorized, intend to enter contract and have clear, comprehensible, accurate information in durable medium (or if by phone for phone sales shortly thereafter, in good time) about: ◦ contracting party’s legal identity, address, telephone, fax and/​or email; ◦ description of service, key charges including: contract minimums, applicable early termination; payment terms; any termination right and procedures; likely service date if not immediate; any fixed commitment period; and for consumers, any relevant access charges for calls to unbundled tariff numbers (C8.5).334 Provider to ensure relevant services are available for customer to receive (C8.6).335 Providers to ensure that it (reasonable endeavours to ensure that it or a person acting on its behalf ) carries out and retains for its mobile service retailers (not including prepaid/​ SIM only) a minimum of a check of credit references, director disqualification, director of entity with bankruptcy/​administration filing, ongoing checks for relevant updates of this information, information provided by retailer to be kept confidential, used only for monitoring, not given to anyone (eg, partners, subsidiaries) for whom it provides competitive advantage (C8.9–​8.10). Where customer to receive deferred sales incentive after contract entry, provider must ensure terms & conditions not unduly restrictive, that customer receives in a durable medium (unless by phone, durable medium to follow, in good time) clear, comprehensive, accurate information that includes: ◦ Legal entity making sales incentive offer and undertaking obligations, its address, contact detail (telephone, fax, email) ◦ Description of sales incentive and its terms & conditions; any process customer has to follow to obtain the incentive (C8.11–8.12).336

  Transposes GC 23.3.   Transposes GC 23.4. 333   Transposes GC 24.7. 334   Transposes GC 23.5 with access charge requirement added. 335   New requirement. 336   Transposes GC 23.10. 331

332

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The current revisions have moved the definitions from each condition to a single section at the end of the Condition Schedule but with the possibility that the terms can still have a meaning particular to a specific condition if the context suggests it.337 Each revised condition indicates the providers to which it applies in its ‘Scope’, the first section of each. A particular condition or part of a condition may apply only to a subset of electronic communications service and networks providers. As noted, Ofcom has added a recital to each condition that explains what it intends and to whom it applies but which has no legal effect. These are helpful, however, as are the efforts to specify the actual requirements in the text rather than mere cross-​references.338 Yet, the GCs can still be somewhat difficult to understand readily and there are often background issues that arise in consultations, which give context. For example, the current revision is the product of a series of consultations with the proposal and background rationales and set out in the earlier documents that are cross-​referenced but only partly explained. Similarly frustrating is the failure to provide regularly updated consolidated versions with any interim modification or at least a rolling index of all changes. The new conditions that govern transparency about automated compensation schemes promulgated two months after the revision are just the latest example of changes that are not readily apparent. Guidance and orders that can affect scope or interpretation but which are not part of the GCs can as well create uncertainty.339 The GCs are not models of clarity, therefore.340 The enhanced competition that flowed from early EU/​U K liberalization reforms produced some questionable sales and other marketing practices, such as slamming (switching providers without customer consent), highly pressured sales pitches, and retailer mobile cash-​back schemes that defer its payment until much later and then impose requirements not made clear to customers. Ofcom sought to address these with conditions governing marketing transparency and sales practices.341 It

  Ofcom, ‘Statement: Review of the General Conditions’, 19 September 2017, at Annex 14.   Not always adhered to. See eg definition of Controlled Premium Rate Services as having ‘the meaning set out in the condition issued by Ofcom under section 120 of the Act’ with a footnote reference to the 2015 ‘Changing the implementation date of the new rules governing Freephone and revenue sharing ranges from 26 June 2015 to 1 July 2015’. 339   See eg Ofcom, ‘Guidance on “Material Detriment” under GC 9.6 in relation to price rises and notification of contract modifications’, 23 January 2014 (withdrawn as of the revision’s effect and some, but not all, of the guidance specifications are now transposed to C1.7 and C1.8 and possibly as well the general transparency requirements of C.2). 340   Nor is Ofcom’s website an aid to clarity. 341   Previously, GC 14, governing codes of practice, provided for the fixed-​l ine marketing/​sales code of practice to address ‘slamming’ or unauthorized transfers of accounts to another provider. With the need for a mobile code, Ofcom promulgated both as distinct general conditions, then GC 23 and 24, removing the fixed lines code from GC 14. 337

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imposed requirements for codes of practice governing information provision to consumers and small businesses in order to enhance transparency about service provision generally and for calls to non-​geographic and personal numbers as well as premium rate services, the latter to enable customers to understand the difficult (and often very costly) tariffing structures.342 With the current revision of the General Conditions, however, Ofcom has removed provisions for codes of practice concerning the different transparency requirements. Instead it has consolidated many information provision requirements, especially about charging, into a single condition that imposes a direct general transparency/​information disclosure obligation applicable to all ECN/​ECS providers and specific service-​related information publication/​provision requirements as applicable (eg for unbundled tariff and personal numbers, controlled premium rate services, public payphone charges) contained in C2. The charging obligations reflect 2015 reforms requiring that free calls using 080 or 116 apply to mobile343 as well as fixed lines and the disclosure of unbundled tariffs (access and service charges) for calls to other non-​geographic numbers.344 The revisions, however, delimit the specific transparency requirements imposed only on VoIP services to a direct condition requiring disclosure in pre-​sales terms and conditions and user guides about possible limitations in reliability of VoIP outbound call services for access to emergency service organizations in the event of a power or internet service outage (A3.3) and requirements to advise end-​users to register and update their address or access location information (A3.6). The 2017 revisions eliminate the code of conduct in current Annex 3, GC 14 with its additional and more onerous information and documentation requirements while maintaining the previous application to providers of VoIP outbound call services of requirements for network integrity, access to emergency organizations, free use of 999 or 112 emergency numbers and caller location information if technically feasible. Another emergency service revision mandates that mobile communications providers ensure that end-​users can access 999/​ 112 emergency numbers using eCalls (that must be rolled out in all EU cars in 2018) (A3.4). Ofcom has sought to ensure that competition in technologically evolving markets is encouraged and that end-​users are not deterred from changing providers.

  Annex 1, GC 14.   Ofcom, ‘Simplifying Non-​G eographic Numbers—​change in implementation date’, 26 February 2015. 344   Ibid. See also GCs 14, 17. 342 343

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Some of its reforms have focused on consumers/​small businesses seeking to change broadband providers and that they are not obstructed by uncooperative providers or difficulties in changing residences.345 Ofcom’s 2015 reforms required gaining provider-​led switching coordination so that customers of fixed line/​broadband providers using Openreach/​KCOM platforms need not contact their current provider, a deterrent to consumers, as Ofcom’s research indicated.346 It is currently consulting on how mobile switching can be made easier for customers who still must directly procure a provider authorization code. In a bit of a turn around, Ofcom’s revisions remove the ban on customer ‘save’ efforts by losing providers, recognizing that this can also enable a potentially better deal for consumers. Before 2005, the only QoS reporting obligations 347 were individual obligations specifically imposed on BT 348 some of which now fall within BT Openreach’s ‘undertakings’ following its original functional separation 349 that have now been restructured. These now also reflect BT’s new separate organizational structure with Openreach as a subsidiary under distinct management and extended to reflect KPIs related to revised quality of service requirements concerning timeframes for wholesale fixed line access to address the delays and cancelled appointments by Openreach in effecting this service provision to other providers. 350 While in 2005 Ofcom triggered GC 21 requiring communication providers providing fixed telephony services to publish ‘Quality of Service’ information, 351 it disapplied it in 2009, after research

345   See GC 22; Ofcom, ‘Statement and Notification ‘Broadband migrations: enabling consumer choice’, 13 December 2006. 346   See Ofcom Media Release, ‘Easier broadband switching from tomorrow’, 19 June 2015. 347   In early 2003, Oftel set a list of key performance indicators (KPIs) as a checklist against which BT could perform to attain relaxed retail price controls. Technically, therefore, these 15 KPIs against which performance was measured, while quality of service reporting, were voluntary and not conditions under the BT licence. See Oftel Statement, ‘Wholesale Line Rental’, 11 March 2003. 348   See Ofcom, ‘Statement and Directions: Requirement on BT to publish Key Performance Indicators’, 23 September 2004, . These comprised a range of month and/​or quarterly reports regarding different performance parameters with regard to end user access (data stream), wholesale line rental, virtual path facilities, FRIACO, and specified interconnection circuits. 349  See ‘Our Undertakings:  Key Performance Indicators’ (BT Group Plc London), . 350  See eg Ofcom, ‘Quality of Service Direction for WLR:  Direction setting further minimum standards  for WLR provisions under the SMP condition imposed in the 2014 Fixed Access Market Reviews’, 22 November 2016. 351   Ofcom Notification of Direction, ‘A Statement on setting quality of service parameters’, 27 January 2005.

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found the cost-​b enefit was not justified. 352 The 2017 revisions of the General Conditions eliminate GC 21. This however was in light of the new powers that the Digital Economy Act 2017 grants to Ofcom to require and publish comparative quality of service information, broader than that in GC 21 and likely rendering it unnecessary. 353 Despite not relying on GC 21 for quality of service metrics, Ofcom has produced annual consumer experience reports for nearly a decade and following on from its Digital Communications Review, its first quality of service report in 2017. 354 Ofcom found that consumers have experienced slow repairs and installation delays and missed appointments for new and migrated services. Although the Digital Economy Act 2017 has empowered Ofcom to impose an automatic compensation for such service failures, while Ofcom was consulting on such a scheme, the majority of fixed line/​broadband providers proposed a voluntary scheme in lieu of regulation. 355 The scheme will require them automatically to pay residential service customers (that can include SMEs using these services): • £8 each day for failure to a repair service after two days; • £25 for each engineer’s appointment missed or cancelled within less than 24 hours; • £5 for each day of delayed service after promised start date. Ofcom will review its operation in a year to determine whether regulation will still be needed. Ofcom, however, recently imposed additional SME transparency regarding service level guarantees, adding GC 24 until October 2018 and then within C2.16–​C2.17 in the revised conditions.356 Ofcom’s quality of service concerns have also focused on general customer service and complaint handling, finding that the sector trails behind others with longer wait times, perceived lack of ease and flexibility, and consumer frustration.357 To address these, in the 2017 revisions Ofcom has honed and reinforced

  Ofcom, ‘Topcomm Review: Quality of Service Review’, 29 July 2009.   Ofcom, ‘Review of the General Conditions of Entitlement’, 20 December 2016, at 5.31–​5.34. 354   See eg Ofcom, ‘Research Report: The customer experience’, 28 January 2015. 355   See ‘Communications Providers’ Voluntary Code of Practice for an Automatic Compensation Scheme for service related issues relating to residential fixed-​line telephony and broadband services’, 10 November 2017, at: . 356   See text accompanying n 292 above. 357   Ofcom, ‘Comparing Quality Service’, 12 April 2017, at 46–​62. 352

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the Ofcom Approved Code of Complaints Practice, the only GC 14 code of practice retained (now Annex, C.4).358 Providers must provide, among other things, greater signposting about complaint handling and faster access to alternative dispute resolution once it is clear that the provider will not take further action to resolve the complaint.359 Individual conditions (i) Universal service conditions  ‘Universal service’ is the first of section 45 of the Communication Act’s permitted specific conditions that Ofcom may establish if it deems appropriate for securing compliance with obligations set out in the ‘universal service order’ by the Secretary of State for Trade and Industry (s 67). In the Electronic Communications (Universal Service) Order360 the Secretary of State originally defined the scope of the universal service obligation to include PATS, public pay telephones, directory and directory enquiry facilities, special measures for disabled end-​u sers, and special tariff and billing options, including those for low income users. Pursuant to Communications Act, section 66(1), 361 Ofcom designated that universal service conditions apply to BT and Hull (now Kingston Communications (KCOM)) but only within the latter’s geographical service area. Ofcom imposed specific USO obligations following the Order362 that, although slightly modified after prior reviews, 363 still include the obligation to: • provide a connection enabling to the fixed telephone network at a uniform price364 following a reasonable request, and provide a connection that allows functional internet access;

358   Ofcom Consultation, ‘Review of alternative dispute resolution and complaints handling procedures’, 10 July 2008. 359   See text and accompanying nn 304–​308. 360   2003 c. 21, SI 2003/​1904. 361   Implemented by The Electronic Communications (Universal Service) Regulations 2003, SI 2003/​33. 362   See Ofcom, ‘Strategic Review of Telecommunications Phase 1 Consultation, Annex G’, 2003. 363  eg in 2006, low-​income schemes, including a pre-​pay option, were approved, as was the ability to modify some provision of public call boxes due to their cost and low utilization and the rules for removing them, including a ‘local veto’ for qualifying boxes. See Ofcom, Statement, ‘Review of the Universal Service Obligation’, 14 March 2006. None of these, however, altered the basic requirement in each of the areas, just the extent of the obligation or how it may be satisfied. 364   Ofcom, in its 2006 review, determined that BT could charge non-​u niform prices when the connection cost was more than the standard charge of £3,400, although recommending that it use the standard charge for particularly vulnerable customers. See ibid at 29. The Digital Economy Act’s broadband USO authorization maintains this base cost limitation.

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• provide at least one low-​cost scheme for consumers with special social needs who have difficulty affording telephone services; • provide uniformly priced public call box services; • ensure that tariffs for universal services do not entail payment for additional unnecessary services; • provide itemized billing at no extra charge; • provide universal services that meet the defined quality thresholds; • supply and maintain directories and databases for the provision of directory services.365 The 2009 EU reforms required only limited changes to existing USO obligations. Under BT’s revised condition 9 and KCOM’s condition 6 each must notify Ofcom if it intends to dispose of all or a significant part of their local access network to a separate legal entity under different ownership. The Electronic Communications (Universal Service) (Amendment) Order made few changes. For definitional consistency, it substitutes ‘public communications network’ for ‘public telephony network’.366 The Order also limited USO special disabled end-​user obligations to where an ‘equivalence’ provision has been implemented.367 In 2012, Ofcom removed Condition 4 regarding the provision of Next Generation Text Relay from BT and KCOM in light of the modification to GC 15 that required equivalent access of all communications providers. Ofcom has also, to date, concluded that both BT and KCOM should continue to bear the costs of the USO, in light of findings that the benefits to both of the USO continue to equal or outweigh the costs. Therefore, no USO fund or other method has been required for the current USO obligation.368 The Digital Economy Act 2017369 enables the adoption of a broadband USO with a specified speed that must be at least 10mps.370 Both Ofcom371 and the government

365   Ofcom’s decision found that the USO Condition 7 requiring BT to provide any party the contents from the OSIS database was not lawful as outside the scope of the Universal Service Directive’s obligation. This was upheld in a March 2011 preliminary reference decision by the CJEU in C-​16/​10, The Number Ltd and Conduit Enterprises Ltd. Thus, cost-​orientated access to BT’s OSIS data set by other providers is beyond the scope of the Universal Service Obligation 6. 366   See the Electronic Communications (Universal Service) (Amendment) Order 2011, SI 2011/​1209, Art 5(a). 367   Ibid, at 4. 368   See Ofcom Statement ‘Review of the Universal Service Obligation’, 14 March 2006. Reportedly, BT would like the obligations removed in connection with its NGA roll out commitments. 369 370   Digital Economy Act 2017 c. 30 (27 April 2017).   Ibid, s 1, Pt 1. 371   Ofcom, ‘Designing the Broadband universal service obligation: Call for inputs’, 7 April 2016.

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have held consultations as to scope, potential speed mandate, other quality parameters, pricing and funding of this undertaking.372 These suggest that it could apply on demand only to the estimated 3 per cent of UK premises that would not be served by existing commercial arrangements rather than a uniform universal service roll-​out. There is also a seeming government preference for a USO fund by industry to pay for the reform, highly contested by ISPs. With no other communications provider indicating an interest in being designated as the broadband USO provider in the Ofcom’s call for inputs, BT recently volunteered to do so in lieu of regulation and using a range of technologies and not only fibre, a proposal currently being considered by the government while it simultaneously proceeds with the consultation and next steps of the regulatory USO.373 The Government rejected this offer so that customers will have the legal right to demand an upgrade.374 (ii) Access conditions  Ofcom is authorized by the Act to impose conditions concerning the provision of network access and service interoperability appropriate to secure provider efficiency, sustainable competition, and the greatest possible benefit to end-​users (s 73(2)). Where a person controls access to any electronic communications network, that person may have an access condition imposed on him without being a provider of a Public Electronic Communications Network (PECN) or of associated facilities (s 46(6)). Otherwise, specific access conditions must be imposed on providers of networks.375 Sections 73 and 74 specify the permitted content of such conditions and include those relating to network access and service interoperability considered appropriate by Ofcom in light of the Framework Directive’s regulatory considerations (s 73(2)). These include specific conditions to require interconnection of networks for the purpose of ensuring end-​to-​end connectivity for end-​users of PECNs (s 74(1)). In 2006, in order to ensure end-​connectivity for telephony,376 Ofcom imposed an access condition on BT. Before this no such condition had been imposed on BT, yet BT and the market acted as if BT had such a connectivity obligation as a universal service operator, following earlier guidance in this regard.377 Also included are obligations on a

372   Dept for Digital, Culture, Media & Sport, ‘A new broadband Universal Service Obligation: consultation on design’ (July 2017). 373  Ibid. 374   Fildes, N, ‘BT’s £600m rural broadband offer rejected’ (Financial Times, 19 December 2017), . 375   Section 65 requires that Ofcom impose access conditions of providers of conditional access services for protected programmes. 376   End-​to-​end connectivity ensures that retail customers can make calls to other customers on that same network or any other network. 377   T-​Mobile et  al v Ofcom [2008] CAT 12, 28 (citing Guidance issued by the former Director General of Telecommunications on ‘End-​to-​end connectivity’ dated 27 May 2003).

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person providing facilities for the use of application programme interfaces or electronic programme guides (s 74(2)).378 Section 73 was amended to permit an access-​related condition to be set requiring the sharing of infrastructure. Section 73(3A) indicates that this is to be exercised for the purpose of ‘encouraging efficient investment in infrastructure’ and ‘promoting innovation’, a balance that the 2009 framework and NGA recommendations require of NRAs. The only NGA access conditions, however, are SMP conditions in relevant wholesale access markets imposed on BT and KCOM.379 The non-​ SMP specific access-​ related conditions within the parameters of the Act are conditions to provide conditional access and electronic programme guide services on fair and reasonable terms that are published, on a non-​ d iscriminatory basis, and maintaining accounting separation. 380 These were originally applied to Sky entities with others applied as the pay TV market evolved. 381 Other types of specific access conditions have been imposed in connection with other PECS. (iii) SMP obligations  Section 45 permits Ofcom to apply the SMP conditions to specific providers designated as having dominance either alone or collectively with others in relevant markets (s 78). Dominance may also be found in adjacent markets so closely related as to permit market power in one to influence the other, strengthening market power there (s 78(4)). Dominance, according to the Framework Directive, is a ‘position of economic strength affording it the power to behave to an appreciable extent independently of competitors, customers and ultimately consumers’.382 Ofcom must identify relevant markets and apply the Framework’s factors for determining dominance and taking utmost account of all applicable guidelines of the Commission. After initial determination, the Act requires that, within three years of a service market power determination, Ofcom carry out a further analysis to determine whether the SMP findings remain valid and whether the conditions imposed need

  See further Chapter 8.   See Ofcom, ‘Review of the Wholesale Local Access Market’, 7 October 2010. These may be in addition to the possible non-​f ramework possible infrastructure sharing pursuant to the Communications (Access to Infrastructure) Regulations 2016 that implement the Broadband Cost Reduction Directive 2014. 380   See Oftel Explanatory Statement and Notice, ‘The Regulation of conditional access; Setting of regulatory conditions’, 24 July 2003; Ofcom Consultation, ‘Access regulation, regulation of electronic program guides’, 18 August 2005, at s 3, . Similarly, see Ofcom Statement, ‘Technical platform services: Guidelines and explanatory statement’, 13 September 2006. Also, see Chapter 8. 381   See Ofcom Consultation, ‘The setting of access-​related conditions upon Top Up TV’, 15 February 2007. The final statement expected in May 2007 has not been found on the Ofcom website. 382   2002/​21/​EC, Art  14(2). 378

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to be modified (s 84A(6)). In the case of service conditions, the condition can be modified or revoked after such further market and market power reviews (s 86(3)) or if Ofcom determines that there has not been a material change in the market since that condition was set or last modified (s 86(4)), thereby allowing Ofcom some flexibility to try something else. With apparatus conditions, however, Ofcom may only modify/​revoke conditions after the full relevant market/​market power review (s 86(5)). In setting, modifying, or removing SMP conditions, Ofcom must first do a domestic consultation with interested/​a ffected parties and publish notifications of the proposed determinations that identify: the relevant markets, the parties determined to have SMP with the reasons for making these determinations (s 80A), and, if in a single notice, any proposed SMP condition/​modification/​removal in respect thereof (s 80(4)(c)). Section 80B requires notifications to the Commission, BEREC, and other NRAs of those determinations with EU relevance with periods for Commission objection and reservations, provisions that largely provide the emperor with ‘new clothes’. Sections 87 to 92 implement the SMP-​related provisions under Articles 9 to 13 of the Access Directive and Articles 17 to 19 of the Universal Service Directive.383 The Act specifies the subject matter of these permitted SMP conditions in conformity with the Directives (ss 87–​93), including those related to network access and use and network access pricing, undue discrimination, publication of such information as Ofcom directs to ensure transparency regarding any of these matters, publication of acceptable access terms and conditions (usually called a ‘reference offer’), separate accounting, accounting methods, and, as permitted, access price controls (ss 87–​88). Section 89 of the Act permits other appropriate access conditions to be imposed ‘under exceptional circumstances’ where dominance exists in a service market by a person who is a provider of electronic communications networks or associated facilities. These, however, must be notified to and approved by the Commission (s 89(2)). Sections 89A, B, and C have been added to the Act which transpose the functional separation powers rather literally from the Access Directive. Sections 90 and 92 regarding leased lines and carrier selection provision have now been deleted (s 91). The analysis and imposition of SMP conditions is a time-​c onsuming, complex process. The 2009 EU reforms made it more so with the consecutive, rather than concurrent, domestic and EU consultations and comment periods.

  Ofcom ‘S 4.4, Review of Wholesale Broadband Access Markets’, June 2004.

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The process is also one that market participants seem increasingly willing to challenge. 384 There is a growing similarity to the US market, with its vast numbers of parties lined up on each side of an issue with seemingly perpetual challenges to the FCC’s regulatory measures that can take years to resolve finally, and often after the market has reached another solution or the technology has moved on. (iv)  Privileged operator  The last of the section 45 specific conditions concerns public communications providers with special or exclusive rights regarding the provision of any non-​c ommunications services (s 77(2)). 385 Conditions to ensure transparency and service provision without cross-​s ubsidies from the privileged business must be applied but not where revenues from all communications activities are less than £50 million (s 77(4)). The conditions may include separate accounting, audit, and published financials and structural separation (s 77(3)). Ofcom has not designated any ‘privileged operators’. 6.4.4.4  Compliance and enforcement The Communications Act 2003 enforcement scheme for the section 45 conditions is found in sections 96A to 104 of the Act, with powers, including to impose financial and other penalties, granted to Ofcom. Where a condition has been breached, Ofcom must issue a notification under Section 96A specifying:386 Ofcom’s preliminary determination of the condition allegedly breached and how; steps that Ofcom considers necessary for remediation of the breach and possibly its consequences; any penalty Ofcom is considering; a proposed suspension or restriction for a single serious breach or repeated breaches of a condition (s 100);387 and, in connection with a SMP service condition, a direction of suspension (s 100A). The notice must also specify the period during which the provider may make representations.

384   See eg BT v Ofcom [2017] CAT 25 (successfully challenging Ofcom’s definition of a single relevant market for all bandwidths of contemporary interface symmetric broadband origination (CISBO) and imposing of a SMP dark fibre access remedy); Talk Talk v Ofcom [2013] EWCA Civ 1318 (upholding unsuccessful challenge that Ofcom’s application of charge control condition six months after SMP determination failed to comply with s 86 requirement that either the condition be set upon or after determination that market conditions had not materially changed, as OFCOM was aware of Talk Talk’s likely entry into relevant exchanges at the time of determination). 385   This is not the case where this is solely in connection with associated facilities. 386   Ofcom has set out how its enforcement investigations will proceed, including the s 96A breach notification in its ‘Enforcement Guidelines for regulatory investigations’, 28 June 2017. 387   With repeated, non-​serious breaches, intermediate penalties must be sought.

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Proposed penalties must be appropriate and proportionate but may include both a fixed amount for a past breach and, for a breach allegedly continuing, a daily penalty accruing until it is remedied. However, the fixed penalty is capped at 10 per cent of annual revenues of that person’s relevant business (s 97(1)) and the daily penalty, no more than £20,000. These could clearly comprise ‘dissuasive’ amounts as required by the Framework Directive. When the representation period has expired, Ofcom can choose to withdraw the notice or issue a section 96C notice of confirmation of a penalty within the scope notified but with lesser penalties possible in light of representations or efforts at compliance/​m itigation.388 Ofcom has detailed how these discounts to penalties will operate in its Penalty Guidelines.389 Conditions on SMP apparatus providers are enforced under sections 94–​96 which retain the Act’s former enforcement provisions requiring notification of at least a month to make representations comply and remediate the consequences (s 94(3), (4)) with a separate enforcement notice for penalties (s 95). Recently, Ofcom has issued some unprecedented fines. In early 2017, it fined BT in excess of £42 million (after a 30 per cent reduction for cooperating and admitting culpability) for breach of its SMP conditions in failing to properly compensate its wholesale customers under their contracts for delayed provision of ‘Ethernet’ leased lines services in 2013–​2014 and for failing to provide full and accurate information to Ofcom during the investigation and its prior market review.390 Before that Ofcom’s largest fine was £4.6 million (after a 7.5 per cent discount for entering a settlement agreement), imposed on Vodafone in late 2016 for:  failing to meet GC 11’s billing accuracy requirements when it failed to credit top-​up payments made by over 10,000 pay-​as-​you-​go customers whose accounts that were deactivated for non-​use and its billing and metering procedure requirements in failing to prevent these payments after moving to a new billing system; breaching GC 23.2(a)’s requirements for accurate information in mobile marketing and sales in advising customers who purchased such top-​ups by different means that they would be given services in return; and as well lacking adequate customer complaints handling policies and procedures under GC 14, including the failure to advise customers in writing of their rights to proceed to ADR after eight weeks of an unresolved complaint.391

388  See Ofcom, ‘Penalty guidelines’, 13 June 2011, . 389   Ofcom, ‘Penalty Guidelines, Section 392 Communications Act 2003’, 14 September 2017, . 390  Ofcom Media Release, ‘BT to be fined £42m for breaching contracts with telecoms providers’, 26 March 2017. 391   See Ofcom Media Release, ‘Vodafone fined £4.6 million for failing customers’, 26 October 2016.

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Ofcom has enforcement powers under the Communications Act 2003 beyond the section 45 general and specific conditions. These include, inter alia, powers concerning: the electronic communications code governing rights of way (ss 106–​ 119); premium rate services (ss 120–​124); administrative fees payment (ss 38–​43); information provision (s 135–​144); and network security requirements (ss 105A–​D). The enforcement powers were enhanced under the 2009 reforms to the framework with increased financial penalties across the board for enforcement (potentially up to 10 per cent of turnover for the relevant period), including for the section 45 conditions with daily fines possible for up to 1 per cent of the maximum lump sum penalty where there are continuing contraventions. There are also circumstances where the Act makes the failure to comply with a condition or authorization requirement a criminal offence. These include, eg the provision of a network, service, or associated facility when the entitlement to do so is suspended or so restricted (s 103), and the failure to provide required information392 (s 143). The following considers the electronic communications code, premium rate services, and administrative charges regulation. Rights of access to install facilities: The Electronic Communications Code For over thirty years, Ofcom and its predecessor has granted rights of access over land for the installation and maintenance of communications equipment pursuant to what is called the Electronic Communications Code.393 However, after a Law Commission review in 2013 and further consultations, the UK government, believing then current Code inadequate for network providers to ensure the timely and cost-​effective network build outs and enhancements that will be needed for superfast broadband and 5G networks, proposed a new Code in the Digital Economy Bill 2017. Under the Act that received royal assent in April 2017, the new Code comprising Schedule 3A to the Communications Act 2003 will replace the prior Code in its entirety394 except for some transitioning provisions395 that will govern arrangements existing at its effective date on 28 December

392   Section 135 empowers Ofcom to require providers and other persons to provide justified, proportionate information for specified purposes including determining a condition breach or to ascertain or verify a payable charge, universal service reviews, relevant market and market power analyses, statistical purposes, etc. This has been revised to encompass network security obligations. Here as well there are enhanced potential penalties with the maximum increased from £50,000 to £2 million. 393   Currently Sch 2, Telecommunications Act 1984 retained via deeming provisions under Sch 18 of the Communications Act 2003. 394   Digital Economy Act 2017, pt 2, s 4. 395   These transitioning provisions, inter alia, disapply new Code provisions concerning assignment, upgrades and infrastructure sharing to agreements under the current Code. Digital Economy Act 2017, pt 2, s 4, Sch 2.

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2017.396 As previously, the Code will apply pursuant to a direction from Ofcom under section 106(3)(a) of the Communications Act to operators for providing their networks and providers of infrastructure systems to operators for use by them to provide their networks for agreements with occupiers of land for these purposes.397 The applicable rights provided are to: • install and keep installed electronic communications apparatus on, under or over the land, • inspect, maintain, adjust, alter, repair, upgrade or operate electronic communications apparatus which is on, under or over the land, • carry out any works on the land for or in connection with the installation of electronic communications apparatus on, under or over the land or elsewhere, • carry out any works on the land for or in connection with the maintenance, adjustment, alteration, repair, upgrading or operation of electronic communications apparatus which is on, under or over the land or elsewhere, • enter the land to inspect, maintain, adjust, alter, repair, upgrade or operate any electronic communications apparatus which is on, under or over the land or elsewhere, • connect to a power supply, • interfere with or obstruct a means of access to or from the land (whether or not any electronic communications apparatus is on, under or over the land), or • lop or cut back, or require another person to lop or cut back, any tree or other vegetation that interferes or will or may interfere with electronic communications apparatus.398 Under the Code, operators can also automatically upgrade apparatus or share its use with another operator where the resulting changes have no or only minimal adverse impact on its appearance and impose no additional burden on the landowner. 399 The practical implications of these qualifications to the right remain to be seen since upgrades or sharing may require additional equipment and/​or site maintenance. An operator can assign its Code rights to another.400 The Code delimits the ability to contract out of these statutory rights where the above conditions have been met or to impose additional conditions, including conditions for further payment.401 Thus, landlords may have reduced control over their land.

  The Digital Economy Act 2017 (Commencement No. 3) Regulations, SI 2017/​1286 (c. 119).   Digital Economy Act 2017, pt 2, s 4, Sch 1. 398 399 400   Schedule 3A, Communications Act 2003, s 5.   Ibid, s 17.   Ibid, s 16. 401   Ibid, s 17(5). This does not affect the ability to impose guarantor status on the operator for purposes of ensuring the assignee meets its obligations. 396 397

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That they certainly should have reduced expectations of potential earnings is a further consequence of the Code’s intended objectives to reduce network costs as well as ensure greater ease of rolling out infrastructure. If twenty-​ eight days after the required notice to the landowner of the Code rights and terms an operator wishes to pursue, the parties are unable to agree on consideration or other terms, the operator can apply to the court (the specialist Lands Chamber of the Upper Tribunal402) for imposition of Code rights and their valuation. As under the former Code, the test to be applied in deciding whether to impose Code rights binding a person was whether (1)  the prejudice caused to that person by the order can be adequately compensated by money and (2) the public interest outweighs the likely prejudice to the person including the public interest in access to a choice of high quality electronic communications services.403 Under the new Code, however, the court cannot impose Code rights where it believes that the owner intends to develop all or part of the land or neighbouring land and the order would mean that it could not reasonably do so.404 What this will require in terms of proof is not provided for in the Code. The new Code also differs in that it provides for compensation intended to be akin to the compulsory purchase principles for other utilities and based on the market value of an agreement between a willing buyer and seller not taking into account the value to the communications provider or the potential for assignment, upgrading, or sharing and based on the assumption that other sites are available.405 Effectively, this means the value of the land to its owner without the agreement. This is projected to lower site rents by as much as 40 per cent.406 The former Code did not specify its relationship with the Landlord and Tenant Act 1954 and that has led to confusion.407 The new Code however specifies that the Act does not apply to agreements the primary purposes of which are to grant Code rights, creating certainty that the security of tenure provisions of that Act do not apply. Defining ‘land’ to exclude apparatus so that there is no question whether or not it becomes a fixture annexed to the land under real

402   In respect of England and Wales. The Electronic Communications Code (Jurisdiction) Regulations 2017, SI 2017/​1284 (14 December 2017) (also establishing original jurisdiction in the Lands Tribunal for Scotland and continuing the jurisdiction in the country court for Northern Ireland; in England, the First Tier Tribunal can hear cases referred to it by the Upper Tier Tribunal). 403   Communications Act 2003, s 21, Sch 3A.    404  Ibid, s 21(5). 405   Ibid, s 24. 406  Rathbone, D, Briefing Paper CPB7203  ‘Reforming the Electronic Communications Code’ (House of Commons Library, 1 June 2016) 13. 407   See eg Crest Nicholson (Operations) Ltd v Crest Nicholson (Operations) Ltd v Arqiva Services Ltd and others (Cambridge County Court, 28 April 2015) unpublished.

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property law creates similar certainty.408 The Code continues existing provisions that allow for tenure of rights with successors in interests without the need for their registration.409 The new Code also changes the termination procedures. The landowner must now provide eighteen months’ notice rather than the current twenty-​eight days and specify grounds for termination that must be one of the following: • substantial breaches by the operator of its obligations under the agreement; • persistent delays by the operator in making payments to the site provider under the agreement; • the site provider intends to redevelop all or part of the land at issue, or any neighbouring land, and could not reasonably do so unless the code agreement ends; • the original criteria for the court’s determination whether to apply the code rights no longer apply.410 The operator has three months to serve a counter-​notice indicating that it does not want the agreement to end and wants the owner to either continue to be bound under the former Code or under the new Code.411 Within three months from the date of service, it must file with the court for an order. The court may not grant the order if it finds that the site provider has not established any of the above grounds but must do so otherwise.412 The Code makes provision as well for temporary rights pending a final order413 and for removal of equipment including after a court refuses to enter an order for a new/​extended agreement or where the equipment is unused.414 The new Electronic Communications Code requires Ofcom to establish a Code of Practice that addresses the provision of information by operators, the conduct of negotiations and of operators in relation to persons with an interest in land under the Code.415 Ofcom must also develop standard terms that the parties may use for

  See eg Peel Land and Property (Ports No.3) Ltd v TS Sheerness Steel Ltd [2013] EWHC 1658 (Ch). 410   Communications Act 2003, s 4, Sch 3A.   Communications Act 2003, s 31, Sch 3A. 411   Ibid, s 32 (for prior Code agreements).    412 Ibid. 413   Communications Code 2003, ss 25–​26, Sch 3A. 414   See Communications Act 2003, Pt 6, Sch 3A. 415   Ofcom Statement, ‘Electronic Communications Code:  Digital Economy Act:  Code of Practice, Standard Terms of Agreement and Standard Notices’, 15 December 2017. The Digital Economy Act, however, does not have a provision requiring operators to comply with it, rendering its status non-​binding. The Code of Practice states that it suggests ‘best practice’ and in defining its scope indicates that it ‘provides a reference framework’. Ofcom, ‘Electronic Communications Code: Code of Practice’, 15 December 2017. 408 409

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agreements416 and for template notices that the parties must use where required under the Code417 and may use, otherwise.418 Under Communications Act provisions not modified by the Digital Economy Act 2017, Ofcom must maintain a public register of providers granted Code powers (s 108), currently 125.419 Many on the current register previously held Code powers under the former regime (retained via deeming provisions under Schedule 18 of the Communications Act). In order to obtain a grant of Code powers, a provider of networks or infrastructure systems for networks must still make a standalone application420 to Ofcom with the following: • provider’s identity, address, including any company number, registered office and details of any subsidiaries, parents, and affiliates; • description of the network or system of its infrastructure’s provision, including its location; • reasons for seeking Code powers; explanation of why the network or conduit system provision is not otherwise practicable; • the types of services to be provided and those likely to benefit; if a conduit system, evidence of its availability for use by networks and the applicant’s ability and willingness to share apparatus; • alternative arrangements to Code powers sought, if any.421 Guidance indicates that a business plan should evince the need for the grant as part of the application.422 Applicants must also provide evidence of ability to meet any fiscal liabilities under the Act.423 This can encompass letters from potential guarantors or company directors indicating willingness

416   Ofcom Statement, ‘Electronic Communications Code: Standard Terms’, 15 December 2017 (a template agreement). 417   Communications Act 2003, ss 88–​89, Sch 3A. 418   Ofcom, ‘Electronic Communications Code template notices, December 2017 (file of various template notices (eg requesting rights, assigning rights, requesting removal of apparatus, etc). 419  See Register, . 420   Those with grants of Code powers under PTO or other individual licences were deemed to have Code powers without new application. See Statement DGT, ‘Statement: The Granting of Electronic Communications Code by the Director General of Telecommunications’, 10 October 2003, at 2.4. 421   DGT, ‘Notification under Section 106(2) of the Communications Act 2003: Requirements with respect to the content of an application for a direction applying the Electronic Communications Code and the manner in which such application is to be made’, 10 October 2003. 422 423   Statement, n 420, at 2.64.   Section 109(e), Communications Act 2003.

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to ensure such arrangements are in place.424 These information requirements clearly relate to Ofcom’s considerations under the Act in granting Code powers (s 107(4)(a)–​(d)). These must be balanced, however, with the EU regulatory principles that include the need to promote competition.425 An example of the possible tension between the economic and social policies that underlie these mandatory factors is where Code powers are sought to facilitate the roll-​out of alternative infrastructure presumed to promote competition or make access to new services available except that building of that infrastructure will require significant highway disruptions and infrastructure sharing might alleviate this. Ofcom must allow for consultation on an application by interested parties. While all providers are eligible to apply, providers of essentially private networks are unlikely to be granted Code powers.426 Preference will be given to providers willing and able to share apparatus, although inability or unwillingness does not bar the grant. An administrative charge is associated with a successful application and an annual charge, reflecting respectively the costs of processing the application, and maintaining and administering the Code.427 These remain a £10,000 one-​t ime application charge for the application and a £1,000 annual charge as of 2017/​2018.428 No charge is made to unsuccessful applicants and the annual charge, unchanged since 2005, reflects the cost of administering all grants of Code powers to an undertaking. Ofcom found that its costs were largely related to the scheme as a whole rather than attributable meaningfully to any individual operator, some of which due to historical reasons had multiple grants of Code powers.429 It has been suggested that this separate charging reflects not only a true ‘licence fee’ as previously discussed based on regulatory costs, but also a measure to ensure that use of the public resources is by those that will maximize the benefit and may cause providers to evaluate critically their need for Code powers.430

  Statement, n 420, at 2.85–​2 .88.   Ibid, at 2.57 (noting the factors that will be considered in this balancing). See, eg, Ofcom Consultation, ‘Proposal to apply Code powers to IX Wireless Ltd’, 5 January 2018, at 2.13–​2 .22. 426   Statement, n 420, at 2.101. 427   These are authorized by the Communications Act 2003, s 36(1)(d). 428   Ibid. See Ofcom’s Tariff Tables, 30 March 2017. 429   See Consultation, n 380. 430   See Section 6.2.2. Indeed, a significant number of code operators have requested that their code powers be revoked. See the 20 Directions revoking these at the A–​Z Document List, . 424 425

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The specific direction applying Code powers to a provider is a personal benefit and may not be assigned to a third party.431 It may be limited geographically, determined on a case-​by-​c ase basis and as dictated by limited needs of networks, such as where the business plan indicates it is largely based on leased lines or that the Code power is needed only to facilitate minor interconnections or installations.432 The application of Code powers in addition to the rights previously discussed also provides the following benefits to the grantee: • simplified compliance with planning requirements due to exemptions for ‘permitted development’ under the Town and Country Planning framework;433 • power to install apparatus in the streets without a ‘street works’ licence. Code operators must comply with obligations imposed under the Electronic Com­ munications Code (Conditions and Restrictions) Regulations 2003434 (Regulations). These replaced the former licence conditions and restrictions although are largely unchanged substantively. These, inter alia, detail requirements for providers exercising Code powers in connection with local planning. An example of their interaction with the planning regime is that while most apparatus installation does not require even notice to local planning authority under the General Permitted Development Order (GDPO), the Regulations require a month’s notice to local planning authorities and compliance with their reasonable conditions where the provider has not previously installed apparatus in the area or plans to install certain sized cabinets and boxes that do not require planning permission.435 The Regulations also provide for notice to local planning authorities of fifty-​six days, and other compliance requirements for works in connection with listed buildings and ancient monuments, conservation, and other protected areas.436 The Regulations seek to minimize the aesthetic, environmental, and functional impact of the installation appropriate to the public or private land on which it is installed437 by, eg requiring underground installations to be deep enough so as not to interfere

432   See s 106, Communications Act.   See Statement, n 420 at 2.89–​2 .96.   See the Town and Country Planning, England and Wales (General Permitted Development) Order 1995, SI 1995/​418, Pt 24 as amended. Planning (General Development) (Amendment) Order (Northern Ireland) 2003 SR No 98, Town and Country Planning (General Permitted Development) (Scotland) Amendment (No 2) Order 2001 SSI 2001/​266. 434  The Electronic Communications Code (Conditions and Restrictions) Regulations 2003 (‘the Code Regulations’), SI 2003/​ 2553 (as amended by the Electronic Communications Code (Conditions and Restrictions) (Amendment) Regulations 2009, the Electronic Communications Code (Conditions and Restrictions) (Amendment) Regulations 2013, and the Electronic Communications Code (Conditions and Restrictions) (Amendment) Regulations 2017). 435   Ibid, at reg 5.    436  Ibid, regs 6–​8.    437  See eg ibid, at reg 3. 431

433

347

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with its use, such as agricultural land. They require coordination between providers and others installing utilities,438 or coordinating public works such as highway and road authorities, and impose inspection and maintenance obligations for safety to persons and property.439 The Regulations provide more detailed procedures for ‘funding liabilities’ than the former licence conditions. These involve an annual section 16 certification on 1 April by the provider, if an individual, or its board, detailing amounts available and how this determination was made.440 This encompasses ‘relevant events’ triggering the need for the funds’ availability, including a specified insolvency level.441 Providers not exercising their Code powers must certify two weeks prior to doing so. Ofcom maintains a list of filed certifications. Ofcom’s predecessor had no powers to take any specific action for a breach of a Code condition as such breaches would likely be in violation of private rights actionable in the courts or comprise breaches of other statutes such as unauthorized street works.442 The Communications Act 2003, however, authorizes Ofcom to specify directions for remediation and to issue penalties (s 110(2)(e)), including financial, under revised procedures similar to those for other conditions which may include a daily penalty up to £100 per day for a continuing contravention while a fixed penalty may not exceed £10,000 per contravention (s 110A). Suspension of the Code application to a provider is possible for repeated or serious contraventions of the Regulations (s 112), for urgent cases necessary to protect health and safety or the economic or operational interests of others (s 111A),443 and for serious or repeated failures to pay the administrative charge (s 113(1)). These would appear to apply to the entire network.444 The grant exists as long as the network or conduit system provider does unless suspended or revoked on request.

  Ibid, at reg 14.    439  Ibid, at reg 10.   The annual certificate shall, in the case of a company state, that in the Code Operator’s Board’s reasonable opinion, the Code Operator has fulfilled its duty to put funds in place in compliance with the Regulations, the systems and processes which enabled the Board to form that opinion, and the amount of funds which have been provided for. A copy of the relevant instrument that will provide the funds should accompany the certificate. 441   SI 2003/​2553 (as amended), n 434, at reg 16. 442  Consultation on the Draft Electronic Communications Code (Conditions and Restrictions) Regulations, 3 (DTI, April 2003), . 443   Requiring confirmation/​removal within three months (plus one further extension of three months). 444   Except to the extent that they concern unconfirmed urgent cases. 438

440

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Premium rate services  Section 120 of the Communications Act 2003 authorizes a condition that is general in nature as it may be imposed on all persons providing premium rate services (PRS) or to a person providing a specific description of such services. PRS comprise those goods and services that people can buy like chat lines, call-​i n contests, access to ringtones and horoscopes, and more recently calling card-​l ike services providing access to a block of long-​d istance minutes, in exchange for an amount billed to their telephones as with pre-​paid accounts or via their communications service bill.445 The Act defines a PRS as one that provides the user with access to content or a facility via an electronic communications service where the charge paid to the communications service provider for that facility accessed or that content is included in the use of the service (s 120(8)). The section 120 condition applies to persons who provide the content, exercise editorial control, make available the facility, package the service, or provide the service over their network under an agreement with the provider or retain part of the service charge. It authorizes Ofcom to approve a code of conduct with which such premium service providers with a section 120 condition must comply (s 120(3)(za)), or, if none is arrived at, to enter an order regulating the provision and content of such services, including pricing and charge-​sharing arrangements. This intends continuation of a prior regulatory framework and its industry-​ funded regulator, the former Independent Committee for the Supervision of Standards of Telephone Information Services (ICSTIS). Although for a while this was rebranded ‘PhonePayPlus’ apparently in an effort to create a higher profile and eliminate the vagaries about its name, in 2016, this co-​regulator with Ofcom was renamed as the Phone-​paid Services Authority (PSA). It regulates premium rate services as an agent of Ofcom and pursuant to its Fourteenth Code of Practice (2016) approved by Ofcom pursuant to sections  120 and 121, Communications Act. This requires prior registration by all network operators and providers of all non-​exempt premium rate services (including various indirect providers) with annual renewal.446 After investigation of a complaint, PSA can impose sanctions for failure to comply with the Code that regulates such things as clear, accurate rate information, truthful and appropriate advertising, unreasonable delays in service, or service prolongation. The Code provides for an emergency investigation procedure with an immediate preliminary investigation for an apparent serious and urgent breach with the possibility to order the withholding of payments

  See further Chapter 9.   As discussed above, revisions to the General Conditions will eliminate Ofcom’s Code of Practice regarding requirement and directly impose information publication and provision obligations in the consumer protection conditions contained in C.2, including those that also govern premium rate services information provision. 445

446

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and the suspension of/​blocking access to the provider service, as provided in the revised EU consumer protections under the Universal Service and Users’ Rights Directive. Sanctions for established breaches can include reprimands, imposition of prior approval requirements, orders to reimburse complainants, fines, orders limiting access to services with requirements for compliance advice sought, and bans on named individuals from providing services.447 A database of sanctions adjudicated by a tribunal selected from an Adjudication Panel established by the PSA code is available on the PSA website.448 Where the premium rate services involve broadcasters, Ofcom may also address breaches under the Broadcast Code.449 The Communications Act sections 94–​96 procedures, discussed above, apply to breaches of section 120 condition (s 123) with a penalty of up to £250,000 possible if proportionate and appropriate (s 123(2)). Section 124 that retains the ‘serious and repeated’ wording of the Act governs suspension. Ofcom has additional powers to promulgate orders necessary to address issues involving premium rate services for which there is not a code (s 122). 6.4.4.5  Fees—​administrative charges and licence fees Ofcom may impose annual administrative charges on designated providers of electronic communications networks, services, or associated facilities, designated USO providers, SMP apparatus suppliers, and a person with a grant of Code powers450 (s 38). Each year Ofcom must publish a statement of charges in keeping with a current statement of charging principles (s 38). On or before 31 March, Ofcom publishes a table of charges that allocate its costs by sector. According to its current statement of charging principles, Ofcom’s cost allocation is based on the budgeted direct costs of individual projects and programmes, according to the relevant regulatory sector and regulatory categories within those sectors, to permit further particularization of regulatory fees.451 Overhead, projects and activities not directly attributable or allocated to specific projects, categories, and sectors are apportioned across these according to Ofcom’s judgement as to time spent and levels of expenditure.

447   For a list of barred service providers, see < https://​psauthority.org.uk/​for-​business/​prohibitions-​f urther​sanctions-​a nd-​suspensions>. 448   Tribunal Service Provider Adjudications (Phone-​paid Services Authority), < https://​psauthority.org.uk/​ for-​business/​t ribunal-​adjudications?date=>. 449   See Notice of Sanction ‘Square 1 Management Ltd., Smile TV’ (22 May 2007; 22:17), Broadcast Bulletin No 114-​21/​07/​0 8, . 450   Code power charges are discussed above at Section 6.4.4.4. 451   Ofcom, ‘Statement of charging principles’, 8 February 2005, s 2.18. Also see, Ofcom’s Tariff Tables 2017/​ 2018, 30 March 2017, at s 1.10 (noting that it applies the 2005 Charging Principles).

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The charging principles provide for administrative fees to be charged as a percentage of annual turnover, currently 0.112 per cent applied to 2015 revenues,452 in accordance with a system of revenue bands derived from ‘relevant activities’ under the Act but not for annual revenues of less than £5  million. The turnover data is based on the last but one calendar year, allowing for a bit of certainty and cross-​market analysis. Relevant activities under the charging principles include: • provision of public electronic communication services to end users; • provision of electronic communication networks, electronic communication services, and network access to communication providers; or • making available of associated facilities to communication providers.453 There is some complexity to determining what falls within the categories, especially in the separation of content services that are excluded and transmissions involving content layers that remain communications services. However, providers are to determine their revenue for ‘relevant activities’ and certify this information to Ofcom within twenty-​eight days of the publication of a general demand for such information.454 Based on this information, Ofcom calculates the individual administrative charge. Charges in excess of £75,000 per annum may be paid in monthly instalments.455 While Ofcom has committed to lower its costs progressively, its current budget for 2017–​2018 is £121.7 million, an increase of £5.1 million or 2.5 per cent (stated in ‘real terms’) over the 2016–​2017 restated budget with a resulting average increase of administration fees of network and service provision, set out in Annex 1, of 12.9 per cent from those of the prior annual period.456 Ofcom cites continued work on the implementation of the Digital Communications Review and the requirement to conduct several market reviews going forward as the reasons for the sector increase.457 Table 6.2 sets out the schedule of charges by revenue bands in light of the increased budget for relevant activities for the year 2017–​2018. This detailed level of fiscal analysis in light of Ofcom work plans and with retroactive adjustment suggests full compliance with Article 12, Authorisation Directive requirements.

  Ofcom’s Tariff Tables 2017/​2018, 30 March 2017, at s 2.3.   DGT Guidelines, ‘The definition of “relevant activity” for the purposes of administrative charging’, 29 July 2003, at 2.1. 454   See Ofcom, Networks and service, general demand for information, March 2004. 455 456   Ofcom’s Tariff Tables 2017/​2018, 30 March 2017, at s 2.4.   Ibid, at Annex 1. 457   Ibid, at s 1.7. Increased costs for the regulation of the BBC and costs for modifications to Ofcom’s headquarters are also cited for the overall increased budget. 452

453

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Table 6.2  Ofcom’s 2017–​2018 Networks and Services Administrative Charges Bands •  Bottom (£)

•  Top (£)

•  Relevant Turnover (£)

•  Fee Payable (£)

0 5,000,000 10,000,000 25,000,000 50,000,000 75,000,000 100,000,000 150,000,000 200,000,000 300,000,000 400,000,000 500,000,000 600,000,000 750,000,000

5,000,000 10,000,000 25,000,000 50,000,000 75,000,000 100,000,000 150,000,000 200,000,000 300,000,000 400,000,000 500,000,000 600,000,000 750,000,000 1,000,000,000

0 5,000,000 10,000,000 25,000,000 50,000,000 75,000,000 100,000,000 150,000,000 200,000,000 300,000,000 400,000,000 500,000,000 600,000,000 750,000,000

5,635 11,270 28,175 56,350 84,525 112,700 169,050 225,400 338,100 450,800 563,500 676,200 845,250

As previously noted, the administrative charge and costing of the application for, and oversight of, the Electronic Communications Code is separate from that of the administrative charge under the general authorization.458 Compliance with  administrative charge requirement  Where, under the Communications Act, a person is reasonably believed by Ofcom to have failed to pay the applicable administrative charge, it may issue a notification of non-​ payment. This must set out Ofcom’s determination of this and notify the person of the opportunity to make representations, however with compliance required and without the previous framework’s allowance for at least a month to do so (s 40). Where no action is taken, a financial penalty that is proportionate and appropriate can be imposed (s 41). The penalty, however, is capped at twice the annual administrative charge (s 41(5)). A separate penalty for each notified period of non-​payment can apply, however (s 41(3)). As with other serious or repeated contraventions, Ofcom may suspend or otherwise restrict the entitlement of network or service provision for non-​ payment (s 42). Where this is for a single, serious contravention, this may only be done after a notice and expiration of the period to comment under section 40 with financial penalties under section 41 failing to secure compliance. The possibility exists therefore not only for these penalties to apply with a single serious infraction but also in the context of repeated infractions over a twenty-​ four-​month period (s 42(9)(b), as amended) that individually might not might

  Ibid, ss 2.5–​2 .7.

458

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comprise ‘serious’.459 In each case, however, the penalty has to be proportionate and appropriate to the notified contravention with notice of the further penalty given under section 42 with a reasonable period for making representations or proposing how to remedy the contravention (s 42(6)). These procedures comply with those provided for in the Framework and Authorisation Directive. 6.4.4.6  Possible future revisions to UK framework The UK framework will likely need to be amended to implement some of the reforms contemplated in the proposed EU Electronic Communications Code after they are agreed and finalized. With its recent amendments, the UK regime will have already implemented a broadband USO that will make this less onerous and accelerate the planning needed to achieve its objectives. Some of the EU requirements surrounding the USO may still remain to be addressed, eg the funding if the BT voluntary proposed solution proves inadequate. Ofcom is likely to continue its simplification and deregulation where possible, meaning that there will likely be on-​going consultations and revisions to the general conditions.460

6 .5  CONC LUDING R EM A R K S For those new to telecommunications law, licensing and authorization might have seemed merely an administrative exercise. However, as the above analysis has demonstrated, while licensing and authorization involves the procedural aspects of filling out the proper forms (if virtual), it is a complex area of telecommunications law concerned not only with the structure and nature of a particular telecommunications market but also the attainment of social policy objectives. Licensing and authorization can be used as a tool to implement important national economic priorities. This is true whether these are the preservation of a monopoly for the time being in order to, inter alia, permit investors to recoup their expenditures or continue a revenue stream for the government, to open the markets for equipment, services, and networks to immediate or gradual competition or to adapt to technological developments in the market. The EU experience with the latter objectives also shows that licensing is a tool that requires skill on the part of the regulator as well as strong and appropriate conditions and sanctions to address market failures inherent in networked product and services market where the former monopolist still controls the access network. The proposed reforms to the EU framework that will govern market entry and market conduct via general authorization are fairly

  Ofcom found compliance with the 12-​month limitation for two sets of notices to be difficult.   None of these considerations touches on Brexit and what changes it may produce, if any.

459

460

830

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minor of themselves, but they reflect continued reliance on this regulatory tool to hone the application and enforcement of other specific reforms. This further fine-​t uning of the EU licensing regime shows that, despite the fact that licensing is a regulatory tool with old legal roots, those roots continue to underlie regulatory foundations of telecommunications markets today, even if not always readily apparent. However, the law is an organic thing. It grows, evolves, and adapts as the societal, technological, and economic conditions that produced it change, with the laws of authorization/​l icensing no exception. The evolution in telecommunications licensing, especially in the UK, shows this clearly. The earliest providers, after the invention of the telephone, entered the market and sold their apparatus and services, without the need for any formality. When telecommunications was deemed to be a service with a public interest, it was reserved to a single provider either under a licence or by requiring any others to have a licence. When this monopolist provider could no longer meet the economic and social needs in an increasingly computerized world that required creative and competitive communications networks and services, licensing was used as a tool to pry open markets and control the level of play. Finally, the removal of individual licence requirements in the UK for everything but access to spectrum brings us almost full circle since no licence is needed or justified under the common law free market principles regarding limitations placed on a person’s economic freedom. At the same time, licensing law has also evolved in the EU to try to address the concerns about convergence in technologies and to provide a consistent, harmonized, and technology-​neutral framework for any electronic communications network or service. More specifically and recently, its authorizations policies have sought to meet the market’s demand for new technologies in a way that does not limit their development or entry but that at the same time seeks to impose ex ante reasonable conditions for their provision and use. While it is to be hoped that the proposed reforms will address the EU’s continued and self-​identified weaknesses in the implementation of authorization, particularly for cross-​border market development, the continued Member State opposition to the enhanced and more centralized powers possibly essential to achieve the EU’s cross-​border and pan-​ European digital agenda is understandable but regrettable. Whatever changes loom in the future, the ‘student’ of EU licensing and authorization law for electronic communications providers will likely continue to witness this dynamic evolution.

381

7 SPEC TRUM MANAGEMENT Anne Flanagan1

7.1 7.2 7.3 7.4 7.5 7.6 7.7

Introduction  Spectrum and Communications  Chart of Radio Spectrum  History of Spectrum Regulation  The EU Spectrum Framework  The UK Spectrum Framework  Concluding Remarks 

381 388 390 391 402 418 432

7.1 INTRODUC TION Developments in communications and broadcast, in addition to wireless technologies, have greatly increased the demand for radio spectrum, an ‘invisible’ natural resource that is, practically speaking, finite or scarce. Although the last decade has witnessed the phenomenal growth worldwide of mobile terminal equipment and wireless networks and services, commentators advise that we ‘ain’t seen nothing yet’2 and are merely at the start of what will be possible with the ‘marriage of high-​quality, super-​fast mobile connections and billions of devices’.3 Various factors have contributed to these developments which may ultimately bridge the ‘digital divide’,4 including the evolution of mobile broadband internet

1   The author thanks Geoff N Chapman (MA, MSc, PhD) and Renee Greenberg (BA, JD) for their research assistance. 2   Bachman—​Turner Overdrive ‘You Ain’t Seen Nothing Yet’ (Mercury Records 1974). 3   Enter, R, ‘The Wireless Industry:  Revisiting Spectrum, The Essential Engine of US Economic Growth’ (Recon Analytics April 2016). 4   See eg Smith, A, ‘U.S. Smartphone Use in 2015’ (Pew Research Center, Pew Hispanic Center, 1 April 2015)  (noting that while that growing numbers have access to digital technology in the US with 64% of Americans adults owning a smartphone, that non-​w hites (12% of Black and 13% of Hispanic Americans) have access to the internet only on their mobile phones, compared to 4% of whites. Also, penetration rates in Africa, while significantly lower than much of the world, are increasing annually although cost and quality issues

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technologies, the migration of telecommunications providers to IP networks, the development of reasonably priced ‘smart’ handsets, constantly evolving digitized mobile multimedia and other content, mobile software applications and services, maturing markets for mobile voice telephony, and the growing demand for ubiquitous internet connectivity. The next if still emergent evolution, or ‘generation’, of wireless technology—​ ‘5G’—​w ith its goals and projected performance requirements is likely to see unprecedented demand for electromagnetic spectrum,5 the medium or ‘pipe’ over which such mobile voice and data and other communications services are provided. Spectrum can be considered a continuum of all electromagnetic energy waves according to their frequency, height (called ‘amplitude’), and wavelength with ensuing propagation and other characteristics. The segment suitable for carrying sound, images, and other data is found in the electromagnetic waves at the lower end of the electromagnetic frequency continuum, encompassing eg ‘radio’, ‘micro’, and ‘short’ waves, which we will call ‘radio spectrum’ or ‘spectrum’. Although theoretically infinite and physically inconsumable, spectrum has practical limitations as a particular usage can cause interference with competing uses in the same and neighbouring ‘bands’ of waves because the low of one wave can disrupt the high of another. This interference potential causes spectrum to be described as ‘scarce’ since often only a limited number of users (possibly only one) can operate effectively within/​near a band. Also, certain technologies work better within different wave bands’ technical characteristics. This and interference have traditionally driven policy regarding spectrum’s allocation and regulation. Existing frameworks at the national, regional, and international levels have been directed at putting in place systems for coordinating and allocating bands of spectrum for specified uses according to their characteristics and potential for interference. At the national level, the means utilized to control this are generally government licensing for access to use spectrum in specified bands under specified condition/​conformity requirements. Ongoing technological developments such as digitization, advanced compression technologies, cognitive radio and intelligent antennas, MIMO, beam forming and multipath propagation, and spread spectrum, etc have greatly minimized ‘scarcity’ and allowed for greater capacity. Despite this, experts conclude that remain, see ITU, ‘Percentage of Individuals Using the Internet 2000–2016’, 2017, . 5   See eg White, B, Keysight Blogs:  ‘FCC 5G spectrum allocation demands 3 breakthrough innovations’ (Keysight Technologies, 29 July 2016)  (noting the FCC’s recent allocation of 11Ghz combined licensed and unlicensed spectrum for 5G use is 200 x that allocated for the first cellular analogue communications), .

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the unprecedented and growing demand for spectrum, including notably for mobile data broadband services, will shortly outpace its availability.6 To address this problem so that further innovation and the economic and social growth possible7 with mobile technologies are maximized, policymakers and regulators are examining their current policies, allocations, and uses of allocated spectrum.8 Various complex strategies are being used or, at least, considered to promote more efficient and effective use of spectrum and further its potential availability, including the 2016–​2017 US ‘voluntary incentive auction’ that required several stages of a reverse auction and then a forward auction after the FCC’s ‘repacking’ of spectrum returned by broadcasters for its reallocation and licensing in contiguous blocks.9 This US effort, proposed in its 2010 National Broadband Plan, is a regulatory option available for currently underused but allocated spectrum:  its repurposing, or ‘refarming’ to more valuable uses or to the same use but using more efficient technology that requires less bandwidth or has less risk of adjacent bandwidth bleed. Refarming has been of considerable recent significance with the reallocation in various jurisdictions of what is called the ‘digital dividend’, or, the spectrum used by bandwidth-​hogging TV analogue broadcasts, including in the 700 and 800 MHz bands10 discontinued with the switchover to digital television that uses digital compression technologies permitting at least four channels to operate in the same spectrum bandwidth as one analogue channel. These more efficient digital TV services take up less bandwidth freeing the remainder for new uses. However, exploiting this ‘digital dividend’ has not been problem free. In the UK, Ofcom estimated that as many as 2.3 million households would be affected

6   See eg FCC Staff Technical Paper, ‘Mobile Broadband:  The Benefits of Additional Spectrum’, October 2010 (noting that demand for mobile data is expected to grow between 25 and 50 times current levels within five years in light of take up of smart devices, producing a spectrum availability deficit of at least 300 MHz). Also see Bazelon, C and McHenry, G, ‘Substantial Licensed Spectrum Deficit (2015–​2019): Updating the FCC’s Mobile Data Demand Projections’ (Brattle Group 23 June 2015) (estimating the deficit as of 2019 at 366 MHz with two thirds unmet by interim re/​a llocations of licensed spectrum as of 2016), . 7   One estimate is that in 2035, 5G value chain will globally have USD 3.5 trillion in output and support 22 million jobs. ‘How 5G Technology Will Contribute to the Global Economy’ (Communications Today, April 2017) (based on Qualcomm Report), . 8   See FCC Staff Technical Paper, n 6. Also, see Decision 243/​2012/​E U of the European Parliament and of the Council establishing a multi-​a nnual radio spectrum policy programme (RSPP Decision), OJ L 81/​7, 14 March 2012; Decision 676/​2002/​EC of the European Parliament and of the Council on a regulatory framework for radio spectrum policy in the European Community (Radio Spectrum Decision), OJ L 108/​1, 7 March 2002. 9   Hazlett, TW, ‘FCC “Incentive Auction” marks progress and pitfalls toward freeing wireless spectrum’ (The Brookings Institute, 24 May 2017). 10   In Europe, the bandwidth freed comprised 470–​862 MHz or the UHF band which has long wave coverage with building penetrating capabilities suitable for mobile networks.

834

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by the new LTE 4G signals in the 800 MHz band of which 900,000 UK households with only Freeview likely to lose all or part of this Digital Terrestrial Television (DTT) service.11 Although this estimate has likely proved well beyond actual experience to date, the possible problems could not be ignored.12 The government determined that the spectrum winners establish a private entity, Digital Mobile Spectrum Limited, (pursuant to an imposed licence condition and key performance indicators) with a budget of up £180 million (added to the spectrum licence fees) to manage these problems. It has an oversight board of mobile operators and broadcasters, several independent board members as well as Ofcom and the Ministry of Digital, Culture, Media & Sport. This entity, aka ‘at800’, appears to be addressing most problems by sending and/​or installing filters for the interfering bandwidths,13 although not all homes are projected to be able to use this fix with some possibly requiring a new platform for which a payment of up to £10,000 was authorized.14 The company is also now beginning to address issues arising from the UK clearance of DTT from the 700 MHz band for mobile data use that Ofcom has indicated it is accelerating by eighteen months to 2020.15 The need to free harmonized bands of spectrum for wireless broadband also drove the repurposing of spectrum bands to allow 3G and then 4G in bands originally allocated for 2G, the earlier generation of digital communications, comprising eg in the EU, the 900/​1800 MHz bands.16 This involves technical co-​existence in parts of the bands over which 2G services are still provided (and possibly will

11   See Ofcom, Second Consultation on coexistence of new services in the 800 MHz band with digital terrestrial television (23 February 2012), . 12   Although the ‘actual’ numbers do not reflect the nearly 1 million filters sent out in advance proactively by at800 and not in response to a complaint. See Letter from Chair 4G/​T V Coexistence Oversight Board to Ofcom proposing revised scheme and trial (Dept for Culture, Media & Sport, 18 December 2013) (requesting enforcement forbearance for a pilot to explore varying the licence conditions and KPIs of 4G spectrum winners in their operation of at800 to permit greater flexibility in light of experience to date and much lower actual numbers of involved households with a view to permanent variance, if successful). 13   See eg, Matthews, C, ‘New 4G masts in Camborne could cause interference for Freeview users’ (Cornwall. live, 7 March 2018), . Not all households have been fully compensated or their problems proactively addressed by at800 as new 4G masts become operational. See Corr, S, ‘Cookstown residents out of pocket as 4G signal kills Freeview TV’ (Mid-​U lster Mail, 18 December 2015) (noting that couple in their 80s only offered £50 reimbursement of £105 spend to fix interference problem, notification of which they did not receive), . 14   Department for Culture, Media and Sport, News Release, ‘Eliminating Interference with TV signals from 4G’, 2 April 2012, . 15   Ofcom, ‘Statement:  Maximising the benefits of 700 MHz clearance, Enabling acceleration of 700 MHz clearance and use of the 700 MHz centre gap’, 10 October 2016. 16   See eg Commission Decision 2011/​251/​E U amending Decision 2009/​766/​EC on the harmonization of the 900 MHz and 1800 MHz frequency bands for terrestrial systems capable of providing pan-​European electronic communications services in the Community, [2011] OJL 106/​9, 18 April 2011.

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continue to be as more advanced mobile handsets still have this capability and these bands allow for other uses such as existing machine-​to-​machine systems that would require costly upgrades).17 Mitigation of adverse effects has been addressed via mandatory channels where technically necessary18 as well as cooperation among providers. Regulatory policy in refarming also often needs to address compensatory issues where the refarming constitutes a taking by government or where existing equipment is no longer usable.19 The US voluntary incentive auction was an innovative way to do this although it did not achieve the targeted 120 MHz of returned spectrum, with only 70 MHz procured for reallocation.20 Concerns about competitive disadvantage may arise from refarming. For example with 2G spectrum, these could include that it was obtained under different allocation processes and at lower costs than that incurred for 3G and most recently, 4G. When the EU directed that 2G bands be liberalized,21 rather than reauction them, the UK government sought to address these concerns by directing that Ofcom allow current spectrum incumbents to retain the 2G bands of 900/​1800 MHz they were allocated in the 1980s but pay current full market value for their liberalized use.22 Ofcom set the market value prices using benchmarks such as the 2013 UK 4G spectrum auction results and other markets’ 2G refarming auction prices but converted to annual fees (as these 2G were never auctioned) and further adjusted,  by taking into account the delay in the spectrum’s availability. Ofcom ultimately raised the fees by nearly quadruple their original amount. The incumbents appealed. The Court of Appeal struck down Ofcom’s pricing decision that was originally upheld by the High Court as will be discussed further.23 Other competitive concerns arise since 2G spectrum was likely to be held by the original mobile market entrants, often a duopoly. Allowing them to change

17   Chambers, D, ‘The mobile industry focuses on spectrum refarming through 2017’ (ThinkSmallCell, 2 February 2017), . 18   See eg Commission Decision 2009/​766/​EC on the harmonisation of the 900 MHz and 1800 MHz frequency bands for terrestrial systems capable of providing pan-​European electronic communications services in the Community (in allowing for the use of these 2G bands spectrum by UMTS terrestrial systems, requiring separation channels for neighbouring UMTS systems of 5MHz and neighbouring GMS and UMTs systems of at least 2.8 MHz), OJ L 274/​32, 16 October 2009. 19   See Ofcom Statement, ‘Maximising the benefits of 700 MHz clearance, Enabling acceleration of 700 MHz clearance and use of the 700 MHz centre gap’, 10 October 2016 (noting that the UK government will fund a grant in 2019 for programme-​making and special events (PMSE) users whose equipment will no longer be operational when the 700 MHz band is cleared before the expected date). 20   See Hazlett, n 9. 21   Decision 243/​2012/​E U of the European Parliament and of the Council establishing a multiannual radio spectrum policy programme, [2012] OJ L 81/​7, 21 March 2012. 22   The Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2010, SI 2010/​3024. 23   Decision 243/​2012/​E U, n 21.

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their licences to include its use for 4G could provide their earlier ability to move to the new technology if liberalized before other 4G spectrum is auctioned or at a lower cost than other 4G spectrum. Such time and cost advantages could serve to entrench the market position of these earliest mobile market entrants. A UK tribunal interpretation of the EU ‘Refarming Directive’,24 however, found that the original 2G GSM spectrum grantee had no directly enforceable right to the automatic revocation of any restrictions in its 2G licence to enable 3G use with only ex post competition law to address any anti-​competitive effects, a compulsory EU regulatory objective.25 Rather, the Directive required a technical harmonization to be effected by making the bands ‘available’ for 3G use (although unnecessary in the UK) with specific authorization decisions to follow after the mandatory framework consultation and taking into account on an ex ante basis any distortions in competition.26 Another key issue with refarming is that significant amounts of spectrum is allocated for public sector purposes, eg in the EU noted to comprise up to 40–​50 per cent of usable frequencies below 15 GHz.27 For some uses this may not only need to be repurposed at the national level but also require regional and international harmonization for effective cross-​border use such as for mobile networks.28 In the UK, for example, since 2010 various public agencies have identified bands that could be freed up or shared with new uses under the Public Sector Spectrum Release Programme’s goal to free up 500 MHz of bandwidth from public uses. According to the government, this has been 80 per cent achieved. The Ministry of Defence, for example, released 200 MHz of bandwidth in the 2.3 GHz–​2.4 GHz and 3.4 GHz–​3.6 GHz bands that was to be made available by 2016 for public mobile uses including likely 5G in the 3.4GHz bands. This spectrum auction, however, was delayed until April 2018 by legal challenges to Ofcom’s proposed caps on the amount of spectrum that any one holder might control. These were to address competition concerns in light of BT’s acquisition of EE that gave it the largest share of available spectrum at 45 per cent, although not market share as BT had not provided mobile services since its 2006 sale of O2 to Telefónica.29 As noted, the US similarly

24   Directive 2009/​114/​EC amending Directive 87/​372/​E EC on the frequency bands to be reserved for the coordinated introduction of public pan-​European cellular digital land-​based mobile communications in the Community. 25 26  See Telefonica O2 Ltd v Ofcom [2010] CAT 25.   Ibid, at 85, 90–​102. 27   Commission Discussion Paper EU Spectrum Summit, at 6 (22–​2 3 March 2010). 28   See eg UK Dept for Culture, Media and Sport, ‘Enabling UK Growth: Releasing Public Spectrum Update on Progress’, December 2011 (noting mobile network operators’ preference for spectrum harmonized at the international level over spectrum that was not). 29   Torrance, J, ‘Ofcom accuses Three of holding up spectrum auction after failed legal bid’ (The Telegraph, 20 December 2017), .

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committed to repurposing at least 500 MHz of bandwidth from both federal government agencies and private entities for mobile and fixed broadband uses. As of 2015 over half had been made available.30 The US auctions addressed competition concerns via ‘set asides’ for entities with sparse holdings of spectrum below 1 GHz, overall caps of the amount to be auctioned and a cap for a single entity serving sparsely populated areas.31 The EU in its newly adopted Multi-​A nnual Spectrum Policy Programme clearly contemplates a harmonized approach across the EU to repurposing public sector spectrum.32 A regulatory option for making spectrum more broadly available is the deregulation of spectrum frameworks from existing ‘command and control’ models that dictate use according to the technical characteristics of the spectrum, explored briefly in Section 7.2, to allow a market-​d riven determination of best use and continued innovation and as well, economically efficient pricing,  and essentially service and technological neutrality. The concern here is how to ensure non-​i nterference and safe use that the designated allocation was intended to control in the first place. Finally, spectrum licensing liberalization may enable those with grants of spectrum to participate in secondary spectrum markets enabling under-​utilized spectrum to be shared or used exclusively by others but more efficiently. A full exploration of all these issues is beyond the scope of this chapter which intends to provide an overview of spectrum used for communications and its regulation, historically and today, so that the reader will appreciate the differences from telecommunications licensing generally addressed in the prior chapter. To do this, it first considers at a fairly basic level the nature and characteristics of spectrum used in communications with inherent relevance to spectrum regulation. It then provides an overview of historical spectrum regulation including at the international level and national level generally for a sense of how and why the frameworks are what they are. It will then examine the EU framework which seeks to harmonize Member State approaches to spectrum regulation, generally within national competence, in order to foster the continued economic and social development of the Single Market. National policy priorities could undermine this given that spectrum interference does not respect national boundaries and mobile communications are a significant growth sector and emergent platform for new

30   Priztger, P and Strickling, L, ‘Six Interim Progress Report on the Ten-​Year Plan and Timetable’ (Dept of Commerce, June 2016). Also see, FCC Staff Technical Paper, n 6, at 2. 31   Meyer, D, ‘FCC sets aside 30 megahertz for auction set to begin March 29, 2016’ (RCR Wireless News, 6 August 2015), . 32   Decision 243/​2012/​E U of the European Parliament and of the Council establishing a multiannual radio spectrum policy programme, [2012] OJ L81/​7, 21 March 2012.

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commercial and government services. The chapter will also examine some recent reforms by the EU to drive this harmonization. It will finally examine how the UK has implemented the EU framework, an overlay on its own legislative scheme that has been in place since the mid-​1800s.

7. 2  SPE C TRUM A ND COMMUNIC ATIONS All radio spectrum comprises waves of electromagnetic energy (photons) that are measured in terms of their frequency, 33 or how many times the wave repeats in a second of time, a cycle counted in ‘Hertz’. 34 Thus a wave that repeats once in a second has a frequency of 1 Hz, a thousand times a second, 1 kilohertz (kHz), a million times a second, 1 megahertz (MHz), a billion times a second 1 gigahertz (GHz). The portion of electromagnetic spectrum usable for communications/​t ransmission technologies has increased over time with technological developments. 35 Lowest usable frequency is likely now at 8.7 kHz (very low frequency or VLF) with recent developments in weak signal processing software 36 and the highest presently around 300 GHz, although the entire range of what is considered ‘radio spectrum’ consists of frequencies between 3 kHz and 3000 GHz. 37 There is a mathematical correspondence with frequency and length and, length and distance.38 Lower frequency waves are longer, travel further, and penetrate structures better without attenuation. Thus, lower frequencies have traditionally been valuable in broadcasting. Higher frequency waves are smaller and do not travel as far.39 Thus, while not suitable for broadcast, these can be re-​used across

33   Electromagnetic spectrum can also be measured according to the length of the wave and its energy with the three elements having a mathematical relationship, so that low frequency waves are long with low energy or power and high frequency waves are very short and have high energy. See Imagine, ‘Electromagnetic Spectrum: Introduction’ (NASA GSFC, February 2010), . 34   Usually measured from the highest point of one wave to the same point in the next, although a standard without a technical difference as the measure of repetition will be the same no matter what point is used. 35   See Lapthorn, R, ‘Sub-​9kHz Amateur Radio’ (March 2011) (noting sub-​9 kHz range radio communications an impossibility as little as five years ago), . 36   See ibid. 37  See eg Rysavy, P, ‘Low Versus High Radio Spectrum’ (High Tech Forum, 5 March 2012), < http://​ hightechforum.org/​low-​versus-​h igh-​radio-​spectrum/​>. 38  There is also correspondence between these and a wave’s height, called ‘amplitude’. See Imagine, ‘Electromagnetic Spectrum: Introduction’ (NASA GSFC, February 2010), . 39   The power of the transmitting device is also relevant to distance that radio waves can travel.

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geographic areas and can carry more data.40 As basically illustrated in Table 7.1, different frequencies’ propagation characteristics are relevant to different communication uses and technologies. While waves at the same frequency in the

Table 7.1  ITU radio frequency designations Designation

Frequency Range

Wavelengths

3 Hz to 30 Hz

SLF

Extremely low frequency Superlow frequency

ULF

Ultralow frequency

300 Hz to 3 kHz

VLF

Very low frequency

3 kHz to 30 kHz

LF

Low frequency

30 kHz to 300 kHz

MF

Medium frequency

300 kHz to 3 MHz

HF

High frequency

3 MHz to 30 MHz

VHF

Very high frequency

30 MHz to 300 MHz

UHF

Ultrahigh frequency 300 MHz to 3 GHz

SHF EHF

Superhigh frequency 3 GHz to 30 GHz Extremely high 30 GHz to 300 GHz frequency

100 Mm to Submarine 10 Mm communications 10,000 km to 1,000 Submarine km communications 1,000 km to 100 km Mine communications 100 km to 10 km Submarine communications, avalanche beacons, wireless heart monitors, geophysics 10 km to 1 km Navigation, time signals, AM broadcasting 1 km to 100 m AM (medium wave) broadcasting 100 m to 10 m Short wave broadcasting, amateur radio, long range aviation and military communications 10 m to 1 m FM broadcasting, television, ground-​ to-​a ir and air-​to-​a ir communications 1 m to 10 cm Television, mobile phones, wireless LAN, Bluetooth, microwave ovens 10 cm to 1 cm Wireless LAN, radar 1 cm to 1 mm Radio astronomy, high-​speed microwave radio

ELF

  Rysavy, n 37.

40

30 Hz to 300 Hz

Typical Uses

930

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same space can interfere with each other, waves at different frequencies do not. Filters and smart antennas can eliminate those that are not wanted, leaving the receiver to decode the information carried as energy without mass on the wave. Radio waves comprising photon energy travel at the speed of light and can often travel through non-​conductive materials without being absorbed,41 also relevant to various wireless communications uses.

7.3  C H A R T OF R A DIO SPE C TRUM That different frequency characteristics make certain uses more likely, combined with the fact that radio waves don’t stop at international borders and the possibility of interference with simultaneous but competing uses at the same frequency in the same geographical location led to national, international, and multilateral cooperation in spectrum policy and allocation management, notably via a framework established within the International Telecommunication Union (ITU), perhaps the oldest intergovernmental body. Coordination of frequency has also had the benefit of allowing the manufacture of equipment that can operate cross-​ borders and, optimally, internationally, with ensuing economies of scope. International spectrum ‘regulation’ also comes from the World Trade Organiza­ tion to the extent that the General Agreement on Trade in Services (GATS) and the Reference Paper impose transparency and other obligations regarding spectrum licensing, as well as from international standards bodies like the Institute of Electrical and Electronics Engineers (IEEE) that work to develop technical specifications for radio equipment. One example is the 802.11 wireless local access network family of standards that permit multiple non-​interfering uses within ITU bands, requiring limited regulatory oversight.42 Although important, a discussion of these sources of spectrum regulation is also beyond the scope of this chapter.43

41   This, as noted, is a very basic analysis. There are many things that affect the propagation characteristics of radio waves at various frequencies, including weather, the earth’s curvature and topography, the ionosphere, line of sight reception, solar flares, absorbing (eg water) and reflective (the ground) or diffractive (roof edges) surfaces. These of course depend on the frequency/​w ave length involved. For a good overview of wave propagation, see Toronto Emergency Communications Group, ‘Basic Amateur Emergency Radio Course: Module 7: Radio Wave Propagation’, October 2010, . 42   The WiFi 802.11 is a grouping of IEEE standards for low-​powered high frequency communications systems intended for non-​i nterfering use within the International Telecommunication Union (ITU) Industrial, Scientific, Medical bands designated by ITU-​R in 5.138, 5.150, and 5.280, Radio Regulations. Use of WiFi is often unlicensed or exempt or subject only to interference tolerance requirements. See generally, eg Negus, K and Petrick, T, ‘History of Wireless Local Area Networks (WLANS) in the Unlicensed Bands’, (2009) 11(5) Journal of Policy, Regulation and Strategy for Telecommunications, Information and Media 36. 43   But see Chapter 16, at Section 16.4.

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The following section examines the history of spectrum regulation which is helpful to understanding the modern regulatory framework.

7.4  HIS TORY OF SPE C TRUM R E GUL ATION As with other elements of telecommunications, the use of radio spectrum and its regulation at the national and international levels arises from the footprint of earlier technology: wired telegraphy and telephony.

7.4.1  International regulation of telegraphy The mid-​1800s saw the emergence and proliferation of national electrical telegraph networks enabling almost instantaneous communications. However, each country had its own systems with the result that messages would have to be transcribed and translated and transported across to the other national system operators to be retransmitted in that country. The telegraph was the most significant invention in communications history, transforming for the first time the speed of message delivery. For thousands of years, this had remained unchanged: the distance a man could travel on horse, or about 100 miles a day.44 To exploit this potential speed, countries recognized that they needed to enable cross-​border telecommunications and began to develop bilateral and regional agreements harmonizing codes and costs and standardizing equipment.45 However, they soon viewed a unifying multilateral treaty as necessary in a shrinking world thanks to steam engines for ships and railroads. In 1865, twenty nations met in Paris to develop an international communications framework. This resulted in the International Telegraph Convention and Regulations46 which created the International Telegraph Union (ITU) to regulate subsequent changes to the Convention.47 This regulatory international framework and institution was the natural forum for other international cooperation and harmonization that arose with the further two revolutions in communications technology of the nineteenth century: the telephone and wireless telegraphy, the forerunner of other wireless communications technologies.

  Standage, T, The Victorian Internet (New York Walker & Co, 1998), 2.   Schmahl, S, ‘The United Nations:  Facing the Challenges of the “Information Society” ’, (2007) 11 Max Planck UNYB 197, 210. 46   Convention télégraphique internationale de Paris (1865) et Règlement de service international (Paris, 1865), CTS Vol 130 No 198. 47   See Feyman, RP, et  al, ‘Electromagnetic Radiation’, The Feyman Lectures on Physics, Vol 1 (CalTech, 1971),  28–​1. 44 45

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Wireless telegraphy, like many other technologies, evolved from a series of theoretical and practical advances over time. Marconi is largely credited with ‘inventing’ wireless telegraphy in the late 1890s. While the extraordinary achievement of his experimentation to apply theory and produce workable equipment as well as his efforts to commercialize wireless technology cannot be minimized, Marconi was standing on the shoulders of giants, as the expression goes. These include, among others, James Clerk Maxwell, a Scottish physicist and mathematician, who in 1865 formalized a cohesive electromagnetic wave propagation theory underpinned by his mathematical equations and which organized prior disparate theories, experiments, and practical observations about light, electricity, and magnetism.48 Heinrich Hertz proved Maxwell’s electromagnetic wave theory by constructing an apparatus detecting their presence. In 1895, inspired by Hertz’s discovery, Marconi began experimenting with Hertzian waves, attempting to transmit signs and symbols without connecting wires.49 In 1895, he successfully transmitted a signal a distance of 2km.50 As Italy lacked interest in his experiments, Marconi moved to England at the Post Office’s invitation51 where he continued his experiments. In 1896 he was granted a patent in his invention and started the Marconi Wireless Telegraphy Co, to develop his worldwide patent monopoly and commercialize the invention fully via equipment manufacture and the construction of wireless telegraphy networks.52 His continued experimentation progressively extended the distance over which the signals were conveyed until 1901 when he successfully transmitted a message from southwestern England to Newfoundland, a distance of 2100 miles53 and in early 1902, between a wireless telegraph station in Cornwall, England and the SS Philadelphia, an American ship.54 Marconi realized that transmission of readable messages over long distances had major implications for maritime safety and naval operations, having conducted a range of experiments with the British Navy.55 In 1898, the Marconi Wireless 48   They also include Michael Faraday on which Maxwell’s work expanded. See Biography: Michael Faraday, Institution of Engineering and Technology, . 49   Marconi, G, ‘Wireless Telegraphic Communication: Nobel Lecture 1909’, . 50   Braga, GM, ‘Marconi Family History’ (Marconi Family Society), . 51  Events in Telecommunications History, BT Archives, . 52 53   Marconi, n 49.  Ibid. 54   According to Marconi who was onboard the SS Philadelphia, ‘readable messages were received by means of a recording instrument up to a distance of 1,551 miles and test letters as far as 2,099 miles from Poldhu.’ Marconi, n 49. 55   For example, in 1899, on two separate occasions when the East Goodwin Sands Lightship encountered problems at sea, lives were saved because the vessel had been equipped with radio installation and could send distress messages, allowing assistance to be quickly dispatched, see Howeth, LS, (Capt., USN (Retired), ‘Birth

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Telegraph Co entered into an agreement with marine underwriters at Lloyd’s to install radio systems at some of their signal stations.56 In 1900, the Marconi International Marine Communication Co contracted with Lloyd’s to install a series of radio stations along England’s coasts using only Marconi equipment and prohibiting Lloyd’s station operators from communicating with ships using radio equipment not Marconi manufactured.57 Underwriters also agreed that ships insured by Lloyd’s would exclusively use Marconi’s equipment and could not communicate with other vessels or shore stations using other companies’ equipment.58 The contract was for fourteen years, the duration of Marconi’s patent.59

7.4.2  The emergence of international radio communications regulation Marconi’s attempt to leverage the patent into a monopoly on radio communication caused international alarm.60 Perhaps in addition to the competition concerns apparently heightened by a sense of injustice that Marconi could exercise this to the disadvantage of others when he alone benefited among the many great scientists from numerous countries whose intellectual contribution enabled Marconi’s antenna,61 was that his exclusionary conduct flew in the face of maritime tradition of rendering assistance to ships in peril without regard for compensation.62 In response, nine ITU member states, the US, Germany, Russia, France, Austria, Hungary, Italy, Great Britain, and Spain, held a preliminary conference in Berlin in 1903 addressing the need for international regulations for radiograph communication and drafted a protocol to that end.63 This sought to address stated concerns that Marconi’s monopoly would limit the usefulness of radio telegraphy and impede further technological development still necessary for solutions to problems

of Science of Radio and Development of Usable Components’ History of Communications-​E lectronics in the United States Navy (Bureau of Ships and Office of Naval History, 1963), Section 9: ‘First Uses of Radio as an Aid to Safety of Life at Sea’, . 57 58 59   Ibid, Section 10.  Ibid.  Ibid.  Ibid.   Radiotelegraph and Radiocommunications Conferences, ‘Preliminary Conference on Wireless Telegraphy (Berlin 1903)’ (ITU History Portal), available at:  . 61   See Kraetke, ‘Opening Speech’, Minutes, Procés-​Verbaux and Protocole Finale, Preliminary Conference on Wireless Technology (Berlin 1903) (trans Neilson, GR), 5, . 62   This surmise is not impossible given the then state of German cartelization, see McGowan, L, The Antitrust Revolution in Europe, (Cheltenham:  E. Elgar, 2010), 50–​52 and the fact that this principle was formalized into international law only seven years later in the Convention for the Unification of Certain Rules of Law Relating to Assistance and Salvage at Sea of 1910 (Brussels Convention). See Parent, J, ‘No Duty to Save Lives, No Reward for Rescue: Is that Truly the Current State of International Salvage Law?’, (2006) 12(1) Annual Survey of International & Comparative Law 90–​92, < https://​digitalcommons.law.ggu.edu/​annlsurvey/​vol12/​iss1/​6/​>. 63   Minutes, Berlin Preliminary Conference, n 61, at 3–​4. 56 60

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such as interference and that radio telegraphy needed to be promoted internationally.64 Specifically, the protocol agreed that coast stations were to receive and transmit telegrams to and from ships without distinction to the wireless system used by the ships and that ‘working wireless telegraph stations must be organized, as far as possible, in such a manner as not to interfere with the working of other stations’.65 This first set of wireless regulations would serve as the model for future regulation. In 1906, the first International Radiotelegraph Conference was held with thirty countries participating.66 They adopted the first International Radiotelegraph Convention which established compulsory intercommunication between ships and shore stations, regardless of the system used67 in a final protocol similar to those drafted in 1903.68 This protocol, however, also created the first international Table of Frequency Allocations with frequencies from 500 to 1000 kHz allocated for public use in the maritime service, frequency bands below 188 kHz assigned for long-​d istance communication by coast stations, and another band, 188–​500 kHz, identified for military and naval stations not open to public use.69 The conference also gave priority to the Morse Code SOS distress signal ( . . . -​-​-​ . . . ).70 The Convention entered into force in 1908,71 marking the beginning of international regulation of radio communication and spectrum allocation and standards harmonization. To table frequencies, members notified the Union of their existing and planned uses which were entered into a register. As has been noted, these early processes had later consequences. The act of registration gave the user ‘squatter’s right’ to that spectrum and once a usage was recognized, it had international law imprimatur.72  Ibid.   ITU Library and Archives, ‘Art V, Final Protocol –​Preliminary Conference on Wireless Telegraphy (Berlin 1903)’, . 66   Conference Documents, Procés-​Verbaux, Conférence Internationale Concernant La Télégraphie Sans Fil (German Department of Post, Empire, 3 October 1906 Berlin), 39–​43, ITU Radiocommunication Conferences, . 67   See Radiocommunications Sector, ‘100 Years of ITU Radio Regulations (1906–​2006)’, . 68   These have since been expanded and revised by numerous radio conferences, and are now known as the Radio Regulations. They are part of the Administrative Regulations and the legal basic framework of the ITU with treaty status. During the 1906 Convention, the protocol was only twelve pages long. The Radio Regulations, now 122 years old, generally harmonizing how frequency spectrum may be used and shared among various services, comprise over 2300 pages. See ITU History Portal: Radio Regulations—​A n Introduction (ITU 2008), . See also Chapter 16, at Section 16.3. 69  Timofeev, V, ‘How ITU processes and regulations have helped shape the modern world of radiocommunications’, (ITU News Magazine, 2006) 5–​9, . 70 71  Ibid.  Ibid. 72   See eg McPhail, TL, ‘The Medium: Global Technologies and Organizations’, in Global Communications: Theories, Stakeholders, and Trends (Wiley-​Blackwell, 2011), 270–​271. 64 65

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Subsequent interfering uses were prohibited with the result that ‘first-​come, first served’ became the operational norm with most spectrum allocated to certain North American and European nations.73 The issue was not divisive when the primary allocations were for maritime activity but with the emergence of commercial broadcast and other public radio this became a growing problem. In 1929, there was agreement for further formal coordination by allocating bands or groups of bands for specific services. In 1932, the International Telegraph Union and the International Radiotelegraph Conference merged into the International Telecommunication Union. Its workings continue to this day via ITU-​R.74 Other technical standards were added. A  table of tolerances and another giving the acceptable bandwidths for various types of emissions were added into the regulations75 as guides for national administrations to measure the technical conformity/​efficiency of radio stations and to focus their attention on the need to develop effective controls on transmitting stations.76 To combat harmful interference and ensure that countries followed the harmonized allocated radio bands that evolved over time with new discoveries such as short waves, registration requirements were strengthened. These require countries to inform the ITU prior to using a new frequency and/​or changing the power of a frequency already in use.77 In 1947, the ITU became a specialist agency of the United Nations. At that year’s International Radio Conference, the International Frequency Registration Board was created. Its role was to formalize, administer, and oversee a master frequency register to track notifications and usage and ensure the compliance of a new frequency use registered with the requirements of the Radio Regulations. This work in connection with international coordination of spectrum, allocation, and interference control is accomplished via the ITU-​R. Its Recommendations address technological developments that may, inter alia, enable new uses, enhance capabilities, and address the desirability of old uses.78 These can be adopted as binding Radio Regulations at ITU Radiocommunication Conferences. Starting in 1947, the ITU divided the world into three regions for the coordination and registration as well as for the preparatory work for its Radio Conferences and regulation promulgation. This allows for regional variation where international harmonization is not

74 75  Ibid.   See Chapter 16, at Section 16.3.  Ibid.   ‘50th Anniversary of the Madrid Conferences’, (1982) 49(9) Telecommunication Journal 510–​511, . 77  Ibid. 78   It is noted that sometimes allocations are determined purely on technological and not political considerations. For example, spark gap wireless technology used in ship transmitters was simple to use but wasteful of spectrum and with considerable signal interference. It was just phased out of usage over time. See Krasner, SD, ‘Global Communications and National Power: Life on the Pareto Frontier’, (1991) 43(3) World Politics 351. 73 76

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essential or based only on technical merits and permits a structure to help consensus building, not an easy process with so many different interests.79 The division comprises:  Zone 1, Europe, Africa, the Middle East; Zone 2, the Americas; and Zone 3, Australia, China, Japan, and other Asian countries. The ITU international coordination process of allocating bands and promulgating harmonizing recommendations and regulations for efficient and non-​ interfering uses of radio spectrum continues to this day. The process has not been without criticisms, such as the ITU’s failure to intervene until congestion and interference had already occurred, and to allocate only according to present needs and technological capability to the detriment of developing nations.80 The continuity of purpose and process of this oldest claimed intergovernmental organization, however, remains notable. For example, the most recent World Radio Communications Conference took place in November 2015 and the next will be in 2019. On its agenda is regulatory support of Global Marine Distress Safety Systems’ modernization, including evaluation of how adding other satellite systems, eg mobile satellite systems, can be supported as per Resolution 359 (rev.WRC-​15), allocations and how possible modifications of the Regulations impact compatibility and sharing with other services,81 an issue blending the regulatory and technical concerns of efficient spectrum management with systems begun over 100 years ago.

7.4.3  National spectrum frameworks and the ITU The ITU allocation framework is the product of international consensus and is generally enforced by the good will and cooperation of the member states that produced it under principles of international treaty obligation.82 A key component of coordination and enforcement, therefore, is the corresponding framework at the national level. In the EU there is also harmonization, with EU institutions working to coordinate spectrum according to ITU regulations.83 This, however, entails a 79   Ibid, considering an economic analysis of pareto outcomes to the international spectrum allocation framework which, post-​1971, is noted to be different from that based solely on equal need for coordination that existed previously. 80   See McPhail, n 72. These issues are considered further in Chapter 16. 81   See WRC 2019 Agenda Item Details, Agenda Item 1.8, (Transfinite Systems), . 82   As has been noted, ‘The ITU is really a gentlemen’s club. It depends on the goodwill of its members. There is no mechanism for forcing an administration into compliance with the rules’, de Selding, PB, ‘France seeks ITU help to Halt Satellite Signal Jamming by Iran’ (Space News, 1 August 2010) (quoting Francois Rancy, director of France National Frequencies Agency), . 83   See ERC Report 25, ‘European Table of Frequency Allocations and Applications in the Frequency Range 8.3 kHz to 3000 GHz (ECA Table)’ (CEPT 2017) (noting its 2002 principle of adopting a ‘harmonised European Table of Frequency Allocations and Applications to establish a strategic framework for the utilisation of the radio spectrum in Europe’), .

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complex arrangement of competences with the EU Member States which as sovereign states and ITU members themselves have jurisdiction over national spectrum allocation but which are bound to exercise these rights in compliance with EU law. This is an area where the EU has asserted its view of the clear limits on any Member State international obligation at the ITU or bilateral level that is not qualified by existing EU Treaty limitations, comprising another application of the ‘existence versus exercise’ distinction that has been found to rationalize EU supremacy in other areas of seemingly exclusive residual national competence.84 Considering national approaches to regulating radio spectrum, it can be said that these were essentially similar around the world for over 100  years. Ofcom noted the limitations in its 2004 Spectrum Framework Review: The general approach adopted world-​w ide during this period has been for the spectrum manager to decide on both the use of a particular band and which users are allowed to transmit in the band. This approach was appropriate when much spectrum was used by the Government for purposes such as defence, public safety, aeronautical and maritime communications and broadcasting. While there were relatively few uses and users, the spectrum manager could also reasonably have as good an understanding of the best use of spectrum as the market itself and hence could sensibly control all aspects of spectrum usage.85

These uses would be reflected in a national allocation table identifying the services for which specific allocated bands could be used and which likely encompassed the international allocation obligations. Allocations and controls have until fairly recently largely been effected via command and control administrative processes using the tool of licensing as a means to specify usage rights, including term, service, geographic area, configuration, apparatus, etc,86 and conditions for that use that could include payment of an annual fee, power limitations, and requirements for conformity to what in the EU are called ‘essential requirements’ for such things as electromagnetic compatibility and efficient spectrum use so as to prevent interfering operation of relevant radio spectrum.87 With the competing commercial demands for its use, nations began to seek ways to allocate fairly the spectrum among the many applicants. The US first used a comparative process to assign licences for various cellular wireless services to

84   This is the case with intellectual property rights, see Case 16-​74, Centrafarm v Winthrop [1974] ECR 1183; Case 15-​74, Centrafarm v Sterling Drug [1974] ECR 1147. 85   Ofcom, ‘Spectrum Framework Review’, 2004. 86   See eg Australian Cordless Class Licence 2014, . 87   See recitals 4–​8, Directive 2014/​53/​E U on the harmonisation of the laws of the Member States relating to the making available on the market of radio equipment and repealing Directive 1999/​5/​EC, [2014] OJL 153/​ 62, 22 May 2014.

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which it had allocated frequency. It set what it considered were appropriate standards for awarding the available, free licences according to the FCC’s statutory charge of ‘public interest, convenience and necessity’.88 The licences were awarded to the candidate considered most qualified after hearings, with decisions often appealed for years in the US courts. The comparative processes, labelled ‘beauty contests’, were time and resource consuming for both applicants and the FCC. They were criticized as too slow, costly, and serving as an impediment to new service entry.89 Also, questions raised about comparative processes concerned the objectivity of their selection criteria and their transparency. The US then employed lotteries to address these concerns. Pre-​lottery screening, however, to ensure that only qualified applicants participated in the lottery was similarly time and resource intensive with screening for the first lottery lasting twenty months with the same concerns about the pre-​selection criteria.90 Open lotteries followed. These, however, introduced speculation and ensuing windfall profits for applicants who had won licences with no intention of providing service to the public and who quickly traded them on then emergent secondary markets. The additional time inherent in a second transaction and the process to reassign the licence as well as the necessity to aggregate licences necessary to use the spectrum efficiently were also suboptimal and delayed service roll-​out.91 The US in 1993 authorized a market mechanism for spectrum allocation, competitive bidding. This decision was premised on modern economic theory that efficient use of scarce resources such as spectrum required allocation other than via traditional command and control since these mechanisms would ensure that the spectrum went to those who valued it the most and would ensure its most productive use.92 While these can be structured in different ways, the US, the UK, and many other countries now employ a form of auction where price alone, typically, dictates outcome. Other criteria or limitations can apply for participation to further social or competition policy, such as set asides to permit new entrants or spectrum caps to ensure relative competitive holdings of spectrum.93 While pure price auctions may be more objective than comparative processes, they also have flaws.

  47 USC §309. See further Chapter 5.   See Goodman, E, McCoy, S, and Kumar, D, ‘An Overview of Problems and Prospects in US Spectrum Management’, Telecommunications Convergence: Implications for the Industry & for the Practicing Lawyer, 698 PLI/​Pat 327 (Practising Law Institute, New York, 1 May 2002). 90   See ‘In the Matter of FCC Report to Congress on Spectrum Auctions’, FCC 97-​353 (Federal Communications Commission Washington DC, 30 September 1997), 7. 91  Ibid. 92   Brito, J, ‘The Spectrum Commons in Theory and Practice’, (2007) Stan Tech L Rev 1, paras 5–​7, . 93   See regarding recent US caps/​set asides, text accompanying n 31; regarding the recent UK applied overall and bandwidth spectrum caps for 5G auctions, see text accompanying n 29. 88 89

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For example, concerns were raised about the massive overbidding for 3G spectrum94 and the high debt levels the successful undertakings incurred long before they could realize the value of the spectrum.95 It has also been shown that auctions may not necessarily be efficient. This can occur, eg where overbidding, whether collusive or not, is intended to foreclose the market to new entrants,96 or where intimidatory collusion occurs via threats of retaliatory bids, or where bidders coordinate and reduce their demand to lower prices.97 The emphasis on maximizing government revenues from spectrum auctions has also been called into question for failing to ensure that policy objectives underlying auctions including efficient and most productive use are, in fact, occurring.98 It is further criticized for failing to allow for spectrum use for broader social objectives that would be undertaken ordinarily by organizations unlikely able to compete in a price-​based auction.99 Another criticism of pure price auctions is that they can inhibit the roll-​out of innovation beyond existing technology, eg the long-​term licences viewed as necessary to recoup costs and justify infrastructure investment.100 Not all market economies, however, have exclusively used a highest bidder approach. For example, Finland, allocates certain blocks of spectrum for development, research, and teaching in geographical areas, See FICORA, Regulation 2500–​2690 MHz Auction (Helsinki, 2009), s 7.  The US has unlicensed bands available for use as a ‘commons’, subject to Part 15 device rules that require they operate on the principle that interference must be tolerated. The UK as well has allocated blocks of spectrum for low-​powered unlicensed use as a commons. Also recently the UK applied overall and bandwidth spectrum caps for the 5G auctions. See text accompanying n 31. 94   See Ozanich, G, Hsu, C, and Park, H, ‘3G Wireless Networks as an Economic Barrier to Entry: The Western Experience’, (2004) 21(3) Telematics and Informatics 225. 95  See generally, Rose, G, ‘Spectrum Auction Breakdown:  How Incumbents Manipulate FCC Auction Rules to Block Broadband Competition’, Working Paper 18 (New America Foundation 2007), . 96   Ibid. Verizon Wireless (perhaps the largest US wireless carrier) sold the ‘A’ and ‘B’ Block spectrum it bought at auction in 2008 but never used in exchange for FCC permission to buy licences from a former cable company wireless venture for spectrum that would better enable its 4G national network. There was considerable industry criticism of Verizon’s alleged ‘warehousing’ of spectrum to keep it out of competitors’ access and, although the sale/​exchange was finally approved, it was subject to regulatory scrutiny. See FCC, Letter to Verizon Wireless (Washington DC, 15 May 2012), . 97   See generally, Bajari, P and Fox, JT, ‘Measuring the Efficiency of an FCC Spectrum Auction’, NBER Working Paper No. 11671 (2005, rev 2009)  (and other works cited therein, 1), . 98  See generally, Hazlett, TW and Muñoz, R E, ‘What Really Matters in Spectrum Allocation Design’, (George Mason Law & Economics Paper No.11-​4 8 27, October 2011), . 99   Industry groups have suggested, however, that restrictions/​set asides for other uses have only ultimately produced delays, enhanced costs, lower state revenues, and proved to the ultimate detriment of consumers over unrestricted pure price auctions. See Position Paper: ‘The Case for Inclusive Spectrum Auction Rules:  How Failed International Experiments with Auction Bidding Restrictions Reveal the Strength of Inclusive Rules that Put Consumers and Innovation First’ (MobileFuture.org, September 2013). 100   See Milgrom, P, et al, Working Paper 17-​028 ‘Redesigning Spectrum Licences to Encourage Innovation and Investment’ (Stanford Institute for Economic Policy Research, October 2017) (suggesting perpetual but

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The UK regime is at one level an example of the approach to spectrum regulation that can be found in other countries. However, as an EU Member State (and seemingly likely to continue with comparable approaches to its sector regulation beyond its exit of the EU), the UK regime is compliant with the EU framework that really has influenced it (or vice versa, more likely) in the last thirty years. An examination of one necessarily requires examination of both. The following, therefore, looks at the UK’s historical regulation, turns to the EU framework and requirements for spectrum and its licensing, and then considers how the recent UK framework complies. 7.4.3.1  The UK and historical regulation of spectrum—​from wired to wireless telegraphy The UK public regulation of the telegraphy, wired and wireless, stems from the historical framework for provisioning and regulating posts as a public necessity, discussed in Chapter 6. The invention of the telegraph prompted the nationwide building of networks necessary to provide these services. To address their rapid expansion, the government passed several Telegraph Acts in the 1860s. The Telegraph Act of 1863101 was designed to regulate the rights of telegraph companies to install lines throughout the country, effectively code powers. Telegraphy, then, was still a privately owned enterprise. Subsequent legislation changed this. The Telegraph Act of 1868,102 incorporating the provisions of the 1863 Act, granted the Postmaster General the right to acquire and operate the inland telegraph systems in the UK.103 Before this took effect, the 1869 Act was passed, granting the Postmaster General an ‘exclusive privilege’ in the General Post Office to operate telegraph services in the UK but not subject itself to a licence or regulation as a government department.104 The Act exempted only certain entities such as railroads, canals, and limited other undertakings, such as Lloyds of London, providing these for their own use. However, a licence granted by the Postmaster General was required for other companies wishing to provide telegraph services.105 The Telegraph Act of 1870 nationalized telegraph services.106 This later extended to telephones when the definition of telegraph under the Act was construed to include telephony that could then no longer be provided by a private company.107

depreciating licences where annual fees are based on a declared value at which the licensees would be willing to sell the licence and that must be sold at that price). 101  Telegraph Act 1863, . See further Chapter 3. 102   Telegraph Act 1868, . 103   Records of the Post Office and British Telecommunications public corporation: 1849–​1984, BT Digital Archives, . 104 105  Ibid.  Ibid. 106   Telegraph Act 1870, . 107   Attorney-​G eneral v The Edison Telephone Co of London, Ltd [1880–​81] LR 6 QBD 244.

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The Postmaster General’s exclusive privilege in telegraphic systems did not extend to communications exchanged by wireless telegraphy with foreign countries or with ships beyond its territorial waters.108 Also, Lloyd’s operated its own wireless systems, the provisioning of which was involved in the Marconi contract. A grant of powers was needed to effect controls over spectrum use for wireless systems without disturbing the framework already established for telegraph services under the current national law. In 1904, the UK passed the first Wireless Telegraphy Act, granting the Postmaster General the power to license the use of radio spectrum.109 In 1908, the General Post Office built its first ship-​to-​shore wireless coast station, and licensed others. In 1909, the General Post Office acquired most of Marconi’s wireless coast stations110 and, as with telephony systems, continued to take over others throughout the country including those operated by Lloyd’s. The UK, in 1913, ratified the International Radio Conference—​on the heels of wireless telegraphy’s role in saving over 700 lives onboard the Titanic in 1912 with its Marconi systems able to radio for assistance.111 Wireless telegraphy and coastal stations operations by the GPO continued well into the twentieth century. The national frequency management infrastructure that exists in the UK today began in 1918 with the establishment of the Wireless Telegraphy Board112 to manage interference problems. The Post Office represented non-​government users’ interests throughout the board’s various reconfigurations until it was disbanded in 1948. The Wireless Telegraphy Act of 1949 vested powers in the Postmaster General generally to license all apparatus using radio frequencies.113 The Post Office Act 1969 abolished the GPO and moved spectrum management authority to the former Ministry of Posts and Telecommunications.114 Responsibility passed in 1974 to the Home Office, and in 1983 to the former Department of Trade and Industry’s Radio Regulatory Division. In 1990, it became an executive agency within the former DTI called the Radiocommunications Agency (RA) operating under the Wireless Telegraphy Act as amended over time. The RA merged with Oftel and three other agencies in 2003 to form Ofcom, a converged regulator intended to better address convergence in electronic communications networks and services. Ofcom now regulates spectrum under the Wireless Telegraphy Act of 2006 and the Communications Act 2003, which were

  Preliminary Conference, n 60.   Records of the Post Office and British Telecommunications public corporation: 1849–​1984, n 103. 110 111  Ibid.   Ibid, 1912. 112   See DEFE 59, Record Summary, ‘Ministry of Defence and predecessors: Defence Signal Board and predecessors:  Minutes and Papers’ (National Archives), . 113 114   Wireless Telegraphy Act 1949, s 1.   Post Office Act 1969, s 3(1). 108

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amended not only to reflect that change but also to pursue a more market-​d riven approach to spectrum regulation in contrast to the administrative allocation processes with command and control oversight. Some amendments to these Acts also reflect changes required by European Union telecommunications frameworks that have evolved with respect to spectrum. Although the UK wireless framework precedes the EU’s by nearly eighty-​five years, it must comply with the EU’s requirements for licensing radio spectrum. It may be helpful therefore now to examine the EU regime in this regard.

7.5  THE EU SPE C TRUM FR A ME WOR K As noted in Chapter 4, the EU telecommunication frameworks can largely be divided into three phases. Pre-​EU regulation, the European market generally comprised state-​owned monopoly for all services or with the monopolist empowered to license equipment attached to the network and perhaps the provision of value-​ added wireless services, eg paging or radio-​car services by others. The second phase, the initial EU regulatory regime focused largely on the liberalization and harmonization of fixed-​line communications operated primarily by these monopolists. However, a 1996 service liberalization Directive required the removal of any special and exclusive privileges in the provision of mobile and personal communications services and harmonized the list of essential requirements permitted to justify restrictions.115 Other key provisions of this phase concerned the EU-​w ide technical harmonization by 1991 of the spectrum bandwidths to be used in pan-​European digital mobile communications,116 and provisions for mutual recognition of type approvals for telecommunications terminal equipment.117 Thus the EU mandated an EU-​w ide bandwidth allocation in the 900 MHz range for digital (2G) wireless cellular telephony, called Global Standard Mobile, or ‘GSM’, intended to overcome the disparate national cellular systems and their inability to be used cross-​border with handsets likely not operable on other frequencies. The GSM Directive also required the clearing of further bands beyond that initially mandated so that progressively greater spectrum would be available.118 With

115   Directive 96/​2/​EC amending Directive 90/​388/​E EC with regard to mobile and personal communications, OJ L 020/​59, 26 January 1996. 116   Directive 87/​371/​E EC on the frequency bands to be reserved for the coordinated introduction of public pan-​European cellular digital land-​based mobile communications in the Community. 117   Directive 86/​361/​E EC of 24 July 1986 on the initial stage of the mutual recognition of type approval for telecommunications terminal equipment. 118   The Directive stated that it intended to enable the exclusive occupation of the 890–​915 and 935–​960 MHz frequency bands for digital cellular communications.

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the Terminal Equipment Directive, the EU sought to ensure transparency and simplified, objective procedures for the licensing of equipment attached to networks, in order to meet essential requirements for user and network safety by requiring mandatory approval of equipment manufactured to specifications set by designated independent bodies. The subsequent Radio and Telecommunications Terminal Equipment Directive (R&TTE)119 harmonized the rules for market entry of all equipment using radio frequency spectrum as well as all terminal equipment attached to public telecommunication networks. It applied to a vast array of kit including:  mobile handsets, other various kinds of radio equipment such as mobile GSM and UMTS base stations; car-​door openers and other short-​range radio devices; and fixed network terminal equipment such as normal analogue telephones, ISDN terminals, cable, and PC modems.120 The main changes brought about by the R&TTE Directive included the introduction of the equipment manufacturers’ declaration of conformity to type. The manufacturer’s assessment of its applicable equipment’s ongoing conformity with the Directive’s requirements (by way of European Telecommunication Standards Institute standards) is its responsibility without need to obtain a further approval or certificate from an official body after passing the required initial tests in a legally recognized laboratory. In addition to streamlining processes, the R&TTE Directive also imposed less stringent requirements. For example, fixed network terminal equipment was only required to satisfy electrical safety and electromagnetic compatibility requirements, with radio equipment limited to the requirement to use spectrum efficiently and without harmful interference. However, under the Directive, the EU could still, in certain cases, introduce additional public interest requirements, such as for ‘safety critical’ radio equipment, eg on ships. The Radio Equipment Directive (RED) replaced the R&TTE Directive in 2016. The new Directive encompasses any equipment placed on the market/​put into service that emit or receive radio waves intentionally for communications or radio determination121 operating below 3000 GHz.122 Radio and TV broadcast equipment, receive only, and equipment operating below 9MHz that were previously excluded from the R&TTE Directive must now also comply with the essential requirements of safe, effective, and efficient non-​interfering spectrum use,

119   Directive 1999/​5/​EC on radio equipment and telecommunications terminal equipment and the mutual recognition of their conformity, OJ L 91/​10, 7 April 1999. 120   Directive 2014/​53/​E U on the harmonisation of the laws of the Member States relating to the making available on the market of radio equipment and repealing Directive 1999/​5/​EC, OJ L 153/​62, 22 May 2014. 121   Devices using wave propagation to determine position, eg RFID or radar. 122   Arts 1, 2 RED (with the exception of devices exclusively used for military, state security, amateur radio, and civil aviation).

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among other things.123 The RED continues the prior self-​certification for harmonized standards as one of the possible mechanisms for conformity. A notified body must assess if these requirements are met where harmonized standards don’t exist before self-​certification is possible. The CE mark of such technical compliance is still required. The RED requires that where equipment has restrictions on putting into service or of requirements for authorization of use, information on the packaging must allow identification of the applicable Member States as set by the Commission.124 The EU’s continuing approach of technical and other harmonization for open network provision based on cross-​border and pan-​European considerations together with its ‘essential requirements’-​only licensing mandates comprises the essence of the EU spectrum regulation.125 The harmonizing GSM Directive was amended to permit technological neutrality and refarming of spectrum for 2G, under harmonized technical conditions set out in Commission decisions, to be used for 3G and 4G technologies.126 The Licensing Directive 97/​13/​E C, in the first phase of EU regulation, contained a stated default for general authorizations but clearly permitted individual licences to accord rights to use spectrum, impose conditions, and limit the number of licences where necessary to ensure spectrum’s efficient use as a scarce resource.127 The Directive also only seemed to contemplate market-​pricing structures such as auctions within the context of an individual licence.128 These factors, combined with the vast discretion permitted to the National Regulatory Authorities (NRAs), resulted in the varying individual licences and processes remaining the rule across Europe rather than

123   Art 3(1)(a) and (b)  (incorporating by reference the essential safety and electromagnetic compatibility requirements of respectively Directive 2014/​35/​E U on the harmonisation of the laws of the Member States relating to the making available on the market of electrical equipment designed for use within certain voltage limits (the Low Voltage Directive but without the low voltage limits) and Directive 2014/​30/​E U on the harmonisation of the laws of the Member States relating to electromagnetic compatibility) and Art 3(2) (adding ‘efficient use’) and (3), RED. 124   Art 10(10). See also Commission Implementing Regulation (EU) 2017/​1354 specifying how to present the information provided for in Article 10(10) of Directive 2014/​53/​E U, OJ L 190/​7, 21 July 2017. 125   This is reflected eg in the Roaming Regulation which sets a mandatory glide path of wholesale and retail pricing for cross-​border roaming service provision which harmonization has been extended to voice and SMS in order to force down prices in these, to date, monopoly cross-​border call-​termination markets. 126   Directive 2009/​114/​EC amending Directive 87/​372/​E EC on the frequency bands to be reserved for the coordinated introduction of public pan-​European cellular digital land-​based mobile communications in the Community, OJ L 274/​25, 20 October 2009. Two Commission Decisions have provided the harmonized technical rules for the extension of the 900/​1800 bands to 3G and more recently 4G uses. 127   See Directive 97/​13/​EC, Recitals 3, 7, 13, on a common framework for general authorizations and individual licences in the field of telecommunications services. 128   Ibid, at Art 11.

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the exception intended only for ‘limited, pre-​defined’ circumstances justifying their imposition.129 The EU largely limited this discretion by mandating the use of general authorizations in the 2002 Authorisation Directive,130 part of a revised post-​liberalization framework to address maturing competition but continuing ex ante regulation in markets still not effectively competitive, the ongoing third phase of EU telecommunications. The Authorisation Directive’s limited exceptions to the general authorization requirement include grants of rights to use spectrum but it states that Member States are to ‘facilitate’ the rights to use spectrum under a general authorization (Article 5(1)). A recast framework via the EU Electronic Communications Code (EECC) was proposed in 2016 by the Commission for, inter alia, the purpose of ensuring more harmonized and consistent spectrum management and regulation to address both the Commission’s concerns of delayed and fragmented 4G roll-​out and take-​up in most of the EU and, anticipating 5G attributes131 and the prospective cumulative demand for spectrum, the need to make available more spectrum, including by sharing. The proposed Code includes some new harmonized measures: durations of twenty-​five years for licenses of harmonized bands (Article 49(2)); a non-​binding but mandatory peer review of spectrum-​related decisions, establishing an Article 7, Framework Directive-​ like approach for spectrum (Article 35(2)–​(5)); a harmonized list of spectrum-​related measures that NRAs are to have the power to adopt (Article 35(1)); a single set of conditions that can be attached to spectrum rights of use (Annex 1 (D)); enhanced NRA duties of spectrum management (Article 45(2)) and; factors for consideration in spectrum decisions (including individual licence decisions, limited grants, fees, reserves, award process design) (Article 42). It also provides for harmonized but voluntary pan-​ European/​multicountry joint authorization processes (Article 37), apparently giving up on mandatory one-​stop shop efforts. The Code continues the Directive’s preference for the general authorization for spectrum use but reinforces it by, among other things: • adding shared spectrum to uses under the general authorization;132 • specifying clearly that grants of individual rights of use for spectrum are limited to situations where such rights are necessary to maximize efficient use; 129   Commission Communication, ‘Toward a new framework for electronic communications infrastructure and associated services: The 1999 Communications Review’ (1999 Communications Review), COM(1999) 539, 10 November 1999. Accord, Commission Communication, ‘5th Report on the implementation of the Telecommunications Regulatory Package’ (1999). 130   Directive 2002/​20/​EC on the authorization of electronic communications networks and services, OJ L 108/​21, 24 April 2002. 131   This will include denser networks and at higher bands, mass M2M communications with over 100 x the number of connected devices, ubiquitous connectivity, and ultra low latency. 132   A potentially significant issue for 5G uses. See eg Presentation, ‘5G Spectrum Sharing’ (Qualcomm, 2 December 2016), .

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• requiring Member States in all other cases to set out in advance the conditions for use of spectrum in a general authorization (Article 46(1)).133 The proposed EECC would also further refine the circumstances of individual grants of rights. The Directive now states that Member States can only require individual rights where necessary to: avoid harmful interference, safeguard efficient use of spectrum, ensure technical quality of service, or fulfil other general interest objectives (Article 5(1)). The proposed Code rewords this, perhaps tilting away from a possible single decision defaulting to individual grants where potential challenges to a general authorization exist. It would require that Member States decide on the most appropriate regime for permitting the use of radio spectrum, whether by general authorization or individual grant, taking into account factors that include the: • • • •

specific characteristics of the spectrum concerned; need to protect against (rather than avoid) harmful interference; requirements for a reliable sharing arrangement, where appropriate; appropriate level of receiver resilience to ensure technical quality of communications or service;134 • objectives of general interest (Article 46, proposed EECC). The proposed EECC thus changes slightly the criteria for deciding whether individual grants of use can be permitted. It enhances the technical considerations (arguably objective) that must be explored seemingly with a view to resolve them on the technical merits before a weighted decision of which regime is appropriate in each case can be determined. The Code however permits the Commission to adopt implementing acts on how Member States apply the above criteria, including governing issues relating to sharing, receiver resilience, and protecting against harmful interference (Article 46). The proposed Code would similarly allow the Commission, as a technical implementing measure, to determine whether rights in harmonized bands are subject to a general authorization or individual rights of use (Article 45(2)). BEREC has objected to both of these harmonizing implementing measures as encroaching on NRAs’ ability to determine needs according to national conditions, possibly where a general authorization was mandated but individual licences might be more appropriate, such as existing users in the band or the adjacent band use differs. Also, they contend that harmonized

  See also Recitals 113–​114, proposed EECC.   Adequate receiver resilience is critical to protect against harmful interference. This will be important for denser networks as will be likely in 5G using higher bandwidth as well as for shared spectrum. With enhanced requirements for receivers under the RED, the issue there and here is getting enhanced regulatory focus. 133

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requirements for individual grants of use where not needed in the national market could ‘sterilise valuable spectrum resources’.135 The inclusion of suitable sharing agreements within the decision criteria for granting individual versus general authorizations evidences the proposed Code’s support of spectrum sharing. This support is further reflected in: the Code’s specific definition of sharing indicating that spectrum can be shared on a licensed or unlicensed basis and under both the general authorization or individual licence or combination of the two (Article 2(26)); the NRA harmonization duty to maximize spectrum sharing by ensuring the least onerous authorization system possible (Article 45(2) and; the inclusion of the ability to set access conditions for necessary spectrum sharing among the harmonized competences that NRAs must have (Article 35 (1)(f)). Notable in this regard are, however, the network operators’ objections to the greater use of spectrum sharing, general authorizations for spectrum rights, and other ‘deregulation’ such as allowing third parties to provide RLAN at the edge of fixed networks (Article 55) in order to preserve their status quo on markets.136 The proposed EECC would continue the specific time frames for the process within which individual grants of rights must be awarded, including for spectrum use, under the Authorisation Directive’s specified procedures. As considered in Chapter 6 these include a time limit of six weeks for grants of radio frequencies that have been allocated for specific purposes under the national frequency plan (Article 5(3)). For allocations by competitive/​comparative procedure, a further extension of no longer than eight months is permitted to ensure that the process is fair, reasonable, and open (Article 7(4)). Under the proposed EECC, however, time frames allow for the possibility of a harmonized date set by the Commission for completion of the specific frequency allocation (Article 54(8)). The Authorisation Directive permits restrictions on the numbers of persons granted individual rights to use spectrum only where ‘unavoidable’ and dictated by scarcity and the need to ensure efficient use137 following procedures for consultation with interested parties and publication of NRA decisions with reasons 135  BoR (17) 91  ‘BEREC’s Paper on the Commission’s Proposals for an EECC Spectrum Provisions—​ Implementing Acts’ (BEREC, 27 April 2017). 136  See Orange Position Paper, ‘Spectrum Management:  The European Electronic Communications Code’, December 2016, ; European Telecommunications Network Operators’ Association Position Paper on the European Electronic Communica­ tions Code (ETNO, January 2017), . 137   Recital 11, Directive 2002/​20 as amended 2009. While the recital addresses both spectrum and numbers, it and Art 5, also addressing both, fail to make clear whether these two criteria for limitation apply both to spectrum and numbers, the other individual grant, possibly due to unfortunate wording. However, this would make sense as both are considered scarce public resources, for which ensuring efficient use would seem commensurate under the ‘public trust’ theory discussed in Chapter 6 at Section 6.2.2.

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justifying the limitation. The grant of such limited rights must be on the basis of selection criteria that are objective, transparent, non-​d iscriminatory, and proportionate (Article 7(3)). The Directive requires review of the grant limitation at reasonable intervals for continued justification. Where not, the NRA must publish that decision and invite applications for further grants of such rights. Both users of communications services and providers of networks and services are eligible to obtain spectrum use grants (Article 5(2)). The proposed EECC does not directly refer to selection criteria for limited grant. It rather first requires Member States to state the reasons for the limitation on rights of use, giving due weight to the need to maximize benefits for users and to facilitate the development of competition (Article 54(1)(a)). It then requires Member States to clearly define and justify the objectives pursued with the selection procedure, and where possible quantify them, giving due weight to the need to fulfil national and internal market objectives (Article 54(2), proposed EECC). Possibly referring to the same ‘objectives’, the proposed Code then specifies that the objectives that Member States may set out for the grant, with a view to design the specific selection procedure, must be limited to one or more of: • promoting coverage; • required quality of service; • promoting competition; • promoting innovation and business development; and • ensuring that fees promote optimal use of radio spectrum in accordance with Article 42 that requires they be objectively justified, transparent, non-​d iscriminatory, and proportionate in relation to their intended purpose and take into account an extensive list of policy objectives.138

138   Art 54(2), proposed EECC. The objectives referenced in Art 42 include: the Art 3 general regulatory objectives of promoting regulatory consistency and predictability, non-​d iscrimination, technological neutrality, promoting high capacity data connectivity, promoting competition in provision of networks, including efficient infrastructure-​based competition and services, contributing to the development of the internal market, and promoting the interests of citizens; the Art 4 spectrum coordinating ‘aim of optimising the use of radio spectrum and avoiding harmful interference’; and the Art 45(2) objective of spectrum harmonisation of use of radio spectrum, consistent with the need to ensure effective and efficient use thereof and in pursuit of benefits for the consumer such as economies of scale and interoperability of services and networks by, inter alia,

(a)  ensuring coverage of their national territory/​population at high quality and speed, both indoors and outdoors, including along major transport paths, including the trans-​European transport network; (b) ensuring that areas with similar characteristics, in particular in terms of network deployment or population density, are subject to consistent coverage conditions; (c)  facilitating rapid development in the Union of new wireless communications technologies and applications, including, where appropriate, in a cross-​sectorial approach; (d) ensuring the prevention of cross-​border or national harmful interference in accordance with Articles 28 and 46 respectively, and taking appropriate pre-​emptive and remedial measures to that end;

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The proposed Code requires the further layering that the Member State clearly define and justify the selection procedure choice, including any preliminary phase in order to be able to access the selection procedure. Member States must also state the outcome of any related assessment of the competitive, technical, and economic situation of the market and provide reasons for the possible use and choice in adopting any measure under the required NRA competences under proposed Article 35.139 Any exercise of these would be subject to the previously noted, mandatory but non-​binding prior ‘peer review’ by BEREC, the Commission, and other NRAs, designed to ensure better harmonization of spectrum management (Article 35(2), proposed EECC). This requirement has been criticized for various reasons including in the context of the award process that it is unnecessarily complex, delaying, and likely unworkable, eg, since the review would occur at the final design stage of the award process after rounds of public consultation with any proposed changes further delaying the award and requiring further consultation. The practical feasibility of the regulators to conduct reviews of the very complex award processes within the fairly short time frames, especially under harmonized deadlines where all twenty-​eight Member States would have award processes, is also questioned.140 Individual rights to use spectrum under the Authorisation Directive can currently be subject to conditions that may only include those regarding: • service or technology designations for granted frequency; • effective and efficient use including coverage requirements; • technical and operational conditions for avoiding harmful interference and public exposure to electromagnetic fields; • usage fees; • duration; (e)  promoting shared use of radio spectrum between similar and/​or different uses of spectrum through appropriate established sharing rules and conditions, including the protection of existing rights of use, in accordance with Union law; (f)  applying most appropriate/​least onerous authorisation system possible in accordance with Article 46 in such a way as to maximise flexibility, sharing and efficiency in the use of radio spectrum; (g) ensuring that rules for the granting, transfer, renewal, modification and withdrawal of rights to use radio spectrum are clearly and transparently defined and applied in order to guarantee regulatory certainty, consistency and predictability; (h) ensuring consistency and predictability throughout the Union regarding the way the use of radio spectrum is authorised in protecting public health against harmful electromagnetic fields. 139   These would include, in keeping with relevant proposed Code’s requirements:  the selection process; bidder eligibility criteria, parameters of spectrum economic valuation measures; rights duration and renewal conditions; measures necessary to promote competition; conditions for transferring and assigning spectrum (including by leasing and trading), sharing spectrum or wireless infrastructure; and limiting individual spectrum accumulations. Peer review as per Art 35 (2), proposed EECC. 140   BoR 17/​129 ‘Peer Review Process (Article 35)’ (BEREC, 30 May 2017).

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• transfer by the grantee; and • commitments made in competitive/​comparative selection procedures.141 Individual conditions must be objectively justified according to the service involved, proportionate, transparent, and non-​d iscriminatory (Article 6(1)). They must not duplicate the general conditions or conditions applicable to undertakings by national law (Article 6(3)). However, information can be required to ensure entities can comply with conditions. The proposed EECC is a bit of a ‘hot mess’ on conditions regarding spectrum. It has two separate provisions governing conditions, Articles 13 and 47, the latter possibly lex specialis.142 Article 13 continues the overarching criteria for conditions, including that individual conditions not duplicate legislation or those in the general authorization. While stating that only the conditions in Annex I can apply to the general authorization for the provision of electronic communications networks or services and the rights of use for radio spectrum and numbers, it provides that only the conditions specific to that sector contained in Annex I, A, B, and C are to apply to the general authorization and implicitly for individual grants, Annex I (D) that replicates many of the former Annex B conditions but also: • enables conditions regarding obligations to pool or share radio spectrum or allow access to radio spectrum for other users (Annex I, D(8)); and • extends the regulatory processes for which conditions regarding prior commitments for the spectrum grant can be imposed to any authorization or renewal process, including invitation processes (Annex I, D(7)). The only provision in the Code specifically governing spectrum under the general authorization is that under Annex I, B (for the provision of networks) that allows, as with the Authorisation Directive, conditions for the use of radio spectrum, in conformity with ‘Article 7(2)’143 of Directive 2014/​53/​EU where such use is not made subject to the granting of individual rights of use in accordance with Articles 46(1) and 48 (the procedures for granting individual rights under the Code). This would suggest, therefore, that only conditions limited to essential requirements under the RED may be imposed. Possibly the RED’s efficient/​effective use restrictions and avoidance of harmful interference requirements can encompass general

  Part B, Annex.   Art 13 ‘Conditions attached to the general authorisation and to the rights of use for radio spectrum and for numbers, and specific obligations’; Art 47 ‘Conditions attached to general authorisations and to rights of use for radio spectrum.’ The omission of the additional categories of numbers and specific obligations in Art 47 indicates its likely status as lex specialis. 143   There is no subsection (2)  in Art 7 of the Radio Equipment Directive, likely a drafting oversight here. Article 7, Radio Equipment Directive limits restrictions for radio equipment to those concerning efficient/​effective use, avoidance of interference, and electromagnetic disturbances and public health. 141

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authorization conditions of use to address both the Commission’s goal of spectrum sharing facilitation and the Article 47(1) provision, also governing conditions for both authorizations and grants, that they are to include a level of use requirement. The Commission suggests that this specific provision, combined with the ability to monitor compliance with conditions and implement remedies for their breach under Articles 30 and 47, amounts to a ‘use it or lose it’ requirement,144 if somewhat opaque. Proposed Article 13(1) adds that conditions for rights of use are to be in keeping with Articles 45 and 51. This seemingly requires, under Article 45, consideration of all of the spectrum management factors as eg, for the decision to grant individual rights under Article 45(1) and (2), the Article 45(4) provisions for restrictions on technological neutrality as necessary, and the section 45(5) service neutrality restrictions (continued from the Framework Directive). Somewhat circularly, Article 47 requires that conditions for both rights of use and the general authorization conform to Article 13(1). Likely objectionable to the Member States and BEREC is the Article 47(3) provision allowing the Commission ‘to specify the modalities of applying the conditions that Member States may attach to authorisations to use harmonised radio spectrum.’ Under the Authorisation Directive, usage fees may be charged for spectrum rights to ensure their optimal use and can cover activities not encompassed within the administrative fees. Although a lump sum payment can result from a comparative or competitive selection process, these payments must not detract from the requirement that allocations be designed to ensure their optimal use, seemingly only an ex ante determination.145 The proposed EECC complicates an already complicated process. As previously discussed in the context of award design, it requires that fees be set taking into account a complex list of regulatory objectives, encompassing the enhanced general regulatory objectives (Article 3) (as currently required for all regulatory action), and the objectives for spectrum coordination (Article 4) and harmonization (Article 45(2)) that, although including efficient and effective non-​i nterfering use to maximize the benefit to consumers, have a range of different factors to be considered.146 How a regulator is to take all of these into account in a sensible balancing and ensure that they are implemented accordingly, for example, in a spectrum auction, is to be questioned. Other considerations are further layered into the fee determination (and likely therefore, process design). These specify that Member States in their grant

144   European Commission, ‘Review of the Electronic Communications Regulatory Framework: Executive Summary 3: Wireless Networks and Spectrum’, at s 2.2. 145   See Recital 32, Art 13, Authorisation Directive 2002/​20/​EC as amended. 146   See text and accompanying n 138.

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of these rights to use this public resource must have a coherent approach in setting fees that should not provide an ‘undue financial burden’ linked to the rights of use for undertakings providing electronic communications networks and services (not limited to public) (Article 42(4); Recital 93). They also indicate that Member States are to ensure that fees not only reflect the economic and technical situation of relevant markets and any other significant factor determining the rights’ value but also that they be set in a manner enabling innovation in network and service provision as well as competition, while also ensuring that award processes provide safeguards against distorted fees resulting from revenue maximization policies, anticompetitive bidding, or similar behaviours (Recital 94). The proposed EECC further addresses pricing reserves in any award process, requiring that these reflect the additional costs associated with fulfilling conditions imposed to further policy objectives not reasonably met under normal commercial standards, such as territorial coverage obligations (Article 42(2); Recital 95). This universal service-​like cost consideration is not however required to be counterbalanced with any benefits that might derive from the obligation such as the benefits of ubiquity for brand such as are built into the current USO cost/​benefits analysis. Proposed fee reserves and other spectrum economic valuation measures would also be subject to the peer review process (Articles 42, 35, proposed EECC). The Commission intends that these proposed changes ensure a greater harmonization in the allocation and management of spectrum throughout the EU, a problem it has sought to address in various ways since 2002. The 2002 Radio Spectrum Decision147 established a framework for EU coordination of spectrum management approaches across the EU working with the European Conference of Postal and Telecommunications Administrations (CEPT) to establish the technical parameters. Under the Decision, the Commission can harmonize the technical conditions for the use of spectrum to ensure its efficient use, its access conditions at the EU level, and the interoperability of radio equipment. A Radio Spectrum Policy Group comprising expert members from the Member States and chaired by the Commission assists in the work via reports and opinions on strategic spectrum policy and coordination issues. Since 2002, the Commission has made over two dozen decisions harmonizing spectrum band uses and setting harmonized conditions for use and updated or amended these over time to reflect technological developments and permit refarming. These include decisions to permit public mobile radio access networks based on low power licence-​exempt

  Decision 676/​2002/​EC, OJ L108/​1, 24 April 2002.

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WiFi technologies at 5 GHz148 and the refarming of the 900 MHz and 1800 MHz bands for 4G.149 That the Commission continues to perceive this as inadequate to develop an EU-​w ide harmonized market on the scale of that of the United States is clear from its other various proposals to enhance EU-​centralized control over spectrum management. These have included the 2007 proposal for creation of a European Telecommunications Market Authority with delegated powers to oversee spectrum regulation and allocation to avoid what it perceived as fragmented national regulation and uneven roll-​out of advanced mobile services. The Member States resoundingly rejected this, guarding their prerogatives over this valuable resource and their regulatory competences (as they similarly did with a 2013 ‘Connected Continent’ proposal for a Commission ‘veto’ over national regulatory decisions).150 They will likely also reject the Commission proposals to change BEREC to operate on a more EU agency-​l ike basis, discussed in Chapter 6 and the ‘double lock’ that would allow the Commission ultimately to veto NRA proposed actions in an Article 7 (proposed Articles 32(3), 33) review of market definitions and remedies if both the Commission and BEREC agreed that the NRA proposed action was inappropriate, further discussed in Chapter 9. BEREC has not only decried the double veto but also what it calls the ‘hard harmonisation’ of spectrum in the proposed EECC.151 This has been a significant balance of competence issue for over the last decade. The development of pan-​ European markets using spectrum has been noted to be threatened by the varying national approaches to spectrum management and regulation, including trading and refarming of spectrum. In the latter context this was true for the ‘digital dividend’, the vast blocks of spectrum that were being freed up, essentially globally, for other use by the switch from analogue broadcast television to digital terrestrial television. This was a one-​off opportunity to repurpose spectrum that had been tied to a specific use and technology for many decades. A lack of EU-​w ide harmonization here might have resulted in purely local and possibly non-​technological considerations being applied to valuable spectrum with propagation characteristics that made it suitable for wide area delivery, eg 3G and 4G wireless broadband

148   Commission Decision 2005/​513/​EC on the harmonised use of radio spectrum in the 5 GHz frequency band for the implementation of Wireless Access Systems including Radio Local Area Networks (WAS/​R LANs), OJ L 187/​22, 19 July 2005. 149   Commission Decision 2009/​766/​EC on the harmonisation of the 900 MHz and 1800 MHz frequency bands for terrestrial systems capable of providing pan-​European electronic communications services in the Community, OJ L 274/​32, 20 October 2009. 150   See Commission Memo 08–​0 4 ‘Commission welcomes European Parliament vote to strengthen the EU’s Single Market for Telecoms but important questions remain open’ (Brussels, 8 July 2008). 151   BEREC Press Release BoR (17) 95 ‘BEREC Papers on the Review’ (BEREC, 11 May 2017).

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services or enhanced broadcast and mobile services, among others. Such divergent decisions could have implications for decades since available spectrum below 1 GHz is rare with previous allocations having occurred half a century ago in the UK. With an EU centralized regulator shot down, the Commission’s reforms proposed in 2007 and adopted as amendments to the Framework Directive via the 2009  ‘Better Regulation Directive’ contained specific provisions that, if not full Commission control, enabled higher levels of harmonization and cooperation among the Member States and the Commission in strategic planning for spectrum use. Building on earlier harmonization measures such as the Radio Spectrum Policy Decision, these arguably were a new order of spectrum regulation within the EU and with the Commission more in the driver’s seat as a result of:  (1) enhanced Member State duties of cooperation and spectrum management requirements and, notably, (2)  legislative proposals authorized to be made by the Commission in a multi-​a nnual programme of spectrum objectives and adopted under the co-​decisional procedure (now the ‘ordinary procedure’), both considered as follows.152 The duties of cooperation arose under Article 8a, Framework Directive that imposed somewhat amorphous obligations of enhanced planning, coordination, and harmonization by Member States at the EU level regarding spectrum policy. Relevant factors for their consideration in optimizing the use of radio spectrum and avoiding harmful interference include: • economic, safety, health, public interest, freedom of expression, cultural, scientific, social, and technical aspects of EU policies, and • the various interests of radio spectrum user communities. This remains unchanged under the proposed Code (Article 4). Article 9 of the Framework Directive addresses spectrum management and imposes the requirement that spectrum allocations be service and technologically neutral in order to permit greater market flexibility and allow providers to use any possible technology in a spectrum band and provide any service possible via the spectrum available under the national frequency allocation plan (Article 9(3) and (4)). Limitations on the technological and service neutrality must be only those objectively justified restrictions necessary to meet specified essential requirements (Article 9(3) and (4)). These are reflected in the proposed EECC in adapted Article 45, governing spectrum management, discussed previously.

152   See Decision 243/​2012/​E U of the European Parliament and of the Council establishing a multi-​a nnual radio spectrum policy programme (RSPP), 2010/​0252 (COD), 15 February 2012. See text accompanying nn 153–​158 below for a further discussion of the current programme.

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Article 9b, Framework Directive requires spectrum transfers or leases for bands determined by the Commission under the implementing procedures, subject to continuing application of any attached conditions unless otherwise specified by the NRA. Other transfers and leases are permitted in other bands but not for uses not conforming to designated harmonized uses under the Radio Spectrum Decision. Proposed Article 51, EECC continues these provisions. How the above Member State discretion regarding continuing condition applicability and non-​ compulsory band transfer/​leasing interacts with a new provision intended to ensure consistency and clarity, Article 51(3), is not clear. It states that ‘Member States shall allow the transfer or lease of rights of use for radio spectrum where the original conditions attached to the rights of use are maintained.’ Article 51(3) requires that Member States, without prejudice to the need to ensure undistorted competition, submit leasing/​transfers to the least onerous procedure possible and, on notification by the lessor, not refuse the spectrum lease unless the lessor refuses to remain accountable for the original conditions and, on request by the parties, approve transfer of rights of use unless the transferee is unable to meet the original conditions for use. The competent authorities must facilitate leases/​t ransfers by timely considering requests to adapt the conditions and by ensuring that the rights and the spectrum attached to those rights may best be partitioned or disaggregated. Under both the current and proposed frameworks, transfer/​lease rights may be delimited where the original grant was not paid for. Also related to the amorphous strategic planning and cooperation obligations is the provision for what is essentially secondary legislation by the Commission. In 2009, Article 9(3) (Framework Directive) authorized it to propose legislation for multiannual spectrum policy programmes taking utmost account of the Radio Spectrum Policy Group’s opinion. Such legislation will specify the policy objectives for the relevant strategic planning and harmonization of the use of spectrum (arguably the substance of what the Member States are cooperating in/​w ith/​for) under the Framework and the specific Directives and the common policy objectives for coordinating EU interests at international bodies competent in spectrum matters. This purposive and significant planning programme appears to place much greater control over the direction of EU spectrum allocation and policy with the Commission, if not to the same level of the rejected supranational regulator of spectrum. In pursuit of this agenda, the Commission in 2010 introduced a multi-​a nnual spectrum policy programme, approved by the Council and the Parliament.153 This

153   Decision No 243/​2012/​E U establishing a multiannual radio spectrum policy programme, OJ L 81/​7, 21 March 2012.

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set the regulatory principles and policy objectives to be applied for various spectrum use determinations and other actions through 2015, that included: • Ensuring that at least 1200 MHz spectrum are identified by the end of 2012 to meet the Digital Agenda’s stated 30 Mbps target for wireless broadband in light of demand and that the need for additional harmonized spectrum bands is assessed; • Allowing spectrum trading throughout the EU in all harmonized bands where flexible use has already been introduced; • Making available sufficient harmonized spectrum for the development of the internal market for wireless safety services and civil protection;154 • Fostering different modes of spectrum sharing in Europe since there is great and still growing demand for these bands generally used in licence exempt WiFi access with core role in broadband mobile technologies; • Ensuring that the radio spectrum can be used to support more efficient energy production and distribution in Europe with wireless promoting a low-​carbon society; • Finding appropriate spectrum for wireless microphones and cameras (PMSE);155 and • By mid-​2013 defining details for the EU’s radio spectrum inventory and an adequate analysis of the efficiency of spectrum use, particularly in the 400 MHz to 6 GHz range which inventory and analysis will serve as the basis for further harmonization and coordination in appropriate bands.156 The referenced EU spectrum inventory encompasses all existing public and commercial uses to permit identification of bands amenable to further EU-​w ide harmonization and reallocation (Article 9). It is viewed as a way to maintain a permanent, dynamic inventory of EU spectrum using the European Communications Office Frequency Information System (EFIS) so as to be able to identify technology trends, user demands, and needs as well as efficiency and impact of allocations.157

154   2016/​6 87/​E U Commission Implementing Decision on the harmonisation of the 694–​790 MHz frequency band for terrestrial systems capable of providing wireless broadband electronic communications services and for flexible national use in the Union, OJ L 118/​4, 4 May 2016 (harmonizing technical conditions for Public Protection and Disaster Relief use in various 700 MHz bands). 155   2014/​6 41/​E U Commission Implementing Decision on harmonised technical conditions of radio spectrum use by wireless audio programme making and special events equipment in the Union, OJ L 263/​29, 3 September 2014. 156   2013/​195/​E U Commission Implementing Decision defining the practical arrangements, uniform formats and a methodology in relation to the radio spectrum inventory established by Decision No 243/​2012/​ EU, OJ L 113/​18, 25 April 2013. 157   O’Donohue, P, Presentation, The Radio Spectrum Policy Programme & the Spectrum Inventory (ITU Regional Development Forum Warsaw, 7 May 2012).

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The Decision further identified as a European priority the provision of harmonized spectrum for other EU wireless policies including space exploitation, earth monitoring, intelligent transport safety and management systems, Galileo civil navigation programmes, and academic and scientific initiatives with possible major socio-​economic or investment impact (Article 8).158 As noted, the Commission’s proposals in the EECC, premised on the technical harmonization processes and building on the duties of cooperation would allow various Commission implementing measures to harmonize further the Member State processes of spectrum allocation, allowing the Commission even greater control, as noted by BEREC. Issues of control arise further in the 2012 Decision that also addresses principles for EU/​Member State coordination and prioritization in connection with their respective representation with international bodies (Article 10) such as the duality in their roles as EU Member States and ITU members. It requires that there be an effort, under the principle of sincere cooperation, by the EU and the Member States to arrive at a common position where the matter involves overlapping competences. The Member States and the EU must cooperate in this situation according to the unity of international representation principle.159 This means that, practically, a Member State could not submit any proposals or possibly take a position that is not compliant with those of the EU, even where not yet formally adopted.160 The implementation of any bilateral or multilateral agreement by the Member State must be stated therein or in an accompanying declaration to be in accordance with EU treaties. A recent CJEU decision adds colour to the issue. It governs the legal form that Member States (ultimately as the members of the Council) must use for EU negotiation positions at the ITU and likely has practical implications not only for the balance of powers between the EU and individual Member States but also between EU institutions (in light of the Member States effectively comprising the Council). In Commission v Council of the European Union, the CJEU found that the Member States (acting on behalf of the EU as it is not a party to the ITU) had failed to adopt a formal Council ‘decision’ pursuant to Article 218(9), Treaty on the Functioning of the EU (TFEU), for the EU’s negotiating positions on issues at the ITU’s 2015 Radio Conference where there was no prior EU agreement on issues and ad hoc decisions might be required before Radio Regulation revisions at the Conference. The Council adopted, instead ‘conclusions’. The Commission 158   The Commission in 2014 issued a Report to the European Parliament and the Council on the implementation of the Radio Spectrum Policy Programme, COM/​2014/​0228 final where it noted that a final 2015 report on the particular programme would be forthcoming; the author is unable to locate this or a further proposed multiannual programme plan. It is difficult to track, therefore, the status of the various programme elements beyond the interim report in the absence of implementing decisions as noted. 159   Decision, n 1 at Article 10(1).    160  See Case C246/​07, Commission v Sweden (20 April 2010).

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contested this before the Court. The CJEU agreed with the Commission and found that these conclusions were not legal acts with the form required by the TFEU provision and did not indicate the legal basis that must underpin EU actions for them to have legal effect.161 As the Court noted, the legal basis controls the powers of the Council and the Commission, here requiring a qualified majority on the part of the Council, for approval.162 It is suggested that the practical significance of the decision is: enhanced influence for the Commission in WRC negotiations in light of its right of initiative; reduced influence and veto power for individual Member States in light of qualified majority Council voting and; generally reduced manoeuvring room in negotiations due to the requirement for formal, legally binding Council decisions.163 The outcome of the proposed EU Electronic Communication Code continues the tug of war as to institutional (and intra-​i nstitutional)164 and Member State competences. The Council and the Parliament committees have adopted positions for the trilogue negotiations that are underway with a view to agreement in Spring 2018. Spectrum is clearly a key issue on the table.

7.6  THE UK SPE C TRUM FR A ME WOR K In the UK spectrum use is regulated under the Wireless Telegraphy Act 2006 (WTA).165 This Act combined into one statute the legislation under which Ofcom manages radio spectrum.166 Coming into force on 8 February 2007, this Act replaced the Wireless Telegraphy Acts 1949, 1967, and 1998, the Marine, etc Broadcasting (Offences) Act 1967, Part 6 of the Telecommunications Act 1984, and certain provisions of the Communications Act 2003 regarding regulatory obligations with

162   Case C-​6 87/​15, (25 October 2017), at paras 47–​55.   Ibid, at para 51.   Legal Case Note:  ‘CJEU Decision on EU Negotiation Positions in International Bodies’, (European, 18 December 2017). 164  See reported comment by rapporteur Dita Charanzová, European Parliament Committee on the Internal Market and Consumer Protection (IMCO), that while the Committee on Industry, Research and Energy (ITRE) leads the Parliament negotiations, IMCO has ‘exclusive competence’ over one-​third of the text, Internet Society, EU: Feedback on the negotiations on the European Electronic Communications Code (Internet Society European Regional Bureau Newsletter, 18–​2 4 November), . 165   Wireless Telegraphy Act 2006. 166  Practical Law ‘Wireless Telegraphy Act receives Royal Assent’ (Thompson Reuters, 2006), . 161

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respect to the management of spectrum.167 Parts of the Act have been amended to address the 2009 reforms and other subsequent changes.

7.6.1  The Act’s scope and grant of powers As with prior Acts, all persons must be licensed to install and or use radio equipment.168 It is an offence169 to do so unless the use is subject to an exception under the Act (s 8(3)) as specified in the Wireless Telegraphy (Exemption) Regulations 2003 as amended.170 The Communications Act 2003 did not make major changes to the wireless telegraphy licensing regime but rather some adjustments to bring it into conformity with the 2002 EU Framework and the new UK regulatory structure, transferring the power to manage spectrum from, then, the Department of Business, Industry and Skills to Ofcom.171 The 2009 EU reforms as well required only limited changes. Thus, with limited exceptions, the Wireless Telegraphy Act 2006 has exactly the same effect as the legislation it replaces, including various provisions of the Communications Act 2003. The powers and duties originally granted under the latter are now largely in the 2006 Act. The 2009 EU reforms that required further revisions to the Wireless Telegraphy Act 2006 and the Communications Act 2003 were primarily made by The Electronic Communications and Wireless Telegraphy Regulations 2011.172

167   See Joint Committee on Consolidation of Bills, First Report of Session 2005–​2006, Wireless Telegraphy Bill [HL], Vol II Minutes of Proceedings and Minutes of Evidence (House of Lords, House of Commons, London, 23 May 2006). 168  See Radiocommunications Agency, ‘Licensing Policy Manual’ Section A:  Impact of UK Legislation (Archived 12 July 2008), . The specific acts governed by these are ‘to instal or use wireless telegraphy apparatus’ and ‘to establish or use a wireless telegraphy station.’ WTA 2006, s 8(1)(a)–​(b)). A licence under the Broadcast Act may also need to be obtained for certain TV and radio broadcasters. 169   WTA (2006), at ss 8, 35(1). See R v Blake [1997] 1 Cr App R 209. 170   SI 2003/​74. The criteria for exemptions are discussed at text and accompanying nn 183–​184. These are routinely amended and updated. See Ofcom, Wireless Telegraphy Exemption Regulations, . Also see, eg The Wireless Telegraphy (Exemption and Amendment) (Amendment) Regulations 2017, SI 2017/​4 6 (amending the Wireless Telegraphy (Exemption and Amendment) Regulations 2010, SI 2010/​2512 as amended by SI 2011/​3035, SI 2013/​1253, and SI 2014/​1484). There would not seem to be an up-​to-​date summary list of exempt devices. 171   The spectrum policy role was transferred from BIS to the Department for Culture, Media and Sport (DCMS) in January 2011. The Secretary of State has residual powers to consult on policy and make a direction or order, in consultation with Ofcom and other persons, concerning reserving spectrum for specified uses and licensing exemptions and charges. Communications Act 2003, ss 156, 157; Wireless Telegraphy Act 2006, ss 1–​5. The government has exercised the former extensively. The ability to exercise the latter is questionable in light of recent case law. See text and accompanying nn 181–​186. 172   SI 2011/​1210. Other EU reforms not generally involving spectrum were made via other instruments. Eg some minor amendments were made by The Electronic Communications (Universal Services) Amendment, SI 2011/​1209 (eg removing any GC requirement from the scope of the USO). Another not so minor amendment was

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7.6.2  Ofcom’s spectrum management duties Under the Act, Ofcom has the duty to develop and publish the UK Plan for Frequency Authorisation identifying what frequencies are allocated to a particular purpose173 in the UK within the internationally agreed framework for spectrum allocation, ie the Radio Regulations of the International Telecommunication Union.174 Before the plan is published, Ofcom must ensure that any allocation criteria for a particular purpose is objectively justifiable in relation to the frequency or its uses to which they relate, proportionate and transparent in relation to what they intend to achieve, and not unduly discriminate against a particular person or particular class of persons (WTA, s 2 (3)). The Act sets out duties with respect to spectrum functions in section 3.  It requires that Ofcom, in carrying out its radio spectrum functions, have regard to the extent to which electromagnetic spectrum is available for wireless telegraphy use, or further use and the current and likely future demand for spectrum (WTA, s 3(1)). It must also have regard to the objectives of promoting: efficient management and use; economic and other benefits that may derive from its use; innovative services and competition in electronic communications services (WTA, s 3 (2)), unless these are unrelated to the case or there is no obligation to consider these, apart from this section (WTA, s 4). Ofcom may not disregard these section 3 considerations, however, in the context of payment of sums for spectrum licence fees/​ rights of recognized spectrum access and may, in light of these considerations, prescribe sums greater than those necessary to recover costs incurred by Ofcom (WTA, ss 4, 13, 22). Any conflict between Ofcom’s duty under section 3, WTA and its duties under sections 3–​6 of the Communications Act 2003 (CA),175 requires priority to be given to the latter (WTA, s 3 (5)). The Act sets duties for the Secretary of State, as well, in executing the functions designated to him under the Act. The Act authorizes the Secretary of State to give general or specific directions to Ofcom concerning the carrying out of its radio spectrum functions. These can include directions to ensure that frequencies are kept or become available for specified uses/​users (WTA, s 5(2)). Where the order governs licence exempt use (s 8(3)), payment for licences and recognized grants

made by The Communications Act 2003 (Maximum Penalty for Contravention of Information Requirements), SI 2011/​1773 (increasing the maximum penalty to £2,000,000 from £50,000). 173   WTA, s 2. Ofcom must also publish as part of the plan, what spectrum is available and whether these can be traded. Ibid. The Plan is online at . 174   See also Chapter 16. 175   These Communications Act duties include: s 3, General Duties; s 4, Duties for the purpose of fulfilling Community obligations (implementing Art 8, Framework Directive); s 5, Directions in respect of networks and spectrum functions and; s 6, Duties to review regulatory burdens.

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of access, including by bid (ss 12–​14, ss 21–​23), the Secretary of State may require Ofcom to exercise their powers in such cases, in such manner, subject to such restrictions and constraints, and with a view to achieving such purposes as is specified in the order (WTA, s 8(3), (4)). All of these duties were the subject of a recent Court of Appeal decision, EE Ltd v Ofcom.176 Here the Court found that Ofcom, following the Secretary of State’s 2010 Direction177 set Annual Licence Fees in 2015 to reflect the market value for the 900 MHz and 1800 MHz spectrum bands (liberalized for other uses by, inter alia, the EU repeal of the GSM Directive) that it had reallocated to existing users also pursuant to the Direction for an indefinite period and varied their licences accordingly. In doing so, therefore, Ofcom had failed to exercise its Article 8, Framework Directive obligations required to be performed by it in carrying out its radio spectrum functions by both section 4(1) and (2), CA and section 5(3), WTA.178 While WTA, section 5 (1), and 5(3) and (4)  authorize the Secretary of State to direct Ofcom in performing its spectrum functions to exercise its power in such manner as the Secretary may specify and subject to such restrictions and constraints, with a view to achieving the purposes specified in the Order,179 the Court found that nothing in the WTA or the Communications Act transferred that power to the Secretary of State or allowed Ofcom to delegate to the Secretary its duties under section 4(2) ‘to act in accordance with the six Community objectives (which give effect, amongst other things, to the requirements of Article 8 of the Framework Directive and are to be read accordingly)’.180 Thus, the 2010 Direction could not have this effect. Therefore, as the duties remained with Ofcom, in following the Direction it failed to meet its duties under both Acts and the Framework Directive.181 The outcome of this decision is not yet clear as the Court of Appeal has given Ofcom leave to appeal. Practically speaking, the decision effectively renders the power of the Secretary to give directions meaningless. Although the Court of Appeal bent over backwards to find that the Direction itself was not ultra vires, the fact is that the Direction itself was not challenged. Rather, only the 2015 annual fee decision by Ofcom. Had the other Ofcom acts pursuant to the Direction

  [2017] EWCA Civ 1873, at para 54.   Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2010, SI 2010/​3024. 178   [2017] EWCA Civ 1873, para 54. 179   The speedy reallocation of the liberalized spectrum to 3G use to avoid delay likely via the regulatory process and the litigation challenges thereto likely, no matter the outcome. Ibid, para 47. 180   Ibid, para 19. 181   Indeed, the Court found that WTA, s 3(5) gave priority to the CA, s 4(2) duties (Art 8, Framework Directive duties) in the event of a conflict with Ofcom’s WTA, s 3 powers. 176

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been subject to the same analysis as here (reallocating the spectrum to the same users and making them indefinite), Ofcom would have had to follow its full regulatory processes of consulting and making a decision in light of the merits of the Article 8 considerations that these actions were warranted as meeting the objectives. A Secretary of State’s order regarding issues with the EU framework would,182 therefore, always seem a moot act subject to Ofcom’s review under Article 8 as these apply across the board to all regulatory functions, calling the CA and WTA provisions into question. The WTA mandates the use of spectrum without licence183 where the conditions of the use are unlikely to: • have an adverse effect on technical quality of service; • lead to inefficient use of the part of the electromagnetic spectrum available for wireless telegraphy; • endanger safety of life; • prejudice the promotion of social, regional, or territorial cohesion; or • prejudice promotion of cultural and linguistic diversity and media pluralism (WTA 2006 s 8(3), (4), and (5)). Here, conditions, if any, may only be those permitted under Annex A, Authorisation Directive (s 8(3A)), ie general authorization conditions. Included within exempt use are, eg terminal equipment for GSM, UMTS, and now LTE and WIMAX (technologies for 4G services).184 Where a licence is granted it may be subject to conditions or limitations (WTA, s 9). While the Act states that these can be any kind Ofcom deem fit, a 2011 revision limits these to areas specified in Annex B of the Authorisation Directive (WTA, s 9(1A)).185 If the condition limits technological neutrality, the nature of the

182   Not all directions might concern such issues. Eg Ofcom notes that a grant of recognized spectrum access could be revoked immediately under a WTA, s 5 Direction. As this is regulation outside the framework except for the application of the Radio Equipment Directive, the Art 8 duties would not apply. See Procedures Manual for Recognised Spectrum Access for Receive Only Earth Stations (Ofcom, July 2017). 183   WTA, s 8.  Ofcom has committed to exempting spectrum whenever possible. See Ofcom, ‘Licensing Exemption’, Licensing Policy Manual, 2007, . 184  See eg Wireless Telegraphy (Exemption) (Amendment) Regulations 2011. Also see, Ofcom, Licence Exempt Radio Use, . 185   Annex B, Authorisation Directive comprises a nine-​item list of the types of conditions that can be imposed on the use of spectrum. These include conditions regarding usage fees; technical/​operational conditions necessary for safe, non-​i nterfering use if different from general authorization obligations; effective and efficient use; maximum duration; transfer of rights; undertakings made in the course of a comparative/​competitive process to obtain the spectrum; obligations to provide a service or use a technology for which the right to use the spectrum was granted, including coverage/​quality requirements where appropriate; obligations

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service or the type of equipment that can be used, it can be imposed only where justified by the essential requirements and general interest objectives set forth in section 9ZA, that comprise: • avoiding undue interference with wireless telegraphy; • the protection of public health against electromagnetic fields; • ensuring technical quality of service; • ensuring maximization of frequency sharing; • safeguarding the efficient management and use of the part of the electromagnetic spectrum available for wireless telegraphy; • ensuring fulfilment of a general interest objective as defined as in section 8B(3) (governing the criteria for an exclusive licence) that includes: o safety of life; o promotion of social, regional, or territorial cohesion; o avoidance of inefficient use of frequencies; o promotion of cultural and linguistic diversity and media pluralism; o fulfilment of an ITU Radio Regulation requirement. These implemented the 2009 reforms to the Directive and reflect its layers of safety/​ efficiency/​international requirements. A  review is required for licences granted for longer than ten years with non-​transferrable individual conditions to determine whether they meet the section 8 exemption criteria, so as to make it eligible not to be subject to the requirement for a licence (WTA, s 8A). A decision to grant a licence for exclusive rights to use a frequency, nationally or otherwise, may not be made by Ofcom except where necessary to protect safety of life services or other exceptional circumstances exist that Ofcom believes justify the exclusive grant to ensure a general interest objective, as above listed. Where the limitation has a significant impact on the market for the use of electromagnetic spectrum for wireless telegraphy, Ofcom must consult and publish a notice of its intention to limit a grant, specifying the reasons why and the period for which representations can be made to Ofcom, but that can be no less than a month (WTA, s 8C). Limitations of either kind must be reviewed for continuing necessity with the consultation outcome published (WTA, ss 8B(5); 9ZA(7)). The review/​publication requirements do not apply in the context of technology/​service limitation where the user can opt for a different spectrum frequency without the limitation (WTA, 9ZA(8)). The precise interaction with the section 8A review for licences and

under international agreements governing frequencies; and obligations specific to experimental use of a frequency. See Annex B, Directive 2002/​20/​EC as amended by Directive 2009/​140/​EC.

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non-​t ransferrable conditions of more than ten-​year duration for possible exemption is not clear. How the section 8A unique licensing provisions practically relate to section 29 of the WTA 2006 is also not precisely clear. Section 29 is intended to implement Article 7(1)(c) of the Authorisation Directive as amended in 2009. This requires that where a Member State is considering whether to limit the number of rights of use to be granted for radio frequencies, it publish any decision to limit the granting of rights of use, stating the reasons. In keeping with Article 5(5) of the Directive, section 29 states that it applies to situations where Ofcom considers ‘it appropriate to impose limitations on the use of particular frequencies for the purpose of securing the efficient use of the electromagnetic spectrum’. Spectral efficiency suggests this is only where limited numbers of users can utilize certain frequencies due to the spectrum’s inability to support more users without interference. As the section 8A exclusive use decision can apply for general objectives like cultural diversity or social cohesion as well as efficient use of spectrum, whether section 29 applies at all or only in the last instance is unknown. Section 29 requires Ofcom to issue an ‘order’ and publish the criteria it will use to determine the number of available licences and the category of persons to whom they will be made available.186 The criteria must also be objectively justified, proportionate to the use, objective, and non-​d iscriminatory in keeping with the requirements of the Framework Directive. Efficiency, or scarcity practically speaking, is likely to mean specific band or pairs of bands that must be allocated nationally or regionally in a way so as to avoid interference. The likelihood exists that scarcity could be co-​extensive with exclusive use in some instances where other interference-​a meliorating conditions will not suffice such as spectrum masks, filters, or smart technologies such as ‘listen before you speak’ transmitters, etc. However, the section 29 requirements may just apply where multiple but limited numbers of users can share the same spectrum bands, perhaps with priorities or other rationalizing conditions to manage interference.187

7.6.3  Grants of recognized spectrum access The 2003 reforms provided for a ‘grant of recognized spectrum access’, now in section 18 of the WTA 2006. Persons using radio equipment (a station or apparatus)

186   WTA, s 29. See also, The Wireless Telegraphy (Limitation of Number of Licences) (Amendment) Order 2006, SI 2006/​2786 (as further amended). 187   See eg The Wireless Telegraphy (Licence Award) Regulations 2012, SI 2012/​2 817 specifying the criteria for the 800 MHz and 2.6G band awards, cohesive draft Regulation, .​

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where a licence is not required but where transmissions occur within the UK may apply for such grant. Ofcom is to consider an RSA to the same extent as it would consider an existing licence when it allocates spectrum (WTA, s 20). Ofcom indicated its intent to limit interference with uses and areas covered by RSAs, as it would with licensed grants.188 The RSA may be given for any use and equipment specified in the grant and subject to any conditions that Ofcom may consider appropriate,189 including for strength of signal and equipment, but cannot duplicate any conditions that are already imposed under general conditions. RSA grants may be converted to a licence or a licence to a grant.190 That RSA conditions could be also imposed under a general condition indicates that the Act here contemplates an exempt or similar use in the nature of a general authorization and where the exempt user might wish to preserve the use for future allocation. A grant effectively reserving a particular usage could be sought by government agencies191 whose spectrum use is currently largely ‘licensed’ only by a voluntary agreement called a ‘side letter’.192 It may also be sought by providers of networks using equipment that is exempt from licensing, as its risk of harmful interference is small, such as WiFi.193 Radio astronomy was identified as a use where RSAs could be valuable to help limit interference. In 2007, Ofcom issued regulations for the granting of RSAs in connection with radio astronomy uses in existing bands and in the six locations where presently carried out.194 The Act also contemplates RSAs for uses unlicensed as they are outside the reach of the Wireless Telegraphy Act. The references to emissions from outside the UK (s 159(1)) as well as the use of a ‘station’ suggests a ‘receiving only’ earth station operator which although outside of licensing jurisdiction under the Act,195 might wish to ensure continued frequency availability and interference minimization. Ofcom

188   Ofcom Statement, ‘Spectrum framework review for the public sector: Extending market mechanisms to improve how spectrum is managed and used’, 31 January 2008, s 2.8. 189  RSAs and conditions could not, however, constrain the uses of public sector agencies, such as the Ministry of Defence. See Ofcom Consultation, ‘Spectrum framework review for the public sector: Notice of Ofcom’s Proposal to make regulations on Recognized Spectrum Access for public bodies and consultation on technical conditions’, 20 June 2008, s 4.7. 190   WTA, s 27. 191   This is limited to Crown bodies. That the Act contemplates this purpose for RSA is reinforced by the authorization to Crown agencies to pay for, inter alia, recognized grants of spectrum use. See WTA, s 28. 192   This would seem a fairly unique UK example of a contract for a licence. See Ofcom Licensing Policy Manual, ‘Authorisation of radio use for Crown bodies’, 2007, . 193   Ofcom Licensing Policy Manual, ‘Licence exemption’, 2004. 194   Ofcom, ‘Statement on regulations for recognised spectrum access as applied to radio astronomy’, 28 February 2007. 195  See eg ‘Procedures manual for recognised spectrum access for receive only Earth stations’, July 2017,  .

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has promulgated regulations providing for RSAs, their conditions, charging, and trading in connection with ‘receive only’ earth stations used for fixed satellite or meteorological satellite services in certain bands, noting that the scheme remains voluntary.196 With RSAs, conditions would be imposed only under the grant notification procedures. RSAs may have a charge, including one determined by auction.197 RSA charging regulations provide that these can vary according to the nature of the use and the frequency bands involved.198 With radio astronomy, Ofcom determined that Administrative Incentive Pricing (AIP) based on the opportunity cost of denying the spectrum to alternative services, eg broadcasting, was appropriate.199 With Receive Only Earth Stations, Ofcom has set an annual £500 plus a calculation based on a rate charge for the bandwidth involved.200 The fee applies to a single REOS or all REOS within 500 metres. The Wireless Telegraphy (Register) (Amendment) Regulations 2007 provided for the inclusion of RSA grants in the registry created by Ofcom to enable spectrum trading.201 As public entities hold a significant allocation of spectrum estimated to have a value of over £20 billion, Ofcom was seeking ways to improve its management and efficient use, including by trading and licensing of traded RSAs where possible.202 The latter is required as RSA eligibility often derives from the non-​ licence status of the user as a public agency. Therefore use by another undertaking would not be subject to an RSA and would have to be licensed. Starting in 2007, Ofcom consulted on RSA tradability by public sector entities.203 In 2009, it adopted regulations to permit trading of an RSA or conversion to a licence or from a licence to an RSA, both where either all of the rights and obligations are transferred

196   Ofcom, ‘Decision to make Regulations for Recognised Spectrum Access (RSA) for receive only Earth stations in the bands 1690–​1710 MHz, 3600–​4200 MHz and 7750–​7850 MHz’, 30 November 2011. 197   WTA, ss 21, 23. 198  The Wireless Telegraphy (Recognised Spectrum Access Charges) Regulations 2007, SI 2007/​392 as amended by The Wireless Telegraphy (Recognised Spectrum Access Charges) (Amendment) Regulations 2011, SI 2011/​2762, The Wireless Telegraphy (Recognised Spectrum Access Charges) (Amendment) Regulations 2015, SI 2015/​1399. 199   See Ofcom Consultation, ‘Notice of Ofcom’s proposal to make regulations for Recognised Spectrum Access (RSA) for radio astronomy’, 10 November 2006, ss 5.38–​5.60. 200   The Wireless Telegraphy (Recognised Spectrum Access Charges) (Amendment) Regulations 2015, SI 2015/​1399; Ofcom, Fees for Grant of RSA for ROES (2015), . 201   The Wireless Telegraphy (Recognised Spectrum Access and Licence) (Trading Regulations) 2009, as amended (the ‘RSA Trading Regulations’). 202  Ibid. 203   See Ofcom Consultation, ‘Spectrum framework review for the public sector: Notice of Ofcom’s proposal to make regulations on Recognized Spectrum Access for public bodies and consultation on technical conditions’, 20 June 2008); Ofcom Consultation, ‘Crown Recognised Spectrum Access in the 3400 MHz -​3600 MHz’, 17 December 2011.

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(surrendered to Ofcom which then issues a new RSA/​l icence) or they remain concurrent.204 The RSA Trading Regulations also allow for partition of spectrum or geographically. Various transactions have resulted, enabling public bodies such as the Ministry of Defence that holds 75 per cent of the public spectrum to share frequencies for other uses.205

7.6.4  Spectrum auction and trading: market mechanisms and liberalization The power to use auctions to allocate spectrum licences206 was introduced by the Wireless Telegraphy Act 1998.207 Section 14 of the WTA 2006 permits Ofcom to set the regulations for the auctions of licences, including the procedures, payment method, the need for a deposit and the terms, provisions, and limitations to which the licence would be subject.208 These permit possible flexibility for different payment methods, including by instalments,209 an option that Ofcom has elected not to pursue. Ofcom has struggled to develop regulations for significant spectrum auctions in light of industry challenges. These have included not only spectrum for ‘3G’ and ‘4G’ spectrum uses, now largely allocated but also the ‘5G’ auction that Ofcom has been trying to get off the ground since at least 2015. As previously noted, in 2005 Ofcom began consulting on 2G spectrum in the 900 and 1800 MHz bands that were being liberalized for uses other than 2G with a view to auctioning it. After repeated rounds of consulting on possible auction structure and whether to reserve bands for other users that had not originally been allocated that spectrum which the relevant operators threatened repeatedly to challenge in court, the government took the matter out of Ofcom’s hands and ordered it to allow the existing users to refarm it for 3G uses and to vary their licences for such uses, as previously discussed. The Direction ordering that Ofcom establish annual fees for the spectrum that reflect market value is still the subject of litigation, with Ofcom having

204   The Wireless Telegraphy (Recognised Spectrum Access and Licence) (Trading Regulations) 2009, SI 2009/​17, as amended (the ‘RSA Trading Regulations’). 205  Ofcom Consultation, ‘Crown Recognised Spectrum Access in the 3400 MHz–​ 3600 MHz’, 17 December 2011. 206 207   RSAs can now be auctioned as well.   Wireless Telegraphy Act 1998, s 3, ch 6. 208   See eg Ofcom’s efforts to make regulations for the auction of spectrum in the 2.3 and 3.4 GHz bands in the face of Three’s continuing legal challenge to the overarching spectrum caps the Ofcom has imposed for the auction. Ofcom, ‘Notice of intent to make regulations: auction of spectrum in the 2.3 and 3.4 GHz bands’, 17 January 2018, . 209   Communications Act 2003, s 167.

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been given the right to appeal to the Supreme Court from the Court of Appeal’s decision in EE Ltd v Ofcom.210 The ‘4G’ auction comprising the 800 MHz spectrum digital dividend and 2.6 GHz and labelled by Ofcom as the ‘largest ever’ UK single auction of ‘internationally harmonized mobile spectrum’ was also plagued with delays.211 Ofcom had difficulty deciding whether and how the prime, low frequency 800 MHz bandwidth should be reserved for bidders other than O2 and Vodafone, both 2G licensees who were eventually allowed to use their 2G 900 MHz band spectrum that they were given (originally for nothing) for refarmed 3G use at lower fees than other 3G spectrum went for at auction. Below 1 GHz, spectrum is considered to have potentially lower network roll-​out and operating costs due to its propagation characteristics, described earlier, requiring fewer base stations, lower power, less backhaul, etc. The potential other bidders, Hutchinson 3(3) and Everything, Everywhere (Orange and T-​Mobile (Deutsche Telekom) (EE)), the UK’s other national mobile providers who did not hold any UK ‘sub 1 GHz’ spectrum, contended that the promotion of competition, a Framework regulatory objective, required that either they should have allocations reserved for their bidding or that caps should apply to the amount of spectrum that the others could acquire.212 Possibly to avoid the litigation hinted at in ‘veiled threats’ by O2 and Vodafone if the rules were not changed,213 Ofcom removed the reservation of sub-​1 GHz spectrum for EE, the nation’s largest network. In early March 2012, Ofcom notified that it proposed to grant EE’s petition to refarm in 2012 its existing 1800 MHz spectrum to LTE and WiMAX usage. Ofcom indicated in the Notice that it did not consider the licence variation to distort competition in light of the nascent state of the market and the availability to other operators of the 2 x 15 MHz of 1800 MHz spectrum that EE was required to sell as a condition for EU approval of the merger of T-​Mobile and Orange to create EE. Ofcom had earlier concluded that there would only be a small difference in EE’s ability to deliver a comparable 4G product with the large amount of 1800 MHz spectrum that it already held for 2G and a network with more base stations.214 Ofcom varied EE’s licence to permit 4G use before the

  See text and accompanying notes 176–​181.   Ofcom, ‘Second Consultation on assessment of future mobile competition and proposals for the award of 800 MHz and 2.6 GHz spectrum and related issues’, 12 January 2012. 212   See Garside, J, ‘4G Spectrum Auction: Time for the Networks to Grow Up’ (Technology Blog, The Guardian, 11 October 2011), . 213   See Garside, J, ‘London Becomes 4G High Speed Internet Hot Spot’ (The Guardian, 13 November 2011), . 214   See Second Consultation, n 211, at 1.24. 210

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800 MHz auction.215 Although the other mobile operators argued that this gave EE an unfair advantage (ultimately less than seven months) in the 4G market, 216 they did not further challenge the decision when Ofcom agreed to advance the auction so that the other operators could launch their 4G offers by early summer 2013. The 800 MHz auction regulation did reserve sufficient spectrum to ensure a fourth national wholesaler, ultimately Hutchinson, Three’s parent. Ofcom proposed a special condition for one block of 2 x 10MHz bands to be imposed on one national provider to provide coverage to 98 per cent of the country by 2017 inclusive of ‘not spot’ areas for which Ofcom had £150 million designated for infrastructure, assuming that others would seek to compete with their network roll-​outs. Vodafone acquired this block. Litigation challenges also delayed Ofcom’s auction of spectrum in the 2.3 GHz–​ 3.4 GHz spectrum bands valuable for, respectively, current 4G uses and future ‘5G’ uses (both freed up by the Ministry of Defence for non-​m ilitary use in keeping with a government initiative to make available 500 MHz of spectrum by 2020). The April 2018 auction made available 190 MHz of spectrum, 40MHz in the 2.3 GHz band, all acquired by O2 and 150 MHz in the 3.4 MHz band, awarded to Vodaphone, O2, EE, and Three who acquired respectively 50, 40, 40, and 20 MHz each of this 5G spectrum for a total auction spend of over £1.4 billion. In a second set of auctions, targeted for 2020, Ofcom will make available spectrum in the 700 MHz band that the government plans to clear from digital terrestrial use,217 moving it to 470–​690 MHz bands and from wireless microphones. Ofcom also plans to auction 116 Mhz of spectrum in the 3.6GHz–​3.8GHz bands, that will be available for 5G use seemingly alongside its current use for fixed links and satellite services. The first auction originally intended for 2016 was delayed by the O2’s proposed merger with Three, rejected by the Commission. Rescheduled for late 2017, in its July 2017 Decision, Ofcom imposed layered spectrum caps to foster competition in the market in light of the current spectrum holdings of the providers. It capped

215   Ofcom, ‘Notice of Proposed Variation of Everything Everywhere’s 1800 MHz spectrum licences to allow use of LTE and WiMAX technologies’, 13 March 2012, at 4.30. 216   See Webster, A,  ‘UK Regulators delay Orange/​T-​Mobile LTE plan, give competitors time to react’ (The Verge, 27 March 2012), . 217   The same challenges faced decisions to make this available. The 600 MHz frequency is the lower part of the digital dividend. The decision to move Digital Terrestrial Television (DTT) down to the 600 MHz band from the 700 MHz band where it is currently operating was considered to be the most beneficial since there is an emergent international trend to harmonize this frequency for this use with a proposal tabled for this at the ITU 2015 conference with the US, Africa, and parts of Asia rolling out LTE in this band. This would promote international interoperability and economies of scope for consumers in terminal equipment. At the same time, however, the 600 MHz band will not be harmonized for DTT with possible ensuing costs for television receiving equipment.

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the amount of overall spectrum holding post-​auctions by any one provider to 340 MHz (or 37 per cent share with the added spectrum) and immediately usable spectrum post-​auction to no more than 255 MHz. EE and Three, for different reasons, challenged these in court. The immediate use cap meant that EE could not bid for spectrum in the 2.3 GHz band with its current possible 4G use. BT’s acquisition of EE gave it a combined pre-​auction holding of 45 per cent of total spectrum, meaning that its auction bid for future use 3.4 MHz was limited to a maximum of 85 MHz. Vodaphone could acquire no more than 160MHz in both auctions but O2 and Three would have no caps. Three objected to the 37 per cent cap, arguing that it should be lowered to 30 per cent. BT/​EE objected to any caps and the phased implementation, or contiguity, of 5G spectrum auctions, contending that spectrum in all relevant bands for 5G use should be combined into a single auction. The High Court found for Ofcom218 but granted Three leave to appeal to the Court of Appeal that it rejected on an expedited basis, allowing the auctions to proceed. Ofcom’s role is not to be envied. In awarding spectrum, it must anticipate the long-​term technological possibilities (while remaining technologically neutral where possible), yet also deal with the short-​term reality while coordinating with the EU and possibly internationally for the medium term, all pursuant to legal and procedural obligations. Even where it seeks to consider all of these required relevant and very complex factors, it faces legal challenge. When it follows government direction, it faces legal challenge. At the same time, the providers’ challenges are understandable. Decisions now could serve to preserve their interests for decades. Their objections to novel ways of proceeding to allow for future developments as rules and frameworks evolve mean that the spectrum regulatory landscape is likely to be fraught with uncertainty and future legal challenges to stop or slow down regulatory developments that they do not like and lobbying in the press and the political arena to bring pressure on the regulator to backpedal after having reached a reasoned, if not perfect, decision based on competition, social policy, and technological considerations. One area, however, where the industry participants appear to have worked together more fruitfully in recent years involves another market liberalizing effort, the trading and leasing of spectrum. The 2003 Act authorized spectrum trading (s 168).219 With the Wireless Telegraphy (Spectrum Trading) Regulations 2004, Ofcom began a phased implementation of spectrum trading combined with a programme of increasing liberalization of spectrum via de-​licensing bands and/​or

218

  Hutchinson 3G v Ofcom [2017] EWHC 3376 (Admin).   Repealed and replaced by the WTA, s 30.

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uses of compliant equipment as well as the removal of conditions specifying uses so that traded spectrum can be put to new uses.220 However, it was considered that the spectrum trading as implemented with requirements for consent, publication, and new licence issuance was not really effective and likely comprised a barrier to trading to the detriment of consumers and other persons. Following adoption of the 2009 reforms, Ofcom consulted and determined to simplify the secondary market mechanisms that now include both leasing and transfers, collectively called ‘spectrum trading’ by Ofcom. Transfers comprise the exchange of all or part of licence rights and associated obligations to another party that can generally be outright (no residual rights) or concurrent (rights and obligations shared concurrently and fully with respect to the spectrum at issue) with some licences subject to limitations.221 Depending on the extent of the transfer, Ofcom will either revoke or vary the original holder’s licence and issue a new licence to the transferee. The transfer can be permanent or time-​l imited, the latter requiring that the transferee must reverse the transfer at the end of the period. Ofcom consent is no longer to be required for transfers of most licence classes to which the right to transfer applies, subject to the promulgation of regulations enabling this change.222 Other spectrum transfers, notably those of public network operators, will continue to require consent in order for Ofcom to be able ex ante to assess the competitive impact, an obligation of the Authorisation Directive.223 For all trading, the spectrum price is subject to commercial negotiations. Spectrum leasing, both total and partial, and one level of sub-​leasing is possible under fairly simple contractual processes for most auctioned spectrum and other business class spectrum licences. Until the licence provides for leasing, a variation must be sought upon application.224 The lease can be for the full term of the licence or a part thereof. It is the licensee/​lessor who remains responsible for all obligation compliance, including payment, and who are expected to be responsive to complaints. Which Ofcom will proceed against regarding any breach will depend on the circumstances. Ofcom notes that it is required to act reasonably and proportionately and will consider whether the licensee could have done more or contributed to the breach in determining whether to hold it accountable.225 Therefore, lease agreements should address the necessary payment obligations and make appropriate provisions for liability and possible indemnification, including legal fees. Ofcom is still proceeding a bit cautiously in implementing this. The necessary regulations to withdraw the requirement for the variation and publication

  Ofcom Statement, ‘A Statement on spectrum trading: Implementation in 2004 and beyond’, 6 August 2004. 222   See Ofcom, ‘Trading Guidance Notes’, July 2015, at 1.  Ibid. 223   The Wireless Telegraphy (Mobile Spectrum Trading) Regulations 2011, SI 2011/​1507, at s 8. 224 225   Trading Guidance Notes, n 221 at Table 4.   Ibid, at s 3. 220 221

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were promised when it was convenient for Ofcom to do so, but have not yet been done. Ofcom possibly wishes to continue to observe some actual developments to take into consideration. This would likely need to be done in the event that the proposed EU reforms requiring the least onerous regime are implemented. Ofcom has, however, established a Spectrum Trading desk to facilitate these. Exceptions to the ability to trade spectrum include failure to pay the charges for the licence and also where Ofcom has not yet made a requested variation or revocation of the licence.226 Ofcom can refuse consent for a transfer where necessary in the interests of national security, compliance with EU and international obligations, or pursuant to an order of the Secretary of State under the Communications Act 2003’s spectrum policy powers under sections 5 and 156.227

7.7  CONC LUDING R EM A R K S The mobile age is as exciting today as it was in 1901 when the new wireless achievements led a London newspaper to conjecture that people would someday carry their wireless telephones with them.228 It took almost ninety years for that to become an almost global reality. The inventions that lie at the heart of today’s mobile devices have their roots in scientific achievement that spans two centuries. Whether 100 years from now, someone marvels at their cochlear ‘brainplants’ that allow them to ‘hear’ from anyone or anything, everywhere, must be left to imagination. However, if the Commission’s vision is any indicator, with spectrum to be allocated for the Internet of Things and new science,229 we cannot rule it out. The law is often in a catch-​up mode. Sea changes in technologies and market trends will occur with regulation needing to react. The regulator as ‘seer’ is part of today’s job description. The benefit of such expertise and vision can be witnessed in a number of the EU’s early decisions to mandate a harmonized EU standard for mobile communications. The GSM Directive allowed for the quick roll-​out and take-​up of wireless communications technology with providers, manufacturers, and ultimately end users able to benefit from the derived economies of scale and certainty about interoperability and technical specifications. This view is not

  See Statement, n 220, at s 7.   The Wireless Telegraphy (Mobile Spectrum Trading) Regulations 2011, s 8(5). 228  White, TH, ‘United States Early Radio History:  Personal Communications by Wireless (1879–​1922) (noting 4 November 1901, Los Angeles Times, at 6, quotation of London Spectator: ‘Some day men and women will carry wireless telephones as today we carry a card case or camera’), . 229   See Decision, n 8. 226 227

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universal,230 and perhaps, in light of the intransigence of mobile rates, NGN roll-​ out delays, and other spectrum bottlenecks in the EU which have caused and continue to cause the Commission to seek new regulatory powers, it is not deserved. However, not every regulator’s decoder ring always receives across all frequencies and sometimes seers do not have 20/​10 vision. Although not perfect, the EU legal infrastructure in place to analyse and agree standards for mutual implementation of spectrum management has been workable. The review and proposed reforms are a good thing if only to step back and take a look at what is needed for future developments and what is working well enough in light of possible alternatives. Spectrum regulation is a truly complex exercise. The allocation of these significant blocks of spectrum are decisions with potential impact for generations, and require engineering and economic expertise and the administrative ability to meet all the policy objectives that must be mashed into the market mechanism the regulator must use for decisions that, ultimately, will not make everyone happy. How the proposed reforms shake out in 2018 are not likely to make everyone happy either.

230  See Sutherland, E, Paper:  ‘European Spectrum Management:  Successes, Failures & Lessons’ (ITU Workshop on Market Mechanisms for Spectrum Management Geneva 22–​2 3 January 2007). Sutherland, however, does not seem to question the GSM Directive itself but the lack of sufficient competition introduced at the time continuing to today with a further failure to anticipate the high pricing issues and the disadvantage fixed networks had in termination rates.

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8 ACCE SS AND INTERCONNEC TION Ian Walden1

8.1 8.2 8.3 8.4 8.5 8.6

Introduction  Basic Concepts and Terminology  Access and Interconnection Regulation  EU Obligations in Relation to Access and Interconnection  UK Access and Interconnection Regime  Practical and Contractual Issues in Negotiating Circuit-​Switched Access Agreements  8.7 Practical and Contractual Issues in Negotiating IP Interconnection Agreements  8 .8 Concluding Remarks and Future Trends 

435 438 443 451 465 478 481 489

8.1 INTRODUC TION For the purposes of this chapter, and under the European Union’s Access Directive,2 the term ‘access’ encompasses all kinds of contractual (private law) arrangements under which an operator or service provider acquires services from another operator in order to enable it to deliver services to its own customers. The issues discussed in this chapter relate to the regulated (public law) rights of operators to access each others’ networks and services at a wholesale level, not the rights of end users to access telecommunications services, at a retail level. The primary rationale in mandating different kinds of access in a liberalizing market is to reduce barriers to market entry, so a new operator will not have to replicate every network element that the incumbent has before being able to offer a competing end-​to-​end service. Once liberalized, however, there will generally

  This chapter was originally written for the 2nd edition by Emma McCormack.   Directive 2002/​19/​EC of the European Parliament and of the Council of 7 March 2002 on access to, and interconnection of, electronic communications networks and associated facilities, OJ L 108/​7, 24 April 2002 (the ‘Access Directive’). The definition of ‘access’ is in Art 2(a). 1 2

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continue to be a need to mandate access from those market players that control facilities and services that a competitor cannot feasibly, economically or technically, duplicate. In a networked industry like telecommunications, competitors are usually also your customers; creating so-​c alled ‘frienemies’. Access rights are also a means of reducing the environmental impact of competition by, for example, reducing the need for road works or the installation of masts. Access rights which are commonly regulated include network access (eg access to the ‘local loop’3), the provision of wholesale products for resale (eg access to wholesale DSL products), and access to services and infrastructure necessary for the provision of a service (eg access to co-​location or number translation services). Broadly speaking, access services can be distinguished into ‘active’ and ‘passive’ elements; the former including any access to the operator’s transmission network and associated operational systems, while the latter would include access to ducts and poles. ‘Interconnection’ is a type of access right.4 At its most basic level, interconnection involves the physical means of linking two different networks for the exchange of traffic, so that users on one network may communicate with users on the other. Typically, interconnection arrangements provide for two networks to be joined together at a ‘point of interconnection’ and require each operator to carry messages received from the other operator at the point of interconnection across their network and to either ‘terminate’ them with the relevant user or pass the messages onto another network operator. There are obvious incentives for operators to enter into interconnection arrangements with operators in other territories. Incumbent operators will have had interconnection arrangements with incumbent operators in other countries, in order that its users could make and receive calls from users in the other country. 5 Interconnection means the ability to extend an operator’s reach and provide a wider range of (sometimes high-​cost and very profitable) services to users. There is, however, little commercial incentive for an incumbent operator to interconnect with an operator who wants to compete in the same geographic market. Incumbent operators with a large number of customers may well determine, in the absence of appropriate regulation, that they bear little commercial risk if their users cannot contact the (initially very small number of) users on a new competitor’s network. The new entrant, however, cannot survive without

3   The ‘local loop’ is sometimes referred to as the ‘local access network’ and refers to the part of a telecommunications network that connects end-​u sers premises with the nearest telecommunications exchange. 4   Access Directive. The definition of ‘interconnection’ is in Art 2(b). 5   International interconnection arrangements are examined further in Chapter 16, at Section 16.3.5.

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interconnection with the incumbent. Its network will be virtually useless to users unless they can contact users on the incumbent’s network. An incumbent operator’s refusal to interconnect, or the imposition of unfairly onerous terms in relation to interconnection, could therefore allow market entry to be obstructed, or even prevented altogether. It is for this reason that interconnection has become a key regulatory issue and is recognized as being essential for creating and maintaining effective competition and any-​to-​a ny connectivity. Most jurisdictions recognize that interconnection is so vital to the development of competition that specific ex ante regulatory controls over access and interconnection are necessary and proportionate. New Zealand tried relying exclusively on ex post competition law, but the courts proved unable to resolve key issues of dispute concerning interconnection arrangements.6 As electronic communications markets have matured, and as communications services have grown in sophistication, demand for other types of access has escalated. Some of these demands were initially dealt with by regulators in the EU under existing interconnection regulation, whereas in other cases access obligations were developed and imposed outside of the interconnection regime. The Access Directive consolidated many of these obligations and gave national regulatory authorities (NRAs) enhanced powers to mandate access. Access issues present regulators with significant challenges. If new entrants are given insufficient rights to acquire interconnection and access from incumbents, effectively competitive markets are unlikely to develop. Markets that are not effectively competitive are less likely to yield lower prices and high levels of innovation. However, over-​regulation can act as a strong disincentive to investment and innovation if incumbents fear that they will be made to give their competitors access to their network without those competitors bearing any of the investment risk or cost involved. Getting this balance right is particularly relevant at the current time, as governments seek to facilitate economic development through the roll-​ out of Next Generation Networks (NGNs). This chapter will review the regulatory regime impacting on access and interconnection, and discuss some of the contractual issues that arise when negotiating some different types of access agreements.7

6  See Telecom Corporation of NZ Ltd v Clear Communications Ltd (1992) 4 NZBLC. Such issues are now subject to an ex ante access regime under the Telecommunications Act 2001, implemented by the Commerce Commission of New Zealand. 7   See also Chapter 11.

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8. 2  B A SIC CONC EP T S A ND TER MINOLO G Y An understanding of some of the terminology used to describe access and interconnection arrangements greatly assists an understanding of the regulatory regime. This section will explain some of the key concepts.

8.2.1  Packet-​switched and circuit-​switched networks There are some key differences between the interconnection arrangements for ‘circuit-​switched’ networks and for ‘packet-​switched’ networks. Circuit-​switched networks are networks which establish an end-​to-​end transmission path in order for a communication to be transmitted from one end to the other. Telephone networks have traditionally used circuit-​switched technology. When a call is made, a dedicated channel is established over which the communication travels. Packet-​switched networks, by contrast, divide the data that comprises a communication into small packets. The packets are sent separately and reassembled at the destination. The internet is made up of interconnected or linked packet-​ switched networks. Packet-​switched technologies are increasingly being used to carry voice, as well as data, and operators are using packet-​switched architectures when modernizing their backbone and access network to NGNs.

8.2.2  Interconnection of circuit-​switched networks—​key concepts 8.2.2.1  Call origination, call termination, and termination charges When a call is made between two interconnected circuit-​switched networks, the operators must work out how the cost of carrying that call is to be divided between them. If the call is made within the same country, usually a wholesale charge known as a termination charge will apply. It is important to understand how this charge works. This is most easily explained by thinking about a typical telephone call between different networks, like a call from a fixed line network (such as BT) to a mobile network (such as Vodafone). In this scenario the call is said to ‘originate’ on the fixed-​l ine network where the user initiates the call by dialing the mobile telephone number. The call is carried over the fixed network to a point of interconnection with the mobile network. The mobile network operator will carry the call over their network from the point of interconnection to the relevant mobile user. When the call is connected, it is said to ‘terminate’ on the mobile network. The concepts of origination and termination are relevant to the charges that flow between the fixed network operator and the mobile network operator.

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Telecommunications operators obviously charge us to make calls on their networks. Generally, the user who initiates a call will pay for that call. This is known as the ‘calling party pays’ (CPP) principle, and is the charging model most widely used by operators at a retail level, which is then reflected in the charging arrangements for interconnection. The terminating operator, in our example Vodafone, would charge the originating operator, BT, for the termination of the call onto the mobile network; known as a ‘termination charge’. The termination charge will usually be a charge per minute (although there are variations), and may vary depending on the time of day, ie congestion pricing. The level at which termination charges are set can be a controversial issue, and is addressed by regulators in a number of ways, as will be discussed later in this chapter.8 The two main alternatives to CPP are a ‘receiving party pays’ (RPP) regime, as operated in the US mobile sector and in the UK for Premium Rate Services,9 and a ‘Bill and Keep’ (BaK) arrangement, as commonly adopted for internet interconnection (see later discussion). 8.2.2.2 Transit The basic scenario described above, where the two networks are directly interconnected, could be varied in a number of ways. For example, it may not be efficient for a small fixed-​l ine operator to establish direct interconnection with every other operator. Instead, a small operator may rely on a third operator, often a large incumbent operator, to transit traffic across that other operator’s network to the terminating operator’s network. Provided that both the originating operator and the terminating operator are interconnected with that third party and the third party has agreed to transit calls across its network, the calls will be connected even though the parties have not established direct interconnection arrangements. Much more complex arrangements have evolved. In the case of international calls or the exchange of internet traffic (discussed further in Section 8.2.3), messages or data may pass through many telecommunications networks.

8.2.3  Interconnection of packet-​switched networks—​key concepts The interconnection of packet-​switched networks is often referred to as ‘IP interconnection’, which describes the connection of networks that support packet-​ based communications controlled by a particular suite of software protocols known as transmission control protocol/​internet protocol (TCP/​IP). The TCP/​IP protocols define how packets of data are addressed, transmitted, tracked, and re-​ assembled by the receiving computers. TCP/​IP is used by all computer networks

  See also Chapter 2, at Section 2.13 and Chapter 16 at Section 16.3.5.

8

  See further Chapter 15.

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which constitute the internet. IP interconnection arrangements, therefore, are in place largely for the purpose of exchanging internet traffic between networks. To understand how the contractual arrangements governing IP interconnection work, it is necessary to understand, at a basic level, the structure of the internet carriage industry and the typical payment arrangements that operators adopt. At a retail level, customers seeking access to the internet will enter into a contract with an internet service provider (ISP), like Plusnet or TalkTalk. A diverse range of retail pricing models have been adopted by ISPs for internet access services, including volume and/​or time-​based charges, flat-​rate charges for unlimited access, and combinations of these models. Many ISPs also often offer web-​hosting services to their users, allowing them to put content onto the internet. In other cases internet content is hosted by specialist networks who do not themselves provide internet access, for example eBay and Facebook. In order that the users of an ISP can communicate with users on other networks, and access content (such as websites) hosted on other networks, ISPs must enter into IP interconnection arrangements with other IP networks. Sometimes direct interconnection is established, especially between networks which are close to each other geographically. However, it would obviously be both inefficient and virtually impossible from a practical point of view for every ISP to enter into direct IP interconnection arrangements with every other ISP and content provider around the world. IP interconnection arrangements have evolved to overcome this problem. The primary way of avoiding the need to directly interconnect is by entering into transit arrangements, similar in principle to transit arrangements for voice telephony. Large, high-​speed networks have developed which aggregate and transit traffic between numerous smaller networks, such as small retail ISPs. The operators of these networks are sometimes referred to as ‘internet access providers’ or ‘transit providers’. There is no strict definition of an internet access provider, but it is generally an operator who can transit traffic to and from any other network on the internet, through its own upstream transit agreements. The largest of these networks are often called ‘backbone providers’, or ‘Tier 1 operators’. There are no strict criteria for defining a backbone provider, but they are usually the predominant IP infrastructure operator in a region, or one of a limited number of operators providing direct international internet connectivity.10 The structure described above may give the impression of a neat series of tiered steps, with retail ISPs at the bottom, internet access providers in the middle, and backbone operators, with international links, at the top. However, this would be an

  See European Commission decision in Case IV/​M.1069 WorldCom and MCI, OJ L 116/​1, 4 May 1999.

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over-​simplification. The prevalence of vertically integrated operators means that a large network may be both a retail ISP and a backbone provider. Furthermore, over-​supply of international capacity, resulting in cheaper prices, has allowed some networks that would otherwise be described as ISPs or internet access providers to bypass backbone providers and obtain international connectivity directly. Nevertheless, the analysis is helpful in understanding the structure of the industry and the reasons behind the different methods of charging. 8.2.3.1  Peering and paying transit There are two main types of payment arrangements adopted in IP interconnection agreements, which will be referred to in this chapter as ‘peering’ and ‘paying transit’. The term ‘peering’ has often been used as a generic term to describe the interconnection of any two computer networks. However, the term is now generally understood to describe settlement-​f ree IP interconnection arrangements; that is, arrangements  where the interconnecting operators agree not to charge each other.11 Peering arrangements are commonly adopted between networks where the traffic flowing in each direction can be expected to be roughly symmetrical.12 Where the parties enter into ‘paying transit’ IP interconnection arrangements, by contrast, charges will be levied for traffic passing through the point of interconnection. Paying transit arrangements are generally entered into where the traffic flow is asymmetrical between the two networks. Transit providers may charge for traffic flowing in one or both directions over the point of interconnection. Whether parties enter into peering arrangements or paying transit arrangements will largely depend on their respective bargaining positions, based on factors such as size of subscriber base (‘eyeballs’) or content hosted. These issues, and some of the other considerations that arise in negotiating IP interconnection agreements, are considered at Section 8.7.

8.2.4  Other access arrangements As noted in the introduction, the term ‘access’ encompasses a broad range of arrangements, of which interconnection is only one kind. These range from very intrusive arrangements involving physical access to another operator’s facilities or network, to the mere provision of wholesale services. Many different kinds of arrangements lie in between these ends of the spectrum.

  They may also be referred to as ‘Bill and Keep’ arrangements.   The peering agreement will sometimes indicate a ratio (eg 1:4) within which the relative volume of traffic flows between the networks may vary, but if they fall outside it can trigger an option to levy charges or renegotiate the agreement. 11

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One of the most intrusive examples of network access lies in local loop access. The ‘local loop’ is defined in the following terms: the physical circuit connecting the network termination point to a distribution frame or equivalent facility in the fixed public electronic communications network.13

This ‘last mile’ of an incumbent’s fixed network has generally been the last component of its network to be upgraded to enable high bandwidth transmission capacity. Where replacement with optical fibre has not occurred, it has been possible, through digital subscriber line (DSL)14 technologies, to upgrade the traditional copper-​based local loop to provide high speed, ‘broadband’ internet access services to users. By obtaining access to the local loop, operators obtain the right to locate equipment at a telephony operator’s local exchange and to physically connect that equipment to end-​users’ local lines, in order to provide DSL-​enabled broadband internet services to customers. Where access to the whole line is obtained, the broadband operator controls the provision of telephony services to the customer as well. Alternatively, ‘shared access’ is where the original operator continues to provide voice telephony services, with the alternative operator providing broadband services to the user. Access arrangements may relate to facilities as well as network elements. An example of access to non-​network facilities is the arrangement between the mobile operators O2 and T-​Mobile to share mobile telephony masts and sites in Germany and the UK, as well as to provide reciprocal roaming services to each others’ customers. These facility-​sharing arrangements were achieved through commercial negotiations, and were subsequently cleared by the European Commission.15 The majority of access arrangements are not as intrusive as the ones described above, and are more like straightforward interconnection arrangements. An example is the provision of carrier pre-​selection, which allow users who are customers of one network to select an alternative operator in advance for particular calls (eg all national calls) without dialling additional digits on their telephone. Unlike local loop access, carrier pre-​selection only involves the interconnection of the two

  Access Directive, Art 2(e).   There are many variants of DSL technology. The variant most commonly used for upgrading the local loop has been asymmetrical digital subscriber line (ADSL) technology. ADSL provides fast download speeds, but comparatively slower speeds for uploading data. To obtain higher speeds over copper, other protocols are deployed, such as VDSL or G.fast. 15  See O2 UK Limited/​T-​Mobile UK Limited (UK network sharing agreement) (2003) OJ L 200/​59, 7 August 2003 and T-​Mobile Deutschland GmbH/​Viag Interkom GmbH (Germany network sharing agreement) (2003) OJ L 75/​32, 12 March 2004. 13 14

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networks; it does not involve the alternative carrier taking physical control of the incumbent’s network infrastructure.16 Some access arrangements are even less intrusive than the ones described above. For example, the provision of wholesale line rental requires the operator who owns a local access line to provide that line on a wholesale basis to another operator. This product is particularly useful for operators who have obtained carrier pre-​selection, as it allows them to bill their customers for both calls and for line rental. In this case, the incumbent operator will continue to service the customer’s line, although the customer’s contract will be with the other operator.

8.3  ACC E SS A ND INTERCONNE C TION R E GUL ATION 8.3.1 Introduction The interests of new entrants in the telecommunications sector may be said to be protected by two distinct tiers of regulation in the EU. Firstly, general competition law prohibits certain anti-​competitive agreements and the abuse of a dominant position.17 Secondly, sector-​specific ex ante measures under the Access Directive. Operators are required to comply with both competition law and the sector-​specific  rules. Most legislators and regulators recognize that general competition law rules are inadequate for fostering the emergence of competition in telecommunications markets. This is because the telecommunications sector may be said to have special characteristics which justify a more interventionist approach than is involved where general competition law is applied. These characteristics include the prevalence of previously state-​owned and state-​funded operators who have historically enjoyed a legal monopoly. These operators have often maintained very high market shares, even many years after the introduction of competition. Secondly, operators who wish to enter the market by building competing infrastructure face very high barriers to market entry; it may not be possible economically, for example, to build out an entire competing communications network. Thirdly, the fact that cooperation among competitors, in the form of access and interconnection arrangements, is essential for the successful operation of competitive communications markets. In this sector, your competitor is also your customer.

16   Carrier pre-​selection was required of all SMP operators under the Universal Services Directive, Article 19, but this was deleted by the 2009 Reforms and under the Access Directive, NRAs may now require an SMP operator to give access to any network elements or facilities that allow carrier selection or pre-​selection (Art 12(1)(a)). 17   See further Chapter 10.

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The aim of sector-​specific legislation is to foster competition. Therefore, as competition emerges, the arguments in favour of maintaining sector-​specific rules lose their force. In the EU the sector-​specific rules have already become more aligned with general competition law over time. It is mostly accepted, however, that sector specific rules in the telecommunications sector are unlikely ever to disappear altogether due to certain innate features of the telecommunications market.

8.3.2  Regulation in the UK prior to the adoption of the Interconnection Directive18 Until the implementation of the Interconnection Directive in the Member States, there was no harmonized access and interconnection policy in the EU, and each Member State took a different approach. Because demand for interconnection at a local level only arises when competition is first introduced in a jurisdiction, the sector-​specific legislation has developed largely in parallel with the history of liberalization of telecommunications markets. When Mercury Communications became licensed in the UK to provide fixed line telephony in competition with BT in 1981, BT was not required to interconnect with it and in some instances refused to do so, arguing that Mercury customers should install an additional line (with an additional telephone) for making and receiving calls from other Mercury customers. Only with the commencement of the Telecommunications Act 1984 was the Director-​General of Telecommunications (DGT)19 empowered to mandate interconnection.20 The first determination setting terms and conditions on which BT and Mercury were required to interconnect was made in October 1985.21 This included a determination as to the charges which BT could levy, which were calculated on the basis of fully allocated costs, including a return on the capital invested. A number of further Mercury/​BT determinations were made in the following years, as well as determinations in 1991 for the interconnection arrangements between Mercury and Vodafone and between Mercury and BT Cellnet (the two mobile network operators at the time).

18   Directive 97/​33/​EC of the European Parliament and of the Council on interconnection in telecommunications with regard to ensuring universal service and interoperability through the application of the principles of open network provision (ONP), OJ L 199/​32, 26 July 1997 (the ‘Interconnection Directive’). 19   The functions of the Director General of Telecommunications (DGT) now rest with Ofcom. 20   Telecommunications Act 1984, s 7(5), (6). 21   See Beesley, ME, and Laidlaw, B, ‘The British Telecom/​Mercury interconnect determination: an exposition and commentary’, in Beesley, ME, Privatisation, Regulation and Deregulation (2nd edn.) (Routledge, 1997) pp 299–​327.

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Further demands for interconnection arose when the first post-​duopoly PTO licences were issued in 1993, and when the first international facilities licences were issued in 1996.22 The new licensees were required to show that they had relevant connectable system (RCS) status in order to be entitled to interconnection. In practice, RCS status was defined in such a way that most PTO licensees were entitled to interconnection. In 1994, Oftel commenced a major review of interconnection pricing. The review was needed to take account of the growing level in sophistication of the interconnection products needed and a growing requirement on the part of operators to purchase disaggregated interconnection services. In 1996/​97 Oftel required that BT’s interconnection charges be based on the forward-​looking incremental cost of replacing capital assets, rather than the historic cost of what the assets cost when originally purchased.23 This type of cost modelling in respect of interconnection pricing was finally adopted in a Commission Recommendation in 1998.24

8.3.3  The Interconnection Directive The Interconnection Directive brought about significant harmonization of interconnection policy in the EU. It introduced two different tiers of interconnection rights and obligations. First, operators authorized to provide the public telecommunications networks and services set out in Annex I of the Interconnection Directive, or who enjoyed significant market power (SMP), were required to meet  all reasonable requests for access to their networks (Article 4(2)). Three categories of networks/​services were listed in Annex I: fixed telephone networks; mobile telephone networks; and leased line services. Member States were required to ensure the adequate and efficient interconnection of these networks to the extent necessary to ensure interoperability of these services for all users within the EC (Article 3(3)). A rebuttable presumption of SMP arose where an operator had a 25 per cent market share. An operator with less than 25 per cent market share could be found to have SMP where the operator’s ability to influence market conditions, its turnover relative to the size of the market, its control of the means of access to end-​ users, its access to financial resource, and its experience in providing products and services in the market were taken into account (Article 4(3)).

  See further Chapter 3.   For further discussion on the costing of interconnection, see Chapter 2. 24  Commission Recommendation 98/​195/​EC ‘on Interconnection in a liberalized telecommunications market’, OJ L 73/​42, 12 March 1998. 22

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SMP operators were also subject to a range of other obligations under the Interconnection Directive. 25 These included adherence to the principle of non-​d iscrimination, and a requirement to make interconnection agreements available to the national regulatory authority and to interested parties. SMP operators providing fixed-​line networks and leased lines (but not SMP operators providing mobile networks) were also required to set transparent and cost-​ orientated interconnection charges, and to publish a reference interconnection offer. The second tier of regulation under the Interconnection Directive required all operators authorized to provide the public telecommunications networks and services set out in Annex II of the Directive to negotiate interconnection with each other on request (Article 4(1)). The categories in Annex II were: (i) organizations which provided fixed and/​or mobile public switched telecommunications networks and/​or publicly available telecommunications services, and controlled the means of access to termination points identified by numbers in the national numbering plan; (ii) organizations which provided leased lines into users’ premises; (iii) organizations which were authorized in a Member State to provide international telecommunications circuits between the Community and third countries, for which purpose they had special or exclusive rights; and (iv) organizations which provided telecommunications services which were permitted to interconnect in accordance with relevant national licensing or authorization schemes. Where commercial negotiations failed to bring about interconnection, NRAs had a range of powers to intervene to settle disputes, to require specified conditions to be observed, to specify issues to be covered in interconnection agreements, and to set time limits for the conclusion of negotiations.

8.3.4  UK implementation of the Interconnection Directive and the imposition of other access rights The Interconnection Directive was implemented in the UK through the Telecom­ munications (Interconnection) Regulations 1997, SI 1997/​2931 (Interconnection Regulations), and through amendments to operators’ telecommunications licences (both individual licences and class licences) in accordance with the

  Such obligations may be found in Arts 6, 7, and 8 of the Interconnection Directive.

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Licensing Directive.26 The Regulations and licence conditions largely replicated the provisions in the Interconnection Directive. This section will examine only some specific, important aspects of the UK implementation. 8.3.4.1  Determinations of SMP and requests for access Oftel determined that Kingston Communications (in respect of the Hull area) and BT (for the remainder of the UK) had SMP in the provision of fixed networks and services and leased lines, and that Cellnet and Vodafone had SMP in the market for mobile networks and services. These operators were therefore required to meet all reasonable requests for access to their network from Annex II operators. BT and Kingston Communications were also required to publish a reference interconnection offer and to provide access services at cost-​orientated prices. A range of interconnection products were requested by Annex II operators, particularly of BT. Some examples that have proved particularly important for competing operators include the following: 1. FRIACO interconnection—​FRIACO stands for fixed-​rate internet access call origination. In simple terms, FRIACO was a service whereby ISPs are charged a flat rate for calls from BT customers to telephone numbers which were dialled by users’ modems to access the internet. When first requested by MCI in 1999, BT refused to provide such a service so the dispute was raised with the DGT. The DGT directed BT to provide a FRIACO product at its digital local exchanges.27 Further directions relating to FRIACO required BT to provide FRIACO interconnection at other levels in its network.28 2. ATM interconnection—​ATM interconnection refers to interconnection with BT’s ‘asynchronous transfer mode’ network. Before BT provided ATM interconnection, operators wishing to purchase wholesale DSL products from BT were required to purchase an end-​to-​end service, consisting of DSL access, conveyance across BT’s core network, and the connection between BT’s network and their own network. ATM interconnection allows competing operators to use their own network for the conveyance of their customers’ traffic wherever possible. This could allow operators to provide wholesale DSL products to other operators in competition with BT. BT was directed to 26   Directive 97/​13/​EC on a common framework for general authorizations and individual licences in the field of telecommunications services; OJ L 117/​15, 7 May 1997 (the Licensing Directive). 27  DGT, Determination of a dispute between BT and MCI Worldcom concerning the provision of a Flat Rate Internet Access Call Origination product (2000). 28  Such as at its tandem exchanges. See DGT, Determination relating to a dispute between British Telecommunications and Worldcom concerning the provision of a Flat Rate Internet Access Call Origination product (FRIACO) (2001).

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provide ATM interconnection on a retail minus basis29 in June 2002 following a dispute with Energis and Thus. 30 3. PPCs—​PPCs are ‘partial private circuits’. In effect, PPCs are circuits providing capacity between an end-​user’s premises and a point of interconnection between two operators’ networks. PPCs allow competing operators to provide leased line services to end-​users even if the competing operator’s network does not reach the end-​user’s premises. BT was directed to provide PPC interconnection products in a series of decisions over 2001 and 2002.31 Another direction made by the DGT under the Interconnection Regulations concerned what are known as radio base station (RBS) backhaul circuits. RBSs are the base stations that transmit signals to and from mobile handsets. RBS backhaul circuits are functionally identical to PPCs, but they are used to link RBSs with the main part of a mobile operator’s network. A dispute arose between BT and Vodafone as to the provision of RBS backhaul circuits. In June 2003 the DGT, using its powers under the Interconnection Directive and the Interconnection Regulations, directed BT to provide RBS backhaul circuits to Vodafone on terms similar to those applying to PPCs.32 BT challenged the DGT’s right to investigate the dispute on the basis that RBS backhaul circuits do not fall within the definition of ‘interconnection’ under the Interconnection Directive and the Interconnection Regulations. In May 2004, the Competition Appeals Tribunal (CAT) handed down a decision holding that RBS backhaul circuits are not interconnection products, and, accordingly, the DGT had no jurisdiction over the Vodafone/​BT dispute.33 The principal reason for the Tribunal’s decision was that RBS backhaul circuits are, in effect, used by Vodafone to construct its own network: they link a Vodafone RBS with the main part of Vodafone’s network. RBS backhaul circuits do not

29   Retail minus pricing does not involve setting an absolute level of charge; it allows the operator to set the level of charges according to its commercial judgment. However, the operator is required to ensure that a sufficient margin exists between the charge in question and the relevant downstream price so as to allow the necessary additional costs of providing the downstream product to be recovered. Setting prices on a retail minus basis should ensure that no discrimination takes place between the downstream arm of the operator providing the product and competing operators. 30  DGT, Direction to resolve a dispute between BT, Energis and Thus concerning xDSL interconnection at the ATM switch (2002). 31  DGT, Direction under condition 45.2 of the public telecommunications operator licence granted to BT under Regulations 6(3) and 6(4) of the Telecommunications (Interconnection) Regulations 1997 (2001), DGT, Phase 1 Direction to resolve a dispute concerning the provision of partial private circuits (2002), DGT, Partial private circuits, Phase 2—​a Direction to resolve a dispute (2002). 32  DGT, Direction to resolve a dispute between BT and Vodafone regarding wholesale connections between BT’s and Vodafone’s networks (radio base station backhaul circuits) (2003). 33   [2004] CAT 8. Although the DGT’s determination was made before the Communications Act 2003 came into force, the appeal was made after that time, and so proceedings were brought before the CAT rather than the High Court.

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ensure connectivity between Vodafone customers and BT customers, or between Vodafone customers and customers on any other network. Indeed, for such connectivity to be established, points of interconnection would be needed. The Tribunal was required to determine the appeal on the basis of the law in force in June 2003, when the direction was made. As will be seen below, the law now permits broader access rights to be mandated. The provision of RBS backhaul circuits has since been mandated under the new regime. 8.3.4.2  Licence conditions Obligations concerning interconnection, largely replicating the provisions of the Interconnection Directive and the Interconnection Regulations, were inserted into all telecommunications licences in 1999.34 They included conditions requiring all Annex II operators to negotiate connection services, including co-​location and facility sharing with each other, and for SMP operators to meet all reasonable requests for access, to not unduly discriminate, to publish a reference interconnection offer, and to charge cost-​based prices for access services. In addition, specific access conditions were at various times imposed on operators via their telecommunications licences. Some examples of these conditions are discussed. 8.3.4.3  Wholesale line rental Following a review of the fixed telephony market which found that BT had market power in the provision of calls and access, BT’s licence was modified in August 2002 to require it to provide line rental on a wholesale basis to other operators. This enabled operators who obtained both CPS interconnection and wholesale line rental from BT to offer their customers a single bill for calls and access, something that, previously, could only be done by those operators who owned the access line.35 8.3.4.4  Access to the local loop In 2000, the European Council in Lisbon identified a pressing need to increase broadband internet use across the EU. The EU was lagging behind the US in terms of penetration of such services, and it was perceived that the EU may miss out on the growth and employment potential of the knowledge economy. It was also perceived that increased competition in DSL broadband services would lead to lower prices and thus stimulate demand. Member States were therefore encouraged to ensure that new entrants were entitled to access to incumbent operators’ local

34   Pursuant to the Telecommunications (Licence Modifications) (Standard Schedules) Regulations 1999, SI 1999/​2 450 and the Telecommunications (Licence Modification) (Mobile Public Telecommunications Operators) Regulations 1999, SI 1999/​2 453. 35  Oftel, Wholesale line rental: Oftel’s conclusions—​statement (2003).

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loop networks. Local loop unbundling was seen as the shot in the arm necessary for stimulating the broadband market. The Commission adopted a Recommendation36 in May 2000 recommending that Member States should mandate access to the local loop by the end of that year. It became clear, however, that many Member States were unlikely to meet this target. The European Parliament and Council then adopted a Regulation37 requiring ‘notified operators’ to meet reasonable requests for unbundled access to their local loop and related facilities under transparent, fair, and non-​d iscriminatory conditions, and to publish a reference offer for such access. NRAs were given powers to intervene to ensure non-​d iscrimination, fair competition, economic efficiency, and maximum benefit for users, and to settle disputes. The Local Loop Regulation was repealed as part of the 2009 Reform. Under the Local Loop Regulation, ‘notified operators’ were those designated by NRAs as having significant market power in the provision of fixed public telephone networks and services under the Interconnection Directive. This meant that BT and Kingston were ‘notified operators’ in the UK, and, accordingly, licence conditions were imposed on them in August 2000. In the months after the imposition of the licence condition a large number of operators expressed interest in obtaining access to BT’s local access network. These operators signed confidentiality agreements with BT and joined an operator interest group established by Oftel to facilitate progress. However, the vast majority of these operators never obtained local loop access and withdrew their interest. This can be attributed to many factors, including financial strains on the telecommunications industry at the time. Some in the industry, however, criticized the DGT and Oftel for failing to take swift and appropriate action against BT when faced with complaints by operators seeking access. To address this concern, Ofcom established a Telecommunications Adjudication Scheme in 2004, operated under the auspices of a Telecommunications Adjudicator, to facilitate competitor access to BT’s local loop (which has since become operated by Openreach38). Over recent years, the availability and take-​up of broadband internet access has boomed, mainly through resale of wholesale DSL products obtained from BT. 8.3.4.5  Conditional access and access control services Conditional access services and access control services are services provided to broadcasters and interactive service providers.39 Conditional access services 36   Recommendation 2000/​417/​EC of 25 May 2000 on unbundled access to the local loop, OJ L 156/​4 4, 29 June 2000. 37   Regulation 2887/​2000 of the European Parliament and Council of 18 December 2000 on unbundled access to the local loop, OJ L 336/​4, 30 December 2000 (‘Local Loop Regulation’). 38 39   See further .   See further Chapter 14.

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enable broadcasters to make access to their television or radio signals conditional upon prior authorization. Where conditional access is applied, users need a set top box and appropriately authorized access card to receive a broadcaster’s channels in intelligible form. Access control refers to a range of services provided to broadcasters so that they can run interactive applications through a viewer’s set top box. Prior to the Access Directive, conditional access services were regulated by the Advanced Television Standards Directive.40 The requirements in that Directive were implemented in the UK through the Advanced TV Services Regulations 1996, SI 1996/​ 3151 and through the class licence for Conditional Access Services.41 The licence required, amongst other things, that providers of conditional access services offered them on a fair, reasonable, and non-​discriminatory basis. Access control services were regulated in the UK under the class licence for Access Control services,42 which required, amongst other things, that ‘regulated suppliers’ of such services offer them on fair, reasonable, and non-​discriminatory terms. Sky Subscribers Services Limited was designated as a ‘regulated supplier’ for access control services supplied over its digital satellite platform.43

8.4  EU OBL IG ATIONS IN R EL ATION TO ACC E SS A ND INTERCONNE C TION During the Commission’s review of regulatory policy in the communications sector in 1999,44 the focus of discussion and debate about access and interconnection surrounded two issues. The first concerned the widening of the scope of access rights: the Commission considered that a broader scope of access obligations should be provided for. Apart from fostering competitive markets, the reasoning for the new approach included other public interest reasons, including the promotion of the Single Market and the protection of the environment. The second issue of focus involved when, and how, an operator should be determined to have SMP, thereby being subject to access and interconnection obligations.

40   Directive 95/​47/​EC on the use of standards for the transmission of television signals, OJ L 281/​51, 23 November 1995. 41   The Class Licence was issued under the Telecommunications Act 1984, s 7 in January 1997 and re-​issued in August 2001. 42   August 1999. 43  DGT, Decision as to the status of Sky Subscriber Services Limited as a regulated supplier in the market for access control services for digital interactive TV services (2000). 44   See Commission Communication, ‘Towards a new framework for Electronic Communications infrastructure and associated services: The 1999 Communications Review’, COM(1999) 539, 10 November 1999.

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The New Regulatory Framework of 2002 includes the Access Directive and the Framework Directive.45 The Access Directive defines Member States’ duties in relation to imposing access obligations. The Framework Directive is relevant in understanding these duties, in particular because it sets out the market analysis process which must be undertaken when imposing access obligations based on an undertaking’s market power. Both Directives were subsequently amended in 2009, by Directive 09/​140/​EC.46

8.4.1  Framework Directive The Framework Directive is relevant to the issue of access and interconnection for two reasons. First, as indicated above and discussed in the next section, the Framework Directive details a process whereby NRAs are required to identify markets susceptible to ex ante regulatory intervention; carry out a market analysis; designate any operator with significant market power; and impose those obligations designed to remedy any market failure. Second, it contains provisions on co-​location and facility sharing, both important components of access. Under the original 2002 measure, NRAs were called upon to encourage the sharing of facilities and property by those providing electronic communication networks that had been granted rights to install facilities on, over, or under public and private property, including through expropriation (Article 12). A process for the granting of such rights is provided for under the previous article (Article 11, Rights of way), which are widely referred to as Code Powers.47 Such powers potentially enable an operator to substantially interfere in the property rights of others, therefore encouraging co-​location and facility sharing was seen as an appropriate counter-​balance to such rights. An NRA only had powers to mandate access where there was (a)  no ‘viable alternatives’ and (b)  there was a need to protect the environment, public health, public security, or town and country planning objectives. Before imposition, the NRA would have to carry out a public consultation. Under the 2009 Reforms, these provisions were significantly enhanced. First, the role of the NRA was strengthened from that of ‘encourage’ to the ability to

45   Directive 2002/​21/​EC on a common regulatory framework for electronic communications networks and services, OJ L 108/​33, 24 April 2002 (‘Framework Directive’). 46   Directive 2009/​140/​EC amending Directives 2002/​21/​EC on a common regulatory framework for electronic communications networks and services, 2002/​19/​EC on access to, and interconnection of, electronic communications networks and associated facilities, and 2002/​20/​EC on the authorization of electronic communications networks and services, OJ L 337/​37, 18 December 2009. 47   See further Chapter 6, at Section 6.4.4.4.

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‘impose’ in all situations where operators exercise Code Powers, subject only to the principle of proportionality (Article 12(1)). Second, the no ‘viable alternative’ threshold for intervention has been removed. Third, the persons who may be required to share has been broadened from operators with Code Powers to any owner of ‘wiring inside buildings or up to the first concentration or distribution point where this is located outside the building’, if such sharing can be justified ‘on the grounds that duplication of such infrastructure would be economically inefficient or physically impracticable’ (Article 12(3)). Fourth, a transparency obligation has been inserted whereby undertakings are required to provide, on request, information about the nature, availability and geographical location of any facilities referred to in the first subsection, to enable an NRA to establish an inventory of such facilities (Article 15(4)).

8.4.2  Access Directive The Access Directive defines ‘access’ as: the making available of facilities and/​or services to another undertaking, under defined conditions, on either an exclusive or nonexclusive basis, for the purpose of providing electronic communications services, including when they are used for the delivery of information society services or broadcast content services. It covers inter alia: access to network elements and associated facilities, which may involve the connection of equipment, by fixed or non-​fi xed means (in particular this includes access to the local loop and to facilities and services necessary to provide services over the local loop); access to physical infrastructure including buildings, ducts and masts; access to relevant software systems including operational support systems; access to information systems or databases for pre-​ ordering, provisioning, ordering, maintaining and repair requests, and billing; access to number translation or systems offering equivalent functionality; access to fixed and mobile networks, in particular for roaming; access to conditional access systems for digital television services and access to virtual network services. (Article 2(a))

Access has been defined in the very broadest term, catching not only network access but access to physical infrastructure such as ducts and masts, and to related facilities such as software. The inclusion of ‘virtual network services’ in the definition also seems to imply that access obligations can be imposed on those who do not own the underlying network, but have other rights to use it, such as Mobile Virtual Network Operators.48

  See further Chapter 11 at Section 11.2.5.

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‘Interconnection’ is defined in the Access Directive as: the physical and logical linking of public communications networks used by the same or a different undertaking in order to allow the users of one undertaking to communicate with users of the same or another undertaking, or to access services provided by another undertaking. Services may be provided by the parties involved or other parties who have access to the network. Interconnection is a specific type of access implemented between public network operators. (Article 2(b))

There is no question, then, that interconnection is considered to be a category of access under the European regulatory regime. 8.4.2.1  Overview of the access conditions under the Access Directive The Access Directive envisages that Member States will have the power to impose several different types of access obligations, which can be summarized as follows: • Member States must impose a general obligation on all providers of public electronic communications networks to ‘negotiate interconnection’ with other such providers on request. • NRAs are to encourage and ensure adequate access and interconnection, and the interoperability of services in a way that promotes efficiency, sustainable competition, and gives maximum benefit to end-​users. • NRAs may impose additional obligations on operators designated as having SMP on a specific market, from a list of remedies detailed in Articles 9 to 13a. • NRAs must impose specific access obligations in relation to conditional access services. These categories of obligations are explored in more detail in the following sections. 8.4.2.2  General condition to negotiate interconnection: Article 4 Article 4(1) of the Access Directive provides that ‘operators of public communications networks’ shall have a right, and, when requested by other such undertakings, an obligation, to negotiate interconnection with each other for the purpose of providing publicly available electronic communications services to ensure the provision and interoperability of services throughout the European Community. The category of operators with rights and obligation to interconnect was expanded under the Access Directive from those falling within one of the categories of Annex II under the 1997 Interconnection Directive, to all providers of public electronic communications networks.49 The obligation to negotiate interconnection does not extend to other forms of access under the Access Directive.50 49

  The right of operators to negotiate is similarly enshrined in the Authorisation Directive, Article 4(2)(a).   See Case C-​277/​07, Commission v Poland, 13 November 2008; [2008] ECR I-​8 403, at para 36.

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During the process of negotiating for interconnection, operators may inevitably disclose commercially sensitive information to each other. Such disclosure could be exploited by the receiving operator for its competitive advantage, either (more usually) by undermining the business of the disclosing operator or engaging in anti-​competitive behaviour with the disclosing operator. To prevent such conduct, operators are obliged to use any acquired information solely for the purpose of interconnection and not to share it with any other department or subsidiary within the corporate group (Article 4(3)). The scope of the negotiation provision was examined by the Court of Justice of the European Union (CJEU) in TeliaSonera Finland Oyj v iMEZ Ab.51 In this case, iMEZ, having failed to secure an interconnection agreement with TeliaSonera for the transmission of text (SMS) and multimedia (MMS) messages, requested that the Finnish NRA intervene. The NRA referred the case to arbitration, but the parties failed to reach an agreement. iMEZ then asserted that TeliaSonera had failed to negotiate in ‘good faith’ by not offering a reciprocal agreement on reasonable conditions, which the NRA accepted and ordered TeliaSonera to recommence negotiations. TeliaSonera appealed this decision to the Supreme Court, which then referred certain questions to the CJEU. The Court held that an NRA does have the authority to decide that a party has failed in its obligation to negotiate in good faith when it has proposed interconnection under unilateral conditions that would not allow customers of the requesting operator to utilize the service. The Court also stated that even if the requesting operator was not able to rely on the obligation to negotiate, because it was not itself an ‘operator of public communications networks’, the NRA could require that the requested operator provide interoperability of its SMS and MMS messaging using its powers under Article 5. 8.4.2.3  Other access-​related conditions: Article 5 Article 5(1) of the Access Directive requires national regulatory authorities to encourage, and, where appropriate, ensure adequate access and interconnection, and interoperability of services, in a way that promotes efficiency, sustainable competition, and gives maximum benefit to end-​users. The Directive specifically provides that this may include obligations: • on operators that ‘control access to end-​users’, including in justified cases the obligation to interconnect their networks, to the extent necessary to ensure end-​ to end connectivity (Article 5(1)(a)); • on operators that ‘control access to end-​users’ to make their services interoperable (Article 5(1)(ab));52

51

  Case C-​192/​0 8, 12 November 2009; [2009] ECR I-​10717.

  Inserted in 2009.

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• to provide access to application program interfaces (APIs) and electronic program guides (EPGs) on fair, reasonable, and non-​d iscriminatory terms, to the extent necessary to ensure accessibility for end-​users to digital radio and television broadcasting services (Article 5(1)(b)). Article 5(1) goes way beyond anything under the 1997 Interconnection Directive. It should be emphasized that it accords Member States the right to impose access obligations even on operators who do not have market power, where the NRA takes the view that such obligations are needed to ensure ‘adequate access and interconnection, and interoperability’. Conditions imposed under Article 5(1) must be notified to the Commission and other NRAs in accordance with the procedures under Articles 6, 7, and 7a of the Framework Directive, as a check on how these powers are used.53 Under the original proposal for the Access Directive, the Commission would have been entitled to require conditions set under Article 5(1) to be withdrawn, but this right was not included in the final wording. In 2006, the Commission again proposed an amendment to require prior authorization from the Commission for Article 5(1) obligations,54 but it was absent from the 2009 Reform; which is illustrative on the ongoing political tussle over the best approach towards harmonization in the European Union. 8.4.2.4  Imposition of access obligations on operators with SMP: Articles 8–​13 The access obligations under Articles 8 to 13a of the Access Directive may only be applied to undertakings possessing SMP, except in ‘exceptional circumstances’ (Article 8(3)). SMP designation  A key difference between the access and interconnection regime under the Interconnection Directive and that under the Access Directive concerns the test that is applied to determine whether an undertaking is considered to have SMP. Whilst the Interconnection Directive created a presumption of SMP where an operator had 25 per cent market share, the Access Directive sets a higher hurdle by adopting a definition which is consistent with European competition case law: . . .  either individually or jointly with others, it enjoys a position equivalent to dominance, that is to say a position of economic strength affording it the power to behave to an appreciable extent independently of competitors, customers and ultimately consumers. (Article 14)

  See further Chapter 4, at Section 4.6.   Commission Staff Working Document ‘on the Review of the EU Regulatory Framework for electronic communication networks and services –​Proposed changes’ COM(2006) 334 final, at 5.4. 53

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The process that NRAs are to undertake to determine whether any undertaking in a given market has SMP is set out in the Framework Directive.55 NRAs are required to take the ‘utmost account’ of the Commission’s guidelines for market analysis and the assessment of SMP56 (EC Guidelines), and the Commission’s Recommendation on the relevant product and service markets.57 There is arguably an underlying tension between the requirement that NRAs must on the one hand define markets according to general competition law, and the requirement on the other hand that they must take ‘utmost account’ of the four markets defined in the Commission’s most recent Recommendation. If a national regulatory authority undertakes a study of part of the industry to determine the relevant market, and such study is undertaken strictly in accordance with the tests set out in general competition law, it is hard to see how taking the ‘utmost account’ of the Commission’s list of markets is meant to change or influence that analysis. However, if NRAs define markets that differ from those set out in the recommendation, they are required to undertake a consultation process with other national regulatory authorities and the Commission. The Commission may ultimately require a market definition which departs from its Recommendation to be withdrawn.58 Based on its market analysis, each NRA must determine whether the market in question is effectively competitive. If the market is not effectively competitive, the NRA must identify the operators with SMP on that market and impose appropriate, specific, regulatory obligations, or maintain or amend obligations already in place (Article 16(4)). The decision to designate or not designate an operator as having SMP is subject to a consultation procedure under the Framework Directive. The Commission ultimately has the power to require that a market definition or market analysis decision be withdrawn (Article 7). Where a finding of SMP is made, NRA must impose at least one of the remedies detailed in Articles 9 to 13a of the Access Directive. These wholesale remedies, graduated in nature from mild behavioural obligations to significant structural intervention, are given preference over the imposition of retail remedies under Article 17 of the Universal Services Directive. The intent of the Commission is that these remedies should be exhaustive; therefore, no other obligations in respect of access and interconnection can be imposed unless the

 Ibid.   Commission Guidelines on market analysis and the assessment of significant market power under the Community regulatory framework for electronic communications networks and services, OJ C165/​6, 11 July 2002. 57   Commission Recommendation (2014/​710/​E U) of 9 October 2014, OJ L 295/​79, 11 October 2014. 58   Framework Directive, Arts 6, 7, and 15(3). See further Chapter 4, at 4.6. 55

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national regulatory authority first obtains authorization from the Commission (Article 8(3)). Remedies  The most important obligation for the present discussion is that which can be imposed under Article 12 of the Access Directive and which relates to the provision of ‘access to, and use of, specific network facilities’, particularly in situations where it is considered that denial of access or unreasonable terms and conditions would hinder the emergence of a sustainable competitive market at the retail level, or would not be in the interest of end-​u sers (Article 12(1)). The following types of access obligations are specifically envisaged in Article 12: • giving of access to specified network elements and/​or facilities, including those which are ‘non-​active’ such as dark fibre,59 as well as unbundled access to the local loop and carrier and/​or pre-​selection; • negotiating in good faith with undertakings requesting access; • not withdrawing access to facilities already granted; • providing specified services on a wholesale basis for resale by third parties; • granting open access to technical interfaces, protocols, or other key technologies that are indispensable for the interoperability of services or virtual network services; • providing co-​location or other forms of facility sharing, including duct, building, or mast sharing; • providing specified services needed to ensure interoperability of end-​to-​end services to users, including facilities for intelligent network services or roaming on mobile networks; • providing access to operational support systems or similar software systems necessary to ensure fair competition in the provision of services; • interconnecting networks or network facilities; and • access to associated services, such as identity, location and presence services. (Article 12(1)(a)–​( j)) The imposition of any of the obligations in Articles 9 to 13a must always be based on the nature of the problem identified, be proportionate, and be justified in light of the general policy objectives in the Framework Directive, like consumer protection, the protection of privacy, and ensuring network security and integrity.60

59

  ‘Dark fibre’ is optical fibre transmission capacity which has not been connected to a laser system.   Access Directive, Art 8(4). See also C-​2 8/​15, Koninklijke KPN BV v ACM, 15 September 2016.

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Where an access obligation is imposed under Article 12, additional factors must be taken into account: • the technical and economic viability of using or installing competing facilities, in light of the rate of market development, taking into account the nature and type of interconnection and access involved; • the feasibility of providing the access proposed, in relation to the capacity available; • the initial investment by the facility owner, bearing in mind the risks involved in making the investment; • the need to safeguard competition in the long term; • where appropriate, any relevant intellectual property rights; and • the provision of pan-​European services. (Article 12(2)(a)–​(f)) Apart from the access obligations in Article 12, as described, the other regulatory obligations that may be imposed on SMP operators are as follows: Article 9 Obligation of transparency—​Operators may be required to make public a range of information, such as accounting information, technical specifications, network characteristics, and terms, conditions and prices, or to publish a ‘reference offer’. The reference offer should be sufficiently unbundled to enable a requesting operator to only receive what is necessary for the requested service. Where an operator is required to give access to the local loop, the operator must be required to publish a reference offer which includes the provisions specified in Annex II of the Access Directive; Article 10 Obligation of non-​ discrimination—​ Operators may be required to provide equivalent conditions in equivalent circumstances, and provide services and information of the same quality as it provides to its own downstream businesses; Article 11 Obligation of accounting separation—​Operators may be required to keep separate accounts in respect of interconnection or access services, including its internal transfer pricing. The regulator shall be able to require the disclosure of accounting data and may publish such information as it considers necessary to contribute to a competitive market, while respecting commercial confidentiality; and Article 13 Price control and cost accounting obligations—​I n specific circumstances, operators may be subjected to price caps, including controls requiring that prices are ‘cost orientated’. The meaning of ‘cost orientation’ is not further defined, although the CJEU has held that it does not mean the ability to recover all costs incurred by an operator, which meant that a NRA was able to ‘set the prices of the services covered by such an obligation below the level of the costs

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incurred by that operator to provide them, if those costs are higher than the costs of an efficient operator’.61 The burden of proving compliance with any obligation of cost-​orientation will reside with the operator (Article 13(3)). Reflecting the desire to encourage the deployment of NGNs by SMP operators, NRAs are required to allow ‘a reasonable rate of return on adequate capital employed, taking into account any risks specific to a particular new investment network project’ (Article 13(1)). Introduced under the 2009 Reforms, this amendment was designed to respond to the threat that Member States could be tempted to grant regulatory ‘holidays’ to SMP operators, generally the national incumbent, in order to promote investment in NGNs. Such an approach was adopted in Germany in respect of so-​c alled ‘new markets’, although it was subsequently struck down by the CJEU.62 Article 13a Functional separation—​Introduced under the 2009 Reforms, this is an ‘exceptional’ structural remedy, under which an operator would be required ‘to place its activities related to the wholesale provision of relevant access products in an independently operating business entity’. The remedy is modelled on the UK’s experience with BT and Openreach. In addition, the separated undertaking may be subject to any of the behavioural obligations specified in Articles 9–​13. As a measure of last resort, imposition of this remedy is subject to a distinct assessment and notification procedure. While Articles 9–​13a are ex ante regulatory measures, an additional procedure has been inserted into the Access Directive as an ex post response to an undertaking deciding to voluntarily separate its ‘local access network assets’ into another legal entity (Article 13b). The operator is required to notify the NRA ‘in advance and in a timely manner’, to enable the NRA to carry out an assessment of the intended separation and impose, maintain, amend, or withdraw any obligations in respect of the operator. Recommendations  Under the Framework Directive, the Commission has the power to publish recommendations designed to address areas where NRAs have adopted divergent approaches to the implementation of their regulated tasks (Article 19(1)). NRAs must ‘take the utmost account’ of these recommendations and follow ‘as a rule’, except where it ‘is not appropriate to the circumstances that it may depart from it, giving reasons for its position’.63 A similar power was granted to the Commission under the Interconnection Directive,

  Case 277/​16, Polkomtel v Prezes Urzędu Komunikacji Elektronicznej, 20 December 2017, at para 40.   Case 424/​07, Commission v Germany, 3 December 2009, [2009] ECR I-​11431. 63   C-​2 8/​15, Koninklijke KPN BV v ACM, 15 September 2016, at para 38. 61

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but was limited in scope to cost accounting systems and accounting separation (Article 7(5)). In 2009, the Commission issued a recommendation on ‘the regulatory treatment of fixed and mobile termination rates in the EU’, designed to further harmonize NRA approaches to cost-​orientation under Article 13.64 The Commission recommends that ‘efficient costs’ should be based on current costs, the use of a bottom-​up modelling approach and long-​r un incremental costs (LRIC) as the cost methodology.65 Concerns about divergent Member State and NRA approaches to encouraging investment in Next Generation Networks lead to the issuance of a recommendation ‘on regulated access to Next Generation Access Networks (NGA)’66. The recommendation calls upon NRAs to mandate access to a range of facilities controlled by an SMP operator, including its ‘civil engineering infrastructure’, particularly ducts; as well as the terminating segments of fibre-​to-​the-​home (FTTH), which are replacing the traditional copper segments accessed under LLU. A further recommendation was adopted in 2013 to ensure more consistent approaches to the imposition of non-​d iscrimination obligations and the use of costing methodologies.67 8.4.2.5  Conditional access systems and other facilities: Article 6 Article 6 of the Access Directive requires Member States to impose a range of conditions in relation to conditional access services for digital television and radio. As noted earlier, conditional access enables broadcasters to make reception of their television and radio signals conditional upon prior authorization such that viewers need descrambling equipment, usually in the form of an authorized access card inserted into a set top box, for viewing or listening to the transmission. These conditions, set out in Part I  of Annex I  of the Access Directive include an obligation for providers of conditional access to offer services to broadcasters on a fair, reasonable, and non-​d iscriminatory basis, compatible with Community competition law. Member States may, where certain conditions are met, maintain, amend, or withdraw conditional access conditions if a market review is carried out and shows that one or more operators do not have SMP on the relevant market (Article 6(3)).

  Recommendation 2009/​396/​EC, OJ L 124/​67, 20 May 2009.   Ibid, at 2. See further Chapter 2, at Section 2.14. 66   Recommendation 2010/​572/​E U, OJ L 251/​35, 25 September 2010. 67   See Commission Recommendation on consistent non-​d iscrimination obligations and costing methodologies to promote competition and enhance the broadband investment environment, COM(2013) 5761 final, 11 September 2013. 64 65

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8.4.2.6  Reform proposals In September 2016, the Commission published proposals to reform the Access Directive, as part of a recasting and consolidation of the existing NRF measures.68 The 2016 Proposals are designed to ‘reinforce’ the SMP access regime and ‘promote infrastructure competition and network deployment by all operators’.69 In terms of the former, the market analysis procedure would be reformed to codify best practices, such as NRAs taking into account commercial access agreements. The market reviews are also to be extended from three to five years, which would benefit operators in terms of long-​term planning and lessen the burden on NRAs. Greater access to an SMP’s physical infrastructure is also to be facilitated, as well as the imposition of symmetrical obligations on all operators to ensure access to ‘non-​replicable network assets, such as in-​house wiring and cables’.70 Existing Commission recommendations on cost-​based and tariff-​setting methodologies would become binding, with the Commission also proposing to establish ‘maximum’ voice termination rates in the EU. These latter interventions are being sold as a means of ‘alleviating the administrative burden for national regulators’, although they clearly also reflect the Commission’s desire for greater harmonization through centralizing key decisions. The 2016 Proposals also address the desire to encourage the deployment of high-​capacity networks within the EU. NRAs will be expected to survey current provision to identify ‘digital exclusion areas’ and measures to tackle them. Going beyond existing facility sharing arrangements, measures will facilitate ‘commercial co-​investment in new infrastructures’, based on a recognition that risk-​ sharing will need to be greater between SMP operators and access seekers when new access products are developed. Finally, there is a provision addressing the role of NRAs in SMP decisions to switch-​off legacy PSTN networks and moving to Next Generation Networks.71 The 2016 Proposals will obviously change in the course of the legislative process, but overall they represent an incremental reform rather than an overhaul of the existing regime.

8.4.3  Roaming Regulation According to the definition of ‘access’, roaming is a form of access that falls within the scope of the Access Directive. However since 2007, ‘Union-​w ide roaming’ has

68   Proposal for a Directive establishing the European Electronic Communications Code, COM(2016) 590 final, 14 September 2016 (‘2016 Proposal’). 69 70   Ibid, at 15.  Ibid. 71   eg BT has announced its intention to close its legacy PSTN core network by 2025.

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been regulated through a separate regime comprising a series of Regulations72 and implementing measures.73 Such intervention was considered necessary because the Framework and Access Directives are not considered to provide NRAs ‘with sufficient tools to take effective and decisive action’,74 which justifies ‘exceptional measures’,75 for four stated reasons. First, the imposition of ex ante obligations by NRAs requires the identification of operators with SMP, which has proven difficult in respect of the wholesale market for international roaming. Second, at a retail level, roaming is not identifiable as a distinct market, since it is only one component of a package of services purchased by consumers. Third, roaming involves the conduct of a foreign operator, the ‘visited network’, over which the NRA where the customers normally reside has no ability to control their behaviour. A final justification is the political desire to promote the achievement of a single European market.76 The Roaming Regulations make reference to the ability of NRAs to impose obligations on non-​SMP operators under Article 5 of the Access Directive (see 8.4.2.3), but it is only in limited circumstances, where interoperability or end-​to-​end connectivity is threatened through termination of a roaming agreement, or there is no agreement in place with any wholesale provider.77 Between 2007 and June 2017, the Roaming Regulations introduced and progressively lowered the so-​called ‘euro-​tariffs’ for calls, SMS, and data until retail roaming charges disappeared and the principle of ‘roam like at home’ was established throughout the EU. Operators can submit a request to an NRA to apply a surcharge on customers where it is unable to ‘recover its overall actual and projected costs’, although only in ‘exceptional circumstances’.78 Such a scenario is considered most likely to arise in the case of Mobile Virtual Network Operators (MVNOs).79 While retail roaming charges have been abolished, charges continue to be regulated at a wholesale level.80

8.4.4  Deployment Directive The deployment of broadband access networks has become a priority issue for the EU and Member States trying to facilitate economic growth through the

72   Regulation No 717/​2007 was amended by No 544/​2009, and was then replaced by No 531/​2012, which has been amended by No 2120/​2015 (‘Roaming Regulations’). 73   eg Commission Implementing Regulation (EU) 2017/​2 311 setting the weighted average of maximum mobile termination rates across the Union, OJ L 331/​39, 14 December 2017. 74 75 76   Regulation No 717/​2007, at recital 4.   Ibid, at recital 13.   Ibid, at recitals 6–​8 and 10. 77 78   Regulation No 531/​2012, at recital 81 and Art 16(5).   Ibid, at Art 6(c). 79   Commission Implementing Regulation (EU) 2016/​2286, OJ L 344/​4 6, 17 December 2016, at recital 27. 80   See n 76.

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digital economy.81 To lower the cost of such deployment, improved access to existing physical infrastructure, such as pipes, ducts, and masts, is seen as a key facilitator. While such access could be mandated through the Access Directive (Article 5) or the Framework Directive (Article 12), both are restricted in scope by being limited in application to providers of electronic communication services, preventing measures being imposed across other utility sectors with similar network infrastructures. To address this lacuna, a Directive was adopted applicable to a broad range of ‘network operators’, including gas, electricity, water, and transport services.82 The measure requires that all network operators should have a right to offer access to its physical infrastructure for electronic communication networks, as well as an obligation ‘to meet all reasonable requests for access . . . under fair and reasonable terms and conditions’ (Article 3). To facilitate such access, network operators must provide certain information to providers of ‘public communication networks’, either upon request or via a ‘single information point’, subject to any limitations required for reasons of network security and integrity, national security, public health and safety, or commercial confidentiality (Article 4). Where new physical infrastructure needs to be built, network operators shall have a right to negotiate agreements for the coordination of any ‘civil works’83 required to build the infrastructure. Such coordination is also seen as a means of reducing the social and environmental costs associated with such works, including pollution and traffic congestion (Recital 13). However, an obligation to meet any reasonable request for coordination only arises where the works are being financed in whole or part through public funds (Article 5). As with access to existing physical infrastructure, network operators have transparency obligations in respect of ‘on-​going or planned’ civil works (Article 6). Another perceived obstacle to network deployment is the number and variety of different permissions that may be required to carry out any works, such as building, planning, and environmental permits; as well as the lengthy procedures associated with their issuance. Member States are therefore required to establish ‘single information point’ systems to make available information on the procedures and conditions applicable to such permits and require that the competent authorities grant or refuse any such permits within four months from receipt of a completed request (Article 7).   Commission Communication, ‘A Digital Agenda for Europe’, COM(2010) 245 final/​2, 26 August 2010.   Directive 2014/​61/​E U on measures to reduce the cost of deploying high-​speed electronic communications networks, OJ L 155/​1, 23 May 2014 (‘Deployment Directive’). 83   This ‘means every outcome of building or civil engineering works taken as a whole which is sufficient of itself to fulfil an economic or technical function and entails one or more elements of a physical infrastructure’ (Art 2(4)). 81

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The final perceived bottleneck addressed by the Deployment Directive is ‘in-​ building physical infrastructure’,84 the facilities within end-​user premises that enable operators to provide access through network termination points. Member States are required to ensure that all new buildings from 1 January 2017 specify in the building permit the need to equip such buildings with ‘high-​speed-​ready’ infrastructure (Article 8). Rights-​holders in respect of such ‘in-​house physical infrastructure’ must then meet all reasonable requests for access from public communication networks (Article 9(3)). If agreement on access cannot be reached within a two-​month period from receipt of an access request, then the dispute can be referred to a national dispute settlement body; which in the case of the UK is Ofcom.85

8.5  UNITED K ING D OM ACC E SS A ND INTERCONNE C TION  R E G IME Shortly after the EU review of telecommunications started in 1999, the UK also began a review of the regulatory environment governing the communications industry, starting with the Communications White Paper in 2000. This review led, eventually, to the passage of the Communications Act 2003, which implemented the Access and Framework Directives (and the other EU Directives which required implementation by July 2003), and brought about further sweeping changes, including the formation of Ofcom, which commenced its operations in December 2003. ‘Interconnection’ is defined in the Communications Act 2003, s 151(2) and largely replicates the definition in the Access Directive. ‘Network access’ is defined in s 151(3) and (4)  of the Communications Act. It includes, apart from interconnection, access to a range of electronic communications networks, services, and facilities for the purpose of the provision of an electronic communications service. Whilst it is not as prescriptive as the definition of ‘access’ in the Access Directive, in that it does not give specific examples of the types of access covered, it is almost certainly as broad. The following sections explain how the UK has implemented both the facility sharing provision under the Framework Directive, the four categories of access obligations in the Access Directive, already mentioned; as well as the Deployment

84   This ‘means physical infrastructure or installations at the end-​u ser’s location, including elements under joint ownership, intended to host wired and/​or wireless access networks, where such access networks are capable of delivering electronic communications services and connecting the building access point with the network termination point’ (Art 2(7)). 85   The Communications (Access to Infrastructure) Regulations 2016, SI 2016/​700, at Pt 3 (‘Infrastructure Access Regulations’).

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Directive.86 Finally, consideration is given to the role of state aid in regulating ‘access’ in the UK.

8.5.1  Facility sharing The facility sharing provisions were transposed into the Communications Act 2003 under the ‘access-​related conditions’, s 73(3). The provision was amended in 2011, in order to transpose the 2009 Reforms.87 The limitation to situations where there is ‘no viable alternative’ has been deleted and instead Ofcom can set such conditions for the purpose of ‘encouraging efficient investment in infrastructure’ and ‘promoting innovation’ (s 73(3A)). In its response to the consultation, the Government noted that operators have expressed concerns about how Ofcom might exercise such power, but promised further guidance from Ofcom.88 In terms of establishing an inventory of facilities, the Government decided not to require Ofcom to build a comprehensive inventory, due to the cost burden on network operators and security and commercial concerns.89 It decided instead to amend Ofcom’s ad-​hoc information-​gathering powers to include ‘identifying electronic communications apparatus that is suitable for shared use’ (s 135(3)(ig)). In addition, Ofcom was given the power to make available information about facilities that in its opinion are ‘suitable for shared use’ (s 76A). Although not required to establish an inventory, Ofcom has stated that it will keep the issue under review.90 In accordance with the Deployment Directive, network operators now have a right to request ‘discloseable information’ from an ‘infrastructure operator’, subject to various conditions;91 but the option of establishing a ‘single information point’ has not been taken up by the UK government. Prior to the 2011 Regulations, Ofcom had already been given a new obligation to report on the UK’s communications infrastructure, which includes the need to report on ‘the extent to which UK networks share infrastructure’ (ss 134A and 134B). 92 The first report was published in November 86   Some of the determinations and guidelines discussed in this section were published by the DGT, others were published by Oftel, whilst those published since 29 December 2003 were published by Ofcom. To avoid confusion, this section will refer to Ofcom in the main text, whilst referencing the actual publishing body in the footnotes. 87  The Electronic Communications and Wireless Telegraphy Regulations 2011, SI 2011/​ 1210 (‘2011 Regulations’). 88  DCMS, Implementing the revised EU Electronic Communications Framework: HMG Response, April 2011, at para 48. Such guidance does not appear to have been forthcoming. 89 90   Ibid, para 59.  Ofcom, Infrastructure Report, 1 November 2011, at para 3.19. 91   Infrastructure Access Regulations, at reg 4 (in respect of physical infrastructure) and reg 8 (in respect of civil works). 92   Inserted by the Digital Economy Act 2010, s 1. Ofcom is obliged to publish a report every three years (s 134A(4)), but has since committed to providing updates on an annual basis.

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2011. 93 Addressing network sharing, Ofcom noted that it would expect any company seeking shared access to infrastructure to attempt to negotiate a commercial agreement in the first instance, before it would consider regulatory intervention;94 which is consistent with its approach to handling disputes in general. 95 Ofcom reported in 2011 and 2014 that there had been limited sharing of passive infrastructure in respect of access networks, which is expected to change with the implementation of the Deployment Directive.

8.5.2  General interconnection obligation One of the first tasks undertaken in preparation for the implementation of the Directives was the drafting of the General Conditions of Entitlement.96 Condition 1 of the General Conditions of Entitlement requires every person who provides a ‘public electronic communications network’ (PECN) to negotiate with other such providers ‘with a view to concluding an agreement (or an amendment to an existing agreement) for Interconnection within a reasonable period’. This condition implements the obligation in Article 4(1) of the Access Directive. The definition of PECN is such that it encompasses a transmission system, and the associated apparatus, software, and data used with the system for the conveyance of signals, where such system is provided wholly or mainly for making electronic communications services available to members of the public.97 As the Communications Act 2003, s 32(4)(a) provides that the ‘provision’ of an electronic communications network includes references to ‘its establishment, maintenance and operation’, it is clear that the ‘provision’ of a PECN is not the same as ownership of the network, although some degree of ‘direction or control’ over it is required (s 32(4)(b)). This issue is further explored in a statement issued by Ofcom in May 2003,98 which states that the provider of a single network node who is willing to obtain transmission infrastructure that builds towards an electronic communications network will fall within the definition of a ‘public electronic communications network’. Therefore, by way of an example used in the Statement, where provider A seeks interconnection from provider B, the links between provider A’s node and provider B’s node will constitute provider A’s transmission system, whether the link is self-​provided, leased from provider B, or leased from another provider altogether.99   Ofcom, ‘Infrastructure Report’, 1 November 2011. It was renamed the ‘Connected Nations Report’ in 2015.   Ibid, at para 3.18.    95  See Chapter 3, at 3.3.7.3.    96  See further Chapter 6. 97   See Part 1 of the General Conditions and General Condition 1.4. 98  Oftel, Guidelines for the interconnection of public electronic communications networks (2003). 99   Ibid, para 4.8. 93

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Ofcom’s statement is also helpful in analysing whether an electronic communications network is ‘provided wholly or mainly for making electronic communications services available to members of the public’. The statement provides that a publicly available service is one that is available to anyone willing to pay for it and abide by the applicable terms and conditions.100 A service with only one customer can be considered to be publicly available where it is genuinely available to others on good faith, but, conversely, a service with more than one customer would not necessarily be considered to be available to the public, such as a landlord providing services to tenants on a single premises where such services are not available except to those tenants. ‘Members of the public’ does not require that the service has to be usable by individuals. A service of such a scale that it is only useful to large corporate customers will be considered to be available to members of the public provided that it is generally available to such potential customers. A service would not normally be considered to be available to members of the public where the provider earns a substantial proportion (ie 80 per cent or more) of its revenue from members of its corporate group. This is an important point, because it means that entities that only provide communications services to other members of their corporate group do not have a right to interconnection. Without this rule it would be open to large companies to obtain interconnection services from operators with SMP at cost-​orientated prices (where cost-​orientated prices have been imposed), and even to charge other operators for termination of calls onto their network. This would be intolerable from a public policy point of view, as interconnection rights and obligations should only accrue to those who invest in infrastructure used to provide truly public services, and who contribute to the competitive market. The Interconnection Directive required operators to register with Oftel to be included on the ‘Annex II list’ in order to acquire rights and obligations to interconnect. By contrast, under the new regime no registration is required; the only legal requirement is that of providing a PECN. Ofcom initially decided to maintain a list, similar to the Annex II list, to simplify the process of negotiating interconnection. The list was known as the voluntary register of public electronic communications networks. To be included on the register, operators were required to submit an application form to Ofcom specifying details of how their network qualifies as a PECN. Ofcom subsequently decided to abandon the register on the grounds that it was difficult to administer and did not provide sufficient benefits to operators.

  Ibid, Chapter 6.

100

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8.5.3  Imposition of obligations on operators with SMP The Communications Act 2003 sets out the definition of SMP (s 78), the procedure that Ofcom must follow in reviewing markets (s 79(1)–​(3)) and consulting and making determinations that one or more operators has SMP in a given market (ss 79(4)–​81), and the conditions that Ofcom may impose on such operators (ss 87–​ 91). The provisions in the Act largely correspond with the relevant Articles in the Framework and Access Directives. NRAs were required to commence the enormous administrative feat involved in undertaking market reviews as soon as possible after the adoption of the Market Recommendation, in February 2003.101 As the Communications Act was not in force at that time, special legislation was passed to ensure that the DGT had the power to undertake the tasks necessary to carry out the reviews required by the Framework Directive.102 8.5.3.1  Ofcom’s Access Guidelines Ofcom published market review guidelines in August 2002.103 These guidelines are used in conjunction with the EC Guidelines when assessing whether any undertaking in a given market possesses SMP. Although Ofcom’s guidelines complement the EC Guidelines on most points, they also set out several pages of additional criteria that Ofcom considers should be taken into account when carrying out the analysis. In order to ensure that both SMP operators and competing operators would have a fair expectation of the kind of access obligations that Ofcom was likely to consider appropriate when conducting its market reviews, Ofcom also published guidelines (‘Access Guidelines’)104 explaining how it proposed to apply the conditions that it is entitled to impose on SMP undertakings under the Access Directive. The Access Guidelines indicate the nature of the products Ofcom would expect to be supplied as a result of such an obligation being imposed, and the conditions under which such products should be made available. While the Access Guidelines are clearly dated, they remain a useful indicator of the range of issues that may be considered and the types of remedies that may be imposed on operators possessing SMP. Obligation to  supply wholesale access products  When imposing an obligation to provide access to wholesale products, Ofcom has often required the SMP   Framework Directive, Art 16(1).   See Electronic Communications (Market Analysis) Regulations 2003, SI 2003/​330. 103  Oftel, Market review guidelines: criteria for the assessment of significant market power (2002). 104  Oftel, ‘Imposing access obligations under the new EU Directives’, 13 September 2002, . 101

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operator to ‘meet all reasonable requests for access’. The Access Guidelines state that Ofcom is likely to consider that a request which is technically feasible is ‘reasonable’ if the SMP operator can reasonably expect to receive at least a reasonable rate of return on any necessary investments when the access product is supplied at a price the requesting operator is willing to pay. Only in ‘extreme examples’ should a request for access be denied on the basis that the request is unreasonable.105 New products and innovative products  The Access Guidelines also provide guidance on the situation arising when a competing operator demands a new wholesale product or where products become available because of innovation on the part of the SMP operator. In the case of a demand on an SMP operator to make a new or untested wholesale access product available to a competitor, it can be difficult to determine whether demand for the product will materialize. It is therefore difficult to determine whether the SMP operator can expect a reasonable rate of return on the investment that they will make, which is Ofcom’s test for whether a request is ‘reasonable’. The Access Guidelines state that if the SMP operator will incur significant development costs in supplying a product for which demand is uncertain, the requesting operator may be required to take on an appropriate level of risk. This could involve: • the requesting operator committing to a level of demand at a price that would justify investment by the SMP operator in supplying the wholesale product; or • allowing the SMP operator to specify a pricing structure based on forecast demand and/​or specify a process of balancing payments between the SMP operator and the requesting operator at the end of a set period, based on actual demand. The development costs would need to be incurred in a reasonable and efficient way by the SMP operator.106 In the case of products developed as a result of innovation (and, typically, significant investment) by an SMP operator, the Access Guidelines state that SMP operators should be required to supply an equivalent wholesale product when introducing innovative retail products. The same applies when an innovative wholesale product is made available by an SMP operator to its own vertically integrated retail business.

  Ibid, at 13.

105

 Ibid.

106

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The risk with this approach, obviously, is that SMP operators will be disincentivized from investing in the development of new services, because they will be required to share the results of their innovation with their competitors, rather than being able to gain a competitive advantage and increased market share by being ‘first to market’. The Access Guidelines propose that this problem should be dealt with by allowing SMP operators to impose sufficiently generous terms in the supply of innovative wholesale products to other operators. Where a new or innovative product involves a high level of risk, cost-​based price controls will normally be avoided, even if the SMP operator has very high market share. In such markets, either no charge control, or a retail minus form of regulation may be more appropriate. A retail minus pricing model would in this case allow an element of supernormal profit to be built into the retail price to be retained by the SMP operator. Setting any kind of cost-​based charge control risks distortion of commercial and investment decisions and discouragement of innovative market offerings, ultimately to the detriment of consumers.107 Access to  information protected by  intellectual property rights  The Access Guidelines state that if information which is protected by intellectual property rights is essential to allow competitors to the SMP operator to offer a competing product, the SMP operator would be expected to make the information available. The operator requesting the information would be expected to demonstrate that it is indeed essential.108 Terms and conditions governing access  Ofcom attaches obligations relating to fairness, reasonableness, and timeliness to all access conditions.109 Terms should be consistent with those which would be offered in a competitive market, should be sensible and practical, should include obligations in relation to time lines, such as reasonable service levels and penalties for non-​delivery, and should provide sufficiently unbundled services, so that a competing operator pays only for what it needs.110 The Access Guidelines also envisage that conditions may be imposed on an SMP operator in relation to the process under which competing operators request new products. Ofcom expects SMP operators to deal with such requests within a

  Ibid, 14, 33–​35.   Ibid, 35. Note that this rule does not apply to standard network interfaces, which must be made available in all cases under the interface publication rules. 109   eg Ofcom, ‘Review of the wholesale broadband access markets’, 26 June 2014, Annex 2, Schedule 1, ‘SMP Conditions imposed on BT in Market A’, Part 3, at Condition 1.2. 110   Oftel, n 98, 22–​2 3. 107

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reasonable timescale and to enter into discussions with competing operators if further information or clarity is needed.111 Imposition of  non-​discrimination obligations  Non-​d iscrimination obligations become particularly relevant where an SMP operator is vertically integrated. The Access Guidelines stated that there is a rebuttable presumption that discrimination by a vertically integrated SMP operator in favour of its downstream business would have a ‘material adverse effect on competition’ (3.9). Both the scope of the rebuttable presumption and the test have since evolved, with the presumption being applied only to ‘non-​price differences in transaction conditions’, while the test has become ‘capable of harm to competition’.112 Vertically integrated SMP operators will therefore normally be required to ensure that they provide services on equivalent terms and conditions as are available to subsidiaries and partners, and that they can objectively justify any differentiation. The application of different pricing may be justified on the basis of different underlying costs, or different levels of risk. The Access Guidelines state that the non-​d iscrimination rule would not always prevent volume discounts from being applied, provided that they are applied in a consistent manner. However, a volume discount that benefited the downstream business of an SMP operator disproportionately, by virtue of its size, would not be permitted.113 Imposition of  transparency obligations  The Access Guidelines state that any new wholesale product offered by an SMP operator will normally need to be published in the form of a reference offer. Initial reference offers for new products, and changes and updates to a reference offer for an existing product, should be released in a timely manner, allowing enough time for a reasonably efficient operator to make necessary preparations. Information (including terms, conditions, and prices) must be supplied to any downstream business at the same time that it is released to the market. Sufficient information should be given at the time of or before the launch of a product to enable competitors to make full and effective use of the product supplied, although the disclosure of such information can be made subject to a confidentiality agreement. A  list of the minimum information that must be included in a reference offer, as well as its applicability and availability, is now set out by Ofcom in respect of each market review.114

112   Ibid, 24.   Ofcom, ‘Undue discrimination by SMP providers’, 15 November 2005.   Access Guidelines, at 16–​17 and 30–​31. 114  eg Ofcom statement, ‘Business Connectivity Market Review—​ Volume 1’, 28 April 2016, at paras 8.110–​8.124. 111

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Imposition of charge controls  In general, Ofcom considers that in markets which are not effectively competitive, and where there is little prospect of this changing in the short-​term future, the imposition of charge controls on SMP operators, in the form of cost-​based prices, are generally appropriate. Prices subject to price control should still allow a return on capital that takes into account the level of risk involved. As competition evolves, price caps should be relaxed. In markets which are not effectively competitive, but where market power is diminishing, the Access Guidelines propose that it may be sufficient to rely on the imposition of a general non-​d iscrimination obligation, implemented by requiring that charges are based on a retail minus model. Whilst allowing the SMP operator to recover the same margin as it recovers when retailing the service itself, retail minus price models are intended to prevent the SMP operator from ‘squeezing’ its competitors’ margins.115 Imposition of  obligations relating to  accounting separation According to the Access Guidelines, the main purpose of obliging operators to prepare and publish regulatory financial information is to ensure compliance with the non-​ discrimination obligations (to prevent margin squeezing), and to prevent anti-​ competitive cross-​subsidy. The information may also be used in setting charge controls, conducting sector reviews, and in specific case work. Typically, separate statements would be required in relation to the different activities of a vertically integrated operator. As it is generally not feasible for NRAs to continually monitor prices, where there are incentives for SMP operators to impose a margin squeeze, it may be appropriate to also require publication of prices in the relevant downstream market, so that any margin squeeze would be highly visible.116 8.5.3.2  Market reviews and remedies The process of identifying relevant markets, operators with SMP, and appropriate remedies was commenced in the UK soon after the publication of the Commission’s first Market Recommendation. The analysis must then be repeated every three years, unless an extension is obtained.117 At the completion of each review a consultation document is published, setting out the relevant markets, proposed findings of SMP, and any proposed SMP conditions, and inviting comments. After the consultation, the draft determinations of market power and SMP conditions are then notified to the European Commission for comment,118 before the final determination comes into effect. Even then, Ofcom’s decision may be subject to appeal

116   Access Guidelines, 19–​21. See also Chapter 2, at Section 2.15.1.5.   Ibid,  21–​22. 118   Framework Directive, Art 16(6).   In accordance with ibid, Art 7(3).

115 117

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before the Competition Appeals Tribunal (CAT), which has quashed its decisions on both geographic and product market definitions,119 and further appeals from the CAT.120 The size of this task should be appreciated. The UK market reviews total many thousands of pages of detailed analysis. A detailed analysis of each of the market reviews is beyond the scope of this chapter.121

8.5.4  Article 5 access-​related conditions As already noted, apart from the general interconnection condition and SMP conditions, Article 5 of the Access Directive entitles national regulatory authorities to impose certain further access conditions. The Article 5 conditions may be imposed where necessary to ensure adequate access and interconnection, and interoperability of services. In particular, NRAs may impose access-​related conditions to ensure end-​to-​end connectivity, and to ensure accessibility for end-​users to digital radio and television broadcasting through access to application programme interfaces and electronic programme guides. These provisions of Article 5 are reflected in ss 73 and 74 of the Communications Act. As in the Access Directive, these conditions can be imposed even where no operator possesses SMP in a market. Ofcom has indicated that it will construe its rights to impose such conditions restrictively, and expects the use of access-​related conditions to be very limited.122 The following sections examine the circumstances where Ofcom has considered imposing Article 5 access-​related conditions. 8.5.4.1  End-​to-​end connectivity In guidance published in May 2003,123 Ofcom considered the question of whether specific obligations were needed to ensure end-​to-​end connectivity, that is, connectivity enabling users to contact users and services on other networks as well as those on the same network. Achieving end-​to-​end connectivity would require that all operators both purchase call termination services from all other operators, and provide call termination services when requested. If imposed, operators would have been positively required to ensure that they are directly or indirectly connected with all other operators and purchase call termination from those

 eg British Telecommunications plc v Ofcom [2017] CAT 25.  eg Hutchison 3G (UK) Limited v Office of Communications [2009] EWCA Civ 683. 121   See further Chapter 2, at Section 2.15.1.6 et seq. 122   DGT, National Roaming Condition, A consultation on proposals to set a national roaming condition after 25 July 2003 (2003), 4. 123  DGT, End-​to-​end connectivity; Guidance issued by the Director General of Telecommunications (2003). 119

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operators whenever one of their customers wants to reach a user or service on that other network, and positively required to ensure that they terminate any call received onto their network. These obligations would have gone beyond the obligation to negotiate interconnection on request, which all operators are required to do under Condition 1 of the General Conditions of Entitlement. Ofcom concluded that the imposition of obligations to ensure end-​to-​end connectivity was not appropriate, for several reasons. In considering imposing an obligation to purchase call termination from other operators, Ofcom considered that the imposition of such an obligation on the universal service providers (that is, BT and KCom) would be disproportionate. This is because those operators must in any case meet reasonable requests for access to publicly available telephone services, which, it is implied, includes being able to contact other customers and services, irrespective of the terminating network. For operators other than BT and KCom, Ofcom considered that the commercial incentives to provide end-​to-​end connectivity were sufficiently strong to ensure that they seek to purchase call termination without any additional obligation to ensure that they do. This is clearly correct, as it is almost unthinkable that an operator would seek to set up a new service that did not allow customers to contact users and services on other networks. Ofcom considered that it was not necessary to impose any additional obligation on any operator to provide call termination services to other operators because almost all public electronic communications networks are already under an SMP condition requiring them to provide call termination to all other public electronic communications networks on fair and reasonable terms. 8.5.4.2  National roaming Before the auction for 3G mobile spectrum in 2000, the DGT sought to amend the PTO licences of the 2G operators who were bidding for 3G spectrum, requiring them to provide ‘national roaming’ to the new entrant who was awarded spectrum in the auction. In the end, because of the timing of a legal challenge,124 amendments were only made to the licences of O2 and Vodafone, who voluntarily accepted the condition. The national roaming condition, Condition 69A, required O2 and Vodafone to negotiate a national roaming agreement with the new entrant 3G operator, ‘3’, allowing its users to roam onto their 2G network. The aim of the condition was to address the concern that 2G mobile network operators which won 3G licences would be able to offer basic 2G services to customers whilst building

124   Mercury, trading as One-​2-​One, appealed the decision to impose the condition and was initially successful (Moses J, QBD, 6 August 1999); although it was overturned in Mercury Personal Communications Ltd v Secretary of State for Trade & Industry [2000] UKCLR 143.

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out their 3G network, whereas a new entrant would not have this advantage, and would not be able to compete. With the abolition of telecommunications licences in July 2003, Ofcom had to consider whether to re-​impose national roaming obligations on 2G operators under the new regulatory regime. The initial conclusion of its predecessor, Oftel, was that all four of the UK’s 2G operators should be subject to a new ‘access-​related condition’, under the Communications Act 2003, ss 73–​74, requiring them to provide national roaming on fair, reasonable, and not unduly discriminatory terms.125 Instead, Ofcom decided to issue continuation notices to O2 and Vodafone, pending a further consultation in July 2004. In this consultation, Ofcom proposed that any access condition be removed in favour of ‘less intrusive regulation’, on the grounds that there was sufficient commercial interest in the offering of national roaming to 3 and Ofcom’s ability to intervene to resolve any disputes if they arose.126 However, 3 asked Ofcom to delay the withdrawal of the condition until it had re-​tendered for the roaming contract, which it successfully completed in 2006, signing a contract with Orange for national roaming outside the 88 per cent coverage it had already built. The condition has since been withdrawn.

8.5.5  Article 6 access-​related conditions Article 6 of the Access Directive requires that the conditions set out in Part I  of Annex I of the Access Directive must be imposed on providers of conditional access services. As noted earlier, conditional access services allow broadcasters to make the receipt of their television and radio signals in intelligible form conditional on prior authorization, as well as enabling the provision of interactive services. Sections 73(5) and 75(2) of the Communications Act require Ofcom to impose access-​related conditions in relation to conditional access. Section 76 is concerned with the modification and revocation of such conditions. Following a consultation, Ofcom set access-​related conditions in relation to conditional access on 24 July 2003, so that they were in place at the commencement of the new regulatory regime.127 The conditions were applied to Sky Subscribers Services Limited (SSSL) in respect of its digital satellite platform and mirror the conditions required to be set under Part I of Annex I of the Access Directive. These include the requirement to provide conditional access services to broadcasters on a fair, reasonable, and non-​d iscriminatory basis, to keep separate financial accounts, and to publish charges terms and conditions in relation to conditional

126  Oftel, National Roaming Condition, 15 May 2003.  Ofcom, National Roaming, 22 July 2004.  DGT, The regulation of conditional access, Setting of regulatory conditions; Explanatory statement and formal notification pursuant to section 48(1) of the Communications Act 2003 (2003). 125 127

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access services. Ofcom carried out a market review of ‘wholesale digital platform services’ in 2006, as well as issuing guidance on how it interprets the obligations on SSSL.128 In 2015, Ofcom let the access control obligations lapse, on the grounds that SSSL had made voluntary commitments that achieve the same outcomes, while Ofcom retained the necessary powers to intervene if required.129

8.5.6  Dispute resolution Section 185 of the Communications Act 2003 empowers Ofcom to deal with certain disputes between operators in relation to network access.130 Sections 94 to 104 set out Ofcom’s rights in relation to the enforcement of conditions which it has imposed (including SMP conditions and the General Conditions of Entitlement). Notably, civil proceedings can be brought by one operator against another where the first operator suffers loss occasioned by the other operator’s breach of a condition. However, Ofcom’s consent is required before such proceedings can be brought.131 Ofcom has issued guidelines for handling disputes and complaints. It is clear that in relation to both disputes and complaints Ofcom expects the party raising the issue with Ofcom to provide substantial evidence before Ofcom will consider taking action.132

8.5.7  Broadband UK As noted previously, much of the focus on ‘access’ issues is currently driven by a policy concern to promote the roll-​out of NGNs, in the UK as well as other jurisdictions. In addition to providing market participants and new entrants with regulated access incentives, however, governments are also directly intervening in the market through the public funding or subsidization of NGN roll-​out by network operators. Such schemes impact on access and interconnection through the conditionality imposed on the receipt of such state funding. State aid may, in itself, create competition problems and is therefore regulated at an EU level;133 but in terms of access, governments will generally impose pro-​access contractual obligations upon any undertaking that receives public monies.

128   Ofcom, ‘Review of Wholesale Digital Platform Services’, 10 October 2006 and ‘Provision of Technical Platform Services—​Guidelines and Explanatory Statement’, 21 September 2006. 129   Ofcom, ‘Review of Sky’s Access Control Services Regulation’, 17 March 2015. 130   Section 185A was inserted in 2003, enabling Ofcom to invite parties to refer a dispute. 131 132   Communications Act 2003, s 104(4).  Ofcom, Dispute Resolution Guidelines (7 June 2011). 133   Commission Communication, EU Guidelines for the application of State aid rules in relation to rapid deployment of broadband networks, OJ C 25/​1, 26 January 2013.

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In the UK, the Department for Culture Media and Sport has established a team, Broadband Delivery UK, to allocate and distribute public funds designated for broadband roll-​out in rural areas.134 Local authorities can submit plans and apply for a share of the monies; which, if allocated, the work would then be put out to tender to potential suppliers.

8.6  PR AC TIC A L A ND CONTR AC T UA L ISSUE S IN NE G OTI ATING C IRC UIT-​S WITC HED ACC E SS AG R EEMENT S Every time that access arrangements are entered into there should, of course, be a contract in place setting out the parties’ rights and responsibilities. This section will examine some of the practical and contractual issues that are likely to arise when negotiating arrangements for access to parts of the public switched network. IP interconnection agreements are discussed in Section 8.7. Access agreements are by no means a generic set. For example, a complex agreement to establish a mobile virtual network135 will have little in common with a basic agreement to interconnect two networks. One factor that does act to distinguish between different kinds of access agreements, however, is whether either party has SMP in the relevant market and, in particular, whether an SMP party is required to publish a reference offer for the access that is sought. This section will analyse first some aspects of those access arrangements not subject to a reference offer, with a particular focus on interconnection agreements. Some special considerations relevant to reference offers will then be examined.

8.6.1  Bespoke access contracts Whilst a growing number of complex access arrangements exist, a common arrangement that operators deal with on a day-​to-​day basis remains interconnection. With new telephony providers entering the market on a fairly regular basis, legal advisers and contract managers at telecommunications companies see a steady flow of interconnection agreements. A new entrant is likely first to seek to establish interconnection with the incumbent operator, in order to take advantage of transit services needed to establish connectivity with other operators. This agreement will usually be covered by the incumbent’s reference offer; see Section

134  See . See also Commission Press Release, Commission endorses UK National Broadband Scheme for 2016–​2020, IP/​16/​1904, 26 May 2016. 135   A mobile virtual network agreement gives one operator, usually with limited infrastructure of its own, and without a licence for radio spectrum, the right of access to parts of the network of a mobile operator in order to provide mobile telephony services to its own customers. See further Chapter 11, at Section 11.2.5.

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8.6.2. The new entrant may then seek direct interconnection agreements with other operators. Interconnection agreements are usually bilateral; that is, they govern the terms on which each party will terminate traffic onto the other party’s network. Each party is usually subject to almost identical obligations, including identical warranties, and the same exclusions and limits on liability. For this reason, bilateral interconnection negotiations are often fairly harmonious. The parties should still ensure, however, that the contract gives them the legal protection they need. If it is unclear or poorly drafted, it will be of no help to the parties in the event of a later contractual dispute that the initial contract negotiations were not difficult. Interconnection agreements will, of course, contain many of the terms that you would expect to see in any commercial agreement, including provisions setting out payment arrangements, confidentiality, limitations and exclusions of liability, and provisions relating to whether the agreement can be assigned or transferred. The following sections describe some provisions that are particular to interconnection agreements. 8.6.1.1  Location of the points of interconnection The interconnection agreement should set out the location of one or more points of interconnection. It will usually be appropriate to provide that the parties may also agree additional locations for additional points of interconnection at a later time. This way, the parties do not need to enter into another agreement just to establish another point of interconnection. The most common place to locate a point of interconnection is at the site of a switch of one of the parties. This is commonly described as ‘customer sited interconnection’. The location of the point of interconnection at some other location is commonly referred to as ‘in-​span interconnection’. With customer sited interconnection arrangements, one party will need to locate (or ‘co-​locate’) equipment inside the other’s premises. The agreement should provide when and how the co-​locating party is to get access to the other’s premises to install and maintain such equipment. The party providing co-​location may require the other to indemnify it for any damage caused in its premises. 8.6.1.2  Termination charges The agreement will set out the charges levied by each party for the termination of calls onto its network. Termination charges are usually calculated on the length of the call, so the interconnection agreement will usually specify a charge per minute. The applicable rates may vary according to the time of day. As already noted, in the UK every public electronic communications network providing mobile call termination or geographic call termination has been

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determined as having SMP in the market for the termination of calls onto their respective networks.136 Ofcom’s approach in imposing SMP conditions in respect of call termination services has varied according to the structure of related markets, and whether each operator possesses market power in the related market for call origination. As a result, in the mobile market Vodafone, O2, T-​Mobile, and Orange were required to comply with charge controls in respect of their 2G call termination services. In the fixed market, BT is required to base its call termination charges on efficiently incurred long-​r un incremental costs, reducing each year in line with charge controls, and each other operator providing call termination services is required to provide such services on terms, conditions, and charges that are fair and reasonable. New-​entrant fixed telephony operators must, therefore, only levy fair and reasonable termination charges. However, as a dispute between BT and Telewest has demonstrated, in practice Ofcom requires that charges for fixed geographic call termination are calculated on the basis of ‘reciprocal charging’.137 This means that fixed geographic call charges will be calculated according to a formula based on BT’s regulated charges. There is some room for the charges to vary if there are relevant differences between the terminating network and BT’s network, but in practice reciprocal charging usually means that each party’s termination rates are identical.138 8.6.1.3  Forecasting and provision of capacity Interconnection agreements will provide how the parties determine the capacity requirements for each point of interconnection (port capacity), and may require that the parties try to ensure that sufficient capacity is maintained to meet ‘busy hour’ traffic demands. The parties will usually be required to give each other rolling traffic forecasts, on the basis of which orders for capacity at a particular point of interconnection are placed. New entrant operators will have no historical data on which to base their traffic forecasts. Whilst there is an entire science dedicated to this area, some element of guesswork will be required. New entrants should therefore resist any provisions that impose penalties for incorrect forecasts, as they are much more likely to get it wrong than a party that has been running its network for some time.

  See further Chapter 2, at Section 2.15.2.  Ofcom, Resolution of a dispute between BT and Telewest about reciprocal charging arrangements for call termination rates (16 April 2004). 138   See Ofcom, ‘Determination to resolve dispute between Opal Telecom and BT about Opal’s fixed geographic termination rates’, 29 October 2009. 136 137

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8.6.1.4  Interconnection circuits Interconnection circuits are links, such as leased lines, that connect a party’s network with the point of interconnection. Each party will generally be responsible for ensuring that sufficient links are in place in order that it can terminate calls received via the point of interconnection. 8.6.1.5  Technical requirements A minimum standard for the number of permitted ‘dropped calls’ (ie calls that are cut off) is common. Interconnection agreements usually also require compliance with a range of standards, as well as with detailed operational manuals developed by the parties.

8.6.2  Reference offers Reference offers are standard contracts setting out the terms on which an operator will enter into access arrangements. As noted above, NRAs are empowered by the Access Directive to require operators with SMP in a given market to publish a reference offer for network access. As the largest SMP operator in the UK, BT is required to publish reference offers for a large number of different services. Rather than publishing a separate agreement for each different type of access, BT historically published a small number of agreements with schedules for each different service. However, with the operational separation of BT and the establishment of Openreach, each SMP product now has a distinct reference offer.139 Regulators like reference offers because they can see exactly what terms an SMP operator is offering. The other principal advantage is that they eliminate the possibility of the SMP operator unduly discriminating in the terms it offers different operators, because the terms are identical. For this reason, the terms set out in reference offers are usually not open to negotiation.

8.7  PR AC TIC A L A ND CONTR AC T UA L ISSUE S IN NE G OTI ATING IP INTERCONNE C TION AG R EEMENT S The internet is characterized by connected networks, and internet users expect close to full connectivity with every website and email address around the world. ISPs, therefore, need to ensure that they have direct or indirect connectivity in place with every other network which makes up the internet. As identified earlier, there are two main ways of achieving IP interconnection: peering arrangements, 139

  Available from .

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and paying transit arrangements. A new-​entrant ISP is likely to start with one or more paying transit arrangement to achieve worldwide connectivity in one step, and then to pursue peering arrangements with local ISPs once it has established its business, in order to reduce costly transit charges. Although some descriptions of internet industries give an impression that they are unregulated (and unregulatable!), IP interconnection falls within the definition of interconnection under the Access Directive, and, as such, is regulated in the same manner as other forms of interconnection.140 As a consequence, those providing a public electronic communications network (which would catch all publicly available ISPs) must generally negotiate IP interconnection with each other on request. IP interconnection agreements are also subject to the same dispute resolution mechanisms as other interconnection agreements, as set above.

8.7.1  Peering agreements Whilst the term ‘peering’ is used in different ways, it usually describes an arrangement between two ISPs under which they agree to directly connect their networks to provide reciprocal access to each others’ users, for no charge.141 To prevent networks taking advantage of this situation and sending all their traffic for free across the networks with which they are peering, peering agreements prohibit the exchange of traffic that has originated from, or is destined for, third party networks; that is, the agreements prohibit the exchange of ‘transit traffic’. There are some clear advantages with establishing peering. There are obvious cost advantages where the traffic flowing in each direction is approximately equal, as operators will not need to invest in the accounting infrastructure needed to bill each other for traffic passing over the point of interconnection. Another cost saving arises from the fact that neither party needs to pay a third party upstream transit provider for carrying the traffic between the two networks. One study showed that the cost of carrying traffic to the peering point of interconnection can be less expensive by a factor of ten, than transit services which achieve the same connectivity.142 There are also some technical advantages with peering, as compared with transit. As the traffic does not traverse third party networks, the connection can

140   However, the Commission has not identified ‘wholesale internet connectivity’ as a market for the purpose of ex ante market analysis. See Commission Staff Working Document, accompanying Recommendation 2007/​879/​EC, SEC(2007) 1483/​2 rev1, at 37. 141  In circuit-​ s witched interconnection, similar such arrangements are generally referred to as ‘bill and keep’. 142  Norton, WB, Internet Service Providers and Peering (2003), 3.  Available at .

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potentially be faster and more reliable, resulting in lower ‘latency’, meaning that less packets of data are lost. It is obviously in ISPs’ interest to ensure faster traffic consumption, particularly if they are billing their users based on the amount of data downloaded! Peering is not always the right solution, however. The most common reason why parties will not peer is that the traffic flow between them is asymmetrical, and one party will therefore bear a greater proportion of the cost of peering.143 This is not only a question of the respective size of the networks, but also of whether the networks are content-​r ich. A network that is content-​r ich will have a small amount of inbound traffic (such as in the form of requests for data on the websites it hosts), but will generate a large amount of outbound traffic (in the form of the content from those websites being sent to the network from which the request was generated). The relative bargaining position of the parties will in this case influence whether a peering arrangement or a paying transit arrangement is established. In considering a potential peering partner, an ISP is therefore likely to examine how much incoming traffic on its network originates from the potential peer, and how much outgoing traffic is addressed to the potential peer.144 Calculations are then made to assess whether peering is likely to reduce the cost of the transit between the two networks. Peering will require investment in router capacity and interconnection circuits to carry traffic to the point of interconnection, so will only be justified if significant savings in transit costs will follow. Some ISPs, particularly large ones, have peering policies which are freely available.145 Any ISP that meets the criteria can apply to become a peering partner of that ISP. Backbone ISPs’ peering policies can include requirements that the peering partner has presence in four or more regions where both parties have a presence, along with sufficient transport bandwidth and traffic volume to warrant direct interconnection.146 Once the parties have decided to establish peering arrangements, they will enter into negotiations on the contractual terms that will govern the relationship. Whilst some peering agreements run to hundreds of pages, most are very short and informal documents compared with typical switched interconnection

  For further discussion on the advantages and disadvantages with peering, see further ibid, 3–​5.   Internet traffic carries in it data that indicates which ISP the traffic originated from (‘originating autonomous system’ or ‘originating AS’) and is destined for (‘terminating autonomous system’ or ‘terminating AS’). An ISP may therefore sample their inbound and outbound traffic and determine approximately how much of it originated from another ISPs’ network (in the case of inbound traffic) or is bound for routers on the other ISP’s network (in the case of outbound traffic). 145   For example, ‘Verizon Business Interconnection Policy for Internet Networks’, available at < http://​w ww. verizonenterprise.com/​terms/​peering/​>. 146   See n 142, 3–​4. 143

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agreements.147 The agreements may be bilateral or multilateral, private or public. Because no charges are levied, peering partners do not treat each other as customers, but as equals. Sometimes this means that each party will be prepared to accept limited contractual undertakings from the other party (such as extremely limited warranties and no service level guarantees) on the basis that they want their own obligations to be as limited as possible. Many peering agreements may be said to lack teeth, but this is a reflection of the perceived low risks involved. Notwithstanding this, there are a number of considerations that legal advisers reviewing peering agreements should be alert to. The sections below examine some of the issues that need to be addressed. 8.7.1.1  Access to the peer’s users A peering agreement should provide each party only with access to the other’s users and should explicitly prohibit transit traffic being sent over the points of interconnection. Without this provision, operators could be required to carry any traffic originating from their peer across their network without receiving any payment for doing so; this would obviously go against the spirit of the peering arrangement. The parties can normally identify and stop transit traffic because each party’s AS numbers and router addresses will be included in the peering agreement. Packets of data with other AS numbers or originating from other routers can therefore be recognized. 8.7.1.2  Location of the points of interconnection One of the first issues that the parties are likely to discuss and agree upon is the location(s) of the point(s) of interconnection. In some large cities, one option may be to interconnect at a public internet exchange, such as London Internet Exchange (LINX), where numerous network operators directly interconnect at one geographic location. Public internet exchanges manage the interconnection on their members’ behalf and require their members to comply with common technical requirements. Some are run on a not-​for-​profit basis, with each member only contributing to the cost of running the exchange, whereas others are run by profit-​ making entities. Internet exchanges such as LINX have hundreds of ISP members, and one or both parties negotiating peering may already have a presence at the exchange. In these circumstances establishing peering may take as little as a matter of hours once the agreement has been signed. There are some clear advantages with interconnecting at a public internet exchange, a primary one being that each ISP will only need to have one single

147   BEREC Report, ‘An assessment of IP interconnection in the context of Net Neutrality’, BoR (12) 130, 6 December 2012, notes, ‘99% of interconnection arrangements are concluded on a handshake basis’!

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interconnection circuit between its network and the exchange in order to peer with many other networks. Some internet exchanges also have standard bilateral agreements on which their members contract, which can significantly simplify negotiations.148 Peering at a public internet exchange will not always be viable or desirable, however. For remote networks, the closest exchange may be far from any of the operator’s network nodes,149 or an operator may anticipate having few regional peering partners, meaning that peering at the exchange does not result in benefits from economies of scale. In these cases operators will enter into arrangements to peer at private peering points. Private peering points give the parties greater control over the interconnection, and, accordingly, much greater control over the quality of the service that can be expected. Private peering is typically arranged by each party obtaining co-​location services at a telecommunications exchange, and then establishing interconnection between the networks. The parties may find that they have points of presence150 in common exchanges already, in which case establishing the physical interconnection can be achieved very quickly. If peering points are needed at further exchanges where the parties do not have points of presence, then they will need to agree which exchange(s) best suit their needs, and approach those exchange(s) to obtain co-​location. Many cost and operational issues will influence the decision when choosing an exchange, including whether competitively priced interconnection circuits are available between the parties’ respective networks and a particular exchange. It is not uncommon for large networks to establish peering at a variety of public internet exchanges and private peering points. Some peering agreements provide that the parties are required to investigate moving the location of a point of interconnection from a public internet exchange to a private peering point if and when the volume of traffic exchanged over the point of interconnection exceeds a certain level. This is intended to give operators greater control over the quality of service at those points of interconnection which carry the heaviest traffic. 8.7.1.3  Compliance with peering criteria As already noted, many network operators have formal or informal criteria when choosing peering partners. What happens, however, when the parties have entered

148   See, for example, the LINX bilateral interconnect agreement at . 149   A network node describes a point in the network at which interconnection can be established. 150   A point of presence is a point in the network from which users are connected.

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into a peering relationship and the peering partner subsequently fails to meet the criteria? For example, many operators will only be looking to peer with networks where the traffic flow between the two networks is relatively equal. However, the ratio of traffic transmitted from one network to the other may change over time, for example if one network operator develops its hosting business and becomes a net exporter of content. Peering agreements sometimes deal with this by setting a traffic ratio (eg 4:1 outbound traffic to inbound traffic). The parties agree to peer (without settlement) up to the ratio, beyond which they must pay the other party, usually for each Megabyte of outbound traffic. This arrangement is a form of paid transit arrangement, discussed further. The issue of traffic ratios was brought into focus in 2003 in a dispute in the US between America Online (AOL) and Cogent Communications Group. AOL offered peering when the traffic ratio was no more than 2:1 and when the ratio with Cogent reached 3:1, AOL terminated the peering connection. In enforcing its traffic ratio criteria, America Online began to charge Cogent for traffic that had previously been exchanged free of charge.151 Another example where peering criteria may be enforced is where one operator requires the other’s network to have certain minimum characteristics. If the characteristics are not met, then sometimes transit charges are payable, such as if a minimum threshold for packet loss is exceeded. Any provisions in a peering agreement that can potentially change the nature of the relationship to a paying transit relationship should be closely reviewed by legal advisers. 8.7.1.4  Confidentiality and security As with switched interconnection agreements, there are two distinct confidentiality concerns: confidentiality of customer information and communications, and confidentiality of business information shared between the parties for the purpose of peering. Although limited, necessary traffic analysis may be permitted by the peering agreement, it will usually prohibit the capture of the content of any traffic exchanged between the parties’ networks. Standard confidentiality clauses should always be included to protect against the disclosure of business information learned through the peering relationship, and, importantly, against the use of such information for any purpose other than the performance of the agreement.

151   See Noguchi, Y, ‘Peering dispute with AOL slows Cogent customer access’, Washington Post, 27 December 2003, available at .

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8.7.1.5  Sharing of costs Where the parties interconnect at a public internet exchange, they will each have a separate agreement with the body that runs the exchange governing the costs of running the exchange, and so such costs will not need to be dealt with in the peering agreement. Where a private peering point is used, however, the parties must determine how costs are to be divided between them. Each operator may pay half, or the costs may be split based on the amount of traffic exchanged in each direction. 8.7.1.6  Technical and operational schedules The information in the technical and operational schedules may include information such as the physical addresses of the points of interconnection, details of the parties’ infrastructure, and the parties’ contact details. Contact details will in most cases include details for a 24-​hour network operation centre. Provisions for disaster recovery are also becoming more common.

8.7.2  Paying transit agreements In this chapter, the term ‘paying transit’ is used to refer to any IP interconnection arrangements that are not settlement free. Historically, smaller ISPs would enter into paying transit arrangements with transit providers in order to obtain connectivity with third party networks that were beyond the smaller ISP’s reach. The exchange of traffic between users of the small ISP and users of the transit provider was often governed by a peering arrangement, with points of interconnection often established at public internet exchanges. This changed, however, between 1996 and 1998, when many of the large US backbone providers radically changed their peering criteria. Within a very short time many pulled out of public internet exchanges and changed the majority of their peering partners into paying customers. Backbone providers commonly only peer with a very small number of their largest competitors. Paying transit arrangements, therefore, now describe both the arrangement under which an operator transits traffic between two different networks for a fee, and the arrangement under which it charges for access to its own users and content hosted on its own network.152 However, a recent relative decline in IP-​t ransit has been attributed to the growth of Content Distribution Networks (CDNs),153 which are designed to

152   A detailed discussion of the series of events in the US in this period is included in Cukier, KN, ‘Peering and fearing: ISP Interconnection and Regulatory Issues’, . 153   Both third party CDN service providers, such as Akamai, and self-​provision CDNs, such as Netflix Open Connect.

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address latency concerns for sensitive traffic, such as streaming video services, as well as greater regional peering, enabling circumvention of transit provided by the tier 1 backbone providers.154 Many ISPs find that they must pay their upstream internet access provider or backbone provider a fee, often called a ‘download fee’ for inbound traffic received over a point of interconnection, whether the traffic has originated on a third party network or the internet access provider/​backbone provider’s own network. The download fee will be charged, for example, when a user on the downstream ISP downloads a web page hosted on the backbone provider’s network or on any network from which the backbone provider has agreed to provide transit. Some internet access providers/​backbone providers also charge a fee, sometimes called a ‘backchannel fee’, for data received onto their network from the downstream network. A backchannel fee will be charged to the downstream network, for example, when a user on the backbone provider’s network, or on any network to which the backbone provider has agreed to provide transit, downloads a web page hosted on the downstream network.155 ISPs can find, therefore, that they are paying for both inbound and outbound traffic carried by their upstream access provider. Although some content-​r ich networks are able to negotiate a more favourable position, many ISPs cannot. These arrangements have caused some disquiet amongst small and medium sized ISPs. Unsurprisingly, in paying transit arrangements customers look for more detailed and more onerous contractual terms from their transit providers than they do from their peering partners. Some of these terms will be similar to those described for peering agreements, above. Some of the terms that are likely to differ are considered in the following sections. 8.7.2.1  Access to all networks Unlike peering partners, who will only provide access to users on their own network, transit providers can provide access to virtually all other networks on the public internet through upstream transit agreements. The paying transit agreement will set out which routes the agreement applies to. This will not, obviously, include those routes where the customer network has established private peering relationships or where other transit arrangements are in place. 8.7.2.2  Location of the points of interconnection Whilst it is possible to establish paying transit arrangements at public internet exchanges, private interconnection arrangements are more common because the transit operator has better control over quality of service.

  See n 152, at 58.   A good explanation of the payment arrangements can be found in the ACCC discussion paper ‘Internet Interconnection Service’ (2003). 154 155

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8.7.2.3  Service levels Detailed schedules are likely to specify service level guarantees and may specify service credits or liquidated damages in the event that the service levels are not met. 8.7.2.4 Charges Much detail is likely to be dedicated to how the charges payable are to be calculated, invoiced, and paid. Numerous different models may be used to calculate transit charges, including on a per byte basis or on a port basis (ie a flat-​rate charge). Discounts may be applied based on volume or the perceived value of the content hosted on the customer network.

8. 8  CONC LUDING R EM A R K S A ND FU T UR E TR END S The interconnection and access regime does not have a significant impact on interconnection and access arrangements between two operators who do not possess SMP. Although the regime requires them to negotiate interconnection with each other, there are commercial incentives for them to do so in any case. In this respect the regime may be said to merely reinforce rational market behaviour. However, it is apparent that competing operators in the EU continue to rely heavily on the existence of sector-​specific rules, particularly in the form of ex ante conditions and directions on network access, to obtain access rights from operators with SMP. This appears to be as much the case under the Access Directive as under the Interconnection Directive before that. Although there is no doubt that general competition law would prohibit the refusal to supply access in many cases,156 it seems unlikely, for example, that general competition law would have resulted in competing operators obtaining rights access to FRIACO interconnection, ATM interconnection, and to wholesale line rental. However, the gradual erosion of the market shares held by incumbents, and the emergence of new technologies in which they do not have a stranglehold, such as voice-​over IP, is likely to prompt incumbents to argue for the retreat of the sector-​ specific rules. This is an ongoing battleground between incumbent operators and their competitors.

  See further Chapter 10.

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9 CONSUMER PROTEC TION AND TELECOMMUNIC ATIONS Elizabeth Newman

9.1 Introduction: Why Is There Consumer Protection for Telecommunications?  9.2 EU Provisions  9.3 UK Provisions  9.4 Concluding Remarks 

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9.1  INTRODUC TION: WH Y IS THER E CONSUMER PROTE C TION F OR TEL E COMMUNIC ATIONS ? Since the last edition of this book, there has arguably been a shift in focus in favour of consumer protection in the telecommunications industry both at EU and at UK level, which is illustrated through two developments. First, in 2016, the European Commission published its proposal for an Electronic Communications Code to codify and amend the four main telecommunications directives, which for the first time explicitly takes full account of the Charter of Fundamental Rights of the EU.1 It states that the proposed measures aim at achieving higher levels of connectivity ‘with a modernised set of end-​user protection rules’. It mandates end-​user rules where existing regulation has only set out minimum requirements. Second, in the UK in May 2017, the consumer association Which? awarded Ofcom Chief Executive, Sharon White, who took up the position in March 2015, the Positive Change Award for her work on putting consumers at the heart of Ofcom’s agenda.2

1   Proposal for a Directive establishing the European Electronic Communications Code, COM(2016) 590 final, 14 September 2016 (‘2016 Proposals’). 2   Which? Press Release, 17 May 2017.

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This chapter looks at why special consumer protection measures exist for telecommunications services, over and above the consumer protection measures that apply to other products and services more generally. The answer is twofold.

9.1.1 Utility First, some telecommunications services have become analogous to public utilities: like gas, electricity, water, and sewage, they are considered to be so important to people’s lives that measures have been put in place to ensure that people have access to them and are not prevented from using them. In the EU, the Universal Service Directive3 ensures provision of a ‘universal service’:  an affordable basic telephony service available to everyone.4 In the UK, the Universal Service Order5 sets out the minimum requirements for the universal service, and has been implemented through the General Conditions of Entitlement (GCs) and through specific conditions on BT and KCOM, who are designated as the universal service providers in the geographic areas they cover.6 Across the EU, the universal service obligation has historically been limited to fixed-​l ine voice services.7 However, the European Commission’s 2016 proposals to amend the telecommunications regulatory framework included an extension of the universal service obligation to basic broadband (defined on the basis of a minimum list of online services needed to enable end-​users to participate in civil society 8). The Commission has also proposed removing the obligation in relation to some older technologies (payphone provision, comprehensive directories, and directory enquiry services9). Under the proposals, Member States will have flexibility to extend affordability measures to mobile as well as fixed line.10

3   Directive 2002/​22/​EC of the European Parliament and of the Council of 7 March 2002 on universal service and users’ rights relating to electronic communications networks and services, OJ L 108, 24 April 2002. 4   Ibid, Art 1(2). See further Chapter 4, at Section 4.8. 5   Electronic Communications (Universal Service) Order 2003, SI 2003/​1904. 6   Designation of BT and Kingston as universal service providers, and the specific universal service conditions: Statement and Notification issued by the Director General of Telecommunications on the implementation of the Universal Service Directive, 22 July 2003. 7   The European Commission concluded in 2011 that it was not appropriate to extend the obligation to broadband. See, European Commission Communication, COM(2011) 795. 8   Defining functional broadband by way of a list was criticized by the European Economic and Social Committee (EESC) in its opinion on the proposals (2017/​C 125/​56), as it created an arbitrary list of accessible internet services, as opposed to a neutral minimum quality link and might give rise to discriminatory practices detrimental to end-​u sers. 9   Removing the obligation in respect of older technologies was also criticized by the EESC (ibid). 10   2016 Proposals, at Arts 79–​86.

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9.1.2 Competition The second reason why special consumer protection measures exist for telecommunications is that, since the end of monopolies in the sector, operators have been regulated to provide for a competitive sector. The introduction of competition is seen as being generally beneficial to consumers in terms of choice, cost, and quality. In a fully competitive market, it could be argued that there would be no need for sector-​specific consumer protection rules, because the availability of choice means that in theory a disgruntled subscriber could simply switch to a provider offering a better service, and the availability of alternative services means that each communications provider has to have an eye to its competitors and ensure that its subscribers remain happy enough with their service that they do not want to switch provider. So, concerns about consumers could be seen as being an issue only during the process of liberalization, before markets are fully competitive and while operators with ‘significant market power’ continue to be prevalent. Indeed, when the European Commission first proposed the Universal Service Directive in 2000, it considered that as competition continued to develop it was likely that the consumer protection environment would become more homogenous among the existing EU Member States and that regulation of consumer protection would not be so necessary. It based its inclusion of consumer protection measures on the prospect of EU enlargement, which was expected to introduce a wide range of national differences, and make it necessary to ensure regulatory intervention to uphold a minimum set of consumers’ rights throughout the Community.11 The 2002 Universal Service Directive included consumer protection measures to increase the ability of consumers to optimize their choices and so benefit fully from competition.12 In fact, consumer protection issues remain a central constituent of the EU regime now, and further measures to strengthen and improve such protections have been included in subsequent amendments and in the latest proposed amendments in 2016. The continued inclusion of consumer protection measures in the light of competition law is justified in two ways. First, competition alone may not be enough to satisfy the needs of all citizens and protect users’ rights. Additional protections are needed, both in the form of the universal service (for more on the universal service, see Chapter 4 European Union Communications Law, Section 4.8), and in the form of consumer protection laws that help to balance the respective bargaining 11   European Commission Proposal for a Directive of the European Parliament and of the Council on universal service and users’ rights relating to electronic communications networks and services, COM(2000) 392 final 2000/​0183(COD). 12   Universal Service Directive, Recital 30.

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positions of consumers and the companies with whom they contract. Secondly, consumer protection law also plays a role in stimulating competition. Most EU measures are focused on stimulating competition from the supply-​side, but consumer protection measures help to stimulate competition from the demand-​side. In order to create demand, consumers need to be educated about the services on offer. Even in a competitive environment, consumers who purchase telecommunications services are likely to know less about the product or service than the supplier, be required to contract on the supplier’s terms, and possibly vulnerable to pressure to buy.

9.1.3  What is a consumer? It is worth looking at what is meant by the term ‘consumer’ and some related terms. A ‘consumer’ is someone who uses or requests a service for non-​business use, and would include someone not contractually bound to the supplier.13 A ‘subscriber’, by contrast, means someone who has actually signed up to receive a service. The term is defined in the context of electronic communications legislation as someone party to a contract with the service provider.14 A ‘customer’, in a telecommunications context, includes people to whom a network or service is provided, those the communications provider wants to supply and those who want to receive the network or service.15 A customer therefore includes consumers and business users, other than other telecommunications operators. An ‘end-​user’, as defined in Section 151(1) of the Communications Act 2003, encompasses users who are both customers of the provider, and those who use a service with authority from the customer, for example, family members or employees.16 Although a consumer is someone who is not acting in the course of business, a number of consumer-​protection provisions also apply to ‘small business customers’; for example, requirements for communications providers to get express consent to renew an initial commitment period17 and to provide codes of practice.18 Small business customers are businesses with no more than ten workers.19 13   See definition of ‘consumer’ in the GCs. In the Enterprise Act 2002, ss 129 and 183, a consumer is a person to whom goods and services are supplied (whether by sale or otherwise). 14   See, for example, the definitions of ‘subscriber’ in art 2 of the Electronic Communications (Universal Service) Order 2003/​1904, in Regulation 2 of the Privacy and Electronic Communications (EC Directive) Regulations 2003/​2 426 and in the GCs. 15 16   See definition in GCs.   See also the definition in the GCs in force from 1 October 2018. 17   GC C1.3 (GC9.3(a) in the version of the GCs that applies up until 1 October 2018). 18   GC C4 (GC14 in the version of the GCs that applies up until 1 October 2018). 19   See definition in GCs.

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9. 2  EU PROV ISIONS In the EU, the telecommunications industry is regulated through a framework of five directives, which were adopted in 2002 and amended in 2009 and 2015.20 As already mentioned, in September 2016, the European Commission put forward proposals to amend the framework again and to consolidate four of the five directives (Framework, Authorisation, Access, and Universal Service) into one ‘Electronic Communications Code’. At the time of writing, there is no clear timeline for adoption of these proposals, but it seems likely that the date for implementation will fall after the UK has left the EU, and it is uncertain whether the amendments will be incorporated into UK law under the European Union (Withdrawal) Bill 2017–​19.21 Chapter IV of the Universal Service Directive sets out a number of consumer protection measures. It was revised by the Citizens’ Rights Directive,22 which strengthened these provisions, particularly in the light of the increased use of the internet. Additional rights for end-​users were introduced by the 2015 Regulation on Open Internet Access and Roaming.23 The main areas of consumer protection covered by the Universal Service Directive are provisions on minimum contract terms, transparency of information, quality of service (QoS), switching, and number portability. The 2015 Regulation introduced rights of access and requirements for internet access service (IAS) contracts.

9.2.1  Minimum contract terms Provisions regarding customer contracts were included early in the liberalization process under the Equipment Directive and the Services Directive, which granted telecommunications customers a right to terminate long-​term contracts subject to minimum notice periods to facilitate their ability to switch provider.24

21   See further Chapter 4.   See further Chapter 3, at Section 3.4.6.   Directive 2009/​136/​EC of the European Parliament and of the Council of 25 November 2009 amending Directive 2002/​22/​EC on universal service and users’ rights relating to electronic communications networks and services, Directive 2002/​58/​EC concerning the processing of personal data and the protection of privacy in the electronic communications sector, and Regulation (EC) No 2006/​2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws, OJ L 337, 18 December 2009. 23   Regulation 2015/​2120 of the European Parliament and the Council laying down measures concerning open internet access and amending Directive 2002/​22 on universal service and users’ rights relating to electronic communications networks and services and Regulation 531/​2012 on roaming on public mobile communications networks within the Union, OJ L 310/​1, 26 November 2015 (‘2015 Regulation’). 24   Respectively, Directive 88/​301, Art 7 (minimum notice one year) and Directive 90/​388, Art 8 (minimum notice six months). 20 22

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However, the European Court of Justice annulled these provisions on the basis that such private contractual arrangements were not ‘State measures’ to which Article 86(3) of the then EC Treaty was applicable.25 Subsequently, provisions governing subscriber contracts and QoS issues were introduced under the ONP framework.26 In 2002, Article 20 of the Universal Service Directive introduced a requirement for a clear set of minimum contract terms to be included in contracts for connection to the public telephone network and other services, because contracts are an important tool for consumers to ensure a minimum level of transparency of information and legal security.27 These minimum terms include: • The identity and address of the supplier. • The services provided, the service quality levels offered, as well as the time for the initial connection. • The types of maintenance service offered. • Particulars of prices and tariffs and the means by which up-​to-​date information on all applicable tariffs and maintenance changes can be obtained. • The duration of the contract, the conditions for renewal and termination of services and of the contract. • Any compensation and the refund arrangements that apply if contracted service quality levels are not met. • The method of initiating procedures for settlement of disputes using out-​of-​ court procedures. Subscribers also have a right to withdraw from contracts without penalty on notice of proposed modifications in the contractual conditions, and must be given at least one month’s notice. The amendments made by the Citizens’ Rights Directive strengthened these requirements.28 In particular, amended Article 20 sets out more detailed requirements of what should be included in the description of the services. It must be clear whether or not the service allows access to emergency services and whether caller-​location information is available, and whether there are any limitations on the provision of emergency services. This is particularly relevant for VoIP services, as mobility and location independence mean that, unlike during a PSTN call, it may be difficult to locate the user when an emergency call is made,

25   Case C-​202/​8 8: France v Commission [1992] 5 CMLR 552; and Case C-​271/​9 0 Spain v Commission [1992] ECR I-​5833. Article 86 is now Article 106 of the Treaty on the Functioning of the European Union. 26 27   See Chapter 4, at Section 4.5.   Universal Service Directive, Recital 30. 28   Citizens’ Rights Directive, Art 1(14).

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9  Consumer Protection

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meaning that calls may not be directed to the nearest emergency service call centre. With some VoIP services, emergency calls cannot be made at all.29 Service description must also include information on any other conditions limiting access to or use of services and applications. This would include any caps on bandwidth or connection speed. Minimum service quality levels must also be given. This includes the time for the initial connection, and any other QoS parameters required by the national regulatory authority (NRA). This provision backs up NRA powers to impose minimum QoS requirements on communications providers. For more on this, see Sections 9.2.3 and 9.3.1.1. Under Article 4(1) of the 2015 Regulation, end-​user contracts with IAS providers must include information on any traffic management measures that could impact on the quality of the IAS, the privacy of end-​users, and on the protection of their personal data. Explanations of the following must also be included: • How any volume limitation, speed, and other QoS parameters may impact on IAS and, in particular, on the use of content, applications, and services. • How other services to which the end-​user subscribes might impact on the IAS. • Minimum and maximum upload and download speeds, and how significant deviations from advertised speeds could impact the end-​user. • Remedies available in the event of any continuous or regulatory recurring discrepancy between the contracted and actual performance of the IAS. The introduction of these requirements was a response to the introduction by internet service providers of methods to discriminate between different types of traffic delivered over their networks, for example, to restrict certain services at peak times or to block certain services altogether, which could affect service quality or even compete with their own service.30 The European Commission’s 2016 proposals to amend the regulatory framework make no changes to the requirements of Article 4(1) of the 2015 Regulation.31 Other service information required under Article 20 includes the types of maintenance service offered and customer support services provided and the means of contacting those services, and any restrictions on the use of terminal equipment supplied. Also, contracts must include details of the subscriber’s options as to whether or not to include his or her personal data in a telephone directory, and

29  However, most VoIP services would not consider themselves to be ECSs. The linking of interpersonal communications services (as VoIP services are defined under the 2016 Proposals for an Electronic Communications Code) with the use of public numbering resources has been contested by service providers. 30 31   See further Chapter 15.   2016 Proposals, at Art 95(4).

948

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the data concerned.32 Details of prices must include details of payment methods offered and any differences in costs due to payment method. Contracts must also include details of: • Any minimum usage or duration required to benefit from promotional terms. • Any charges related to portability of numbers and other identifiers. • Any charges due on termination of the contract, including any cost recovery with respect to terminal equipment. Some of these issues are discussed in more detail in the section on the UK implementation of these provisions (Section 9.3 below). Lastly, contracts must also include the type of action that might be taken by the undertaking in reaction to security or integrity incidents or threats and vulnerabilities. The European Commission’s 2016 proposals for an Electronic Communications Code have shifted the emphasis for end-​user rules. Rather than providing a minimum harmonization approach, they mandate end-​user rules, making these subject to full harmonization to the extent possible. Member States must not introduce more or less stringent provisions for end-​user protection, except where specified.33 This approach is in line with the aims of the Commission’s Digital Single Market Strategy,34 which aims to increase the ability of individuals and businesses to access services seamlessly across national borders within the EU by removing the opportunity for different consumer protection rules to evolve in each Member State. However, the European Economic and Social Committee has expressed doubts about the maximum harmonization approach in the context of end-​user rights.35 In the light of the increasing number of software-​ based communications services and uncertainty about whether the rules apply to those services, the Commission is proposing to redefine ‘electronic communications service’ so that it applies to: • IASs. • Interpersonal communications services. This term is intended to catch over-​t he-​top (OTT) software-​based applications where the service enables a

  See further Chapter 13.   eg the proposals on contract duration (in Art 98 in the first draft) are not subject to maximum harmonization, so providers can in certain circumstances agree contract periods longer than the general maximum of two years: 2016 Proposals, at Art 94. 34   Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: A Digital Single Market Strategy for Europe, COM (2015) 192 final. 35  Opinion of the European Economic and Social Committee on the proposal for a directive of the European Parliament and of the Council establishing the European electronic communications code (Recast) (COM(2016) 590 final, 2016/​0288 (COD)) (2017/​C 125/​56). 32

33

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direct interpersonal and interactive exchange of information between a finite number of persons determined by the people initiating or participating in the communication. They can be number-​based or number-​independent services depending on whether they connect with the public switched telephone network. 36 • Services consisting wholly or mainly of the conveyance of signals, such as transmission services used for M2M communications and for broadcasting.37 Most end-​user provisions will not apply to number-​independent interpersonal communications services, such as WhatsApp, which will be subject to more limited obligations, such as security and interoperability, compared to other ECSs. Under the consumer protection proposals, Article 20 is replaced by a provision that would apply to publicly available electronic communications services other than number-​i ndependent interpersonal communications services. 38 The information requirements are expressly aligned with those in the Consumer Rights Directive, 39 so minimizing the risk of overlap between specific telecommunications consumer protection measures and consumer protection measures in general. Before consumers are bound by a contract, they must be given the information in Articles 5 and 6 of the Consumer Rights Directive. Article 5 sets out information to be provided for contracts other than those made at a distance or off premises, for example in a high-​street shop. Article 6 contains information to be given in distance or off-​premises contracts, for example where the contract is made over the telephone or online. The provisions cover, among other things, the characteristics of the service, the identity and contact details of the trader, information on pricing and payment, duration of the contract, the functionality of any digital content and its interoperability with likely hardware or software. There are additional protections for consumers making contracts at a distance. The Code elaborates on these provisions. For example, as part of the characteristics of the service provided, the Code requires the provider to set out any minimum service quality levels and any restrictions on the use of terminal equipment supplied. Details are required on any compensation and refund arrangements applicable if service quality levels are not met. The Code sets out detailed requirements on provision of information on tariffs and on duration, termination, and switching. Details must also be given on products and services for disabled end-​ users, the means of initiating dispute procedures, and the type of action that might

37   See further Chapter 4, at Section 4.2.   2016 Proposals, at Art 2(4).   2016 Proposals, at Art 95. 39   Directive 2011/​8 3/​E U on consumer rights, OJ L 304/​6 4, 22 November 2011. 36

38

50

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be taken by the undertaking in reaction to security or integrity incidents or threats and vulnerabilities. The Code also requires providers of number-​based interpersonal communications services to provide information on any constraints on access to emergency services and or caller location information, and the end-​user’s right to determine whether or not to include his or her personal data in a directory in accordance with Article 12 of the Privacy Directive.40 Under the Code, BEREC must provide a contract summary template identifying the main elements of the information requirements, which providers would be required to complete and give to consumers and micro and small enterprises41 prior to conclusion of the contract. This would ensure that consumers and small businesses receive readable short-​form summaries of their contractual provisions. The Code also requires providers of IASs and providers of publicly available number-​based interpersonal communications services to offer end-​users the facility to monitor and control the usage of services billed on the basis of either time or volume consumption. Currently, the requirement to provide consumers with warnings about their consumption only applies where consumers are roaming abroad in the EU,42 and not to domestic contracts, although some providers already offer this service.

9.2.2 Transparency Provisions that require communications providers to publish information about their services enable end-​users and consumers to make informed choices about the services they plan to purchase, and back up the provisions on what must be included in contracts.43 The transparency provisions also provide some protection for those end-​users who are not also subscribers and so do not benefit from the requirements for certain information to be made available in contracts. Article 21 of the Universal Service Directive introduced a number of transparency requirements, which reflect the requirements for information to be provided in contracts under Article 20. Article 21 of the Directive, as originally drafted, required member states to ensure that transparent and up-​to-​date information on applicable prices and tariffs,

40   Directive 2002/​58/​EC (the European Commission proposed in January 2017 replacing this Directive with an E-​P rivacy Regulation). See further Chapter 13. 41   Micro and small enterprises are a category of small and medium enterprises as defined in Commission Recommendation of 6 May 2003 concerning the definition of micro, small and medium-​sized enterprises (2003/​361/​EC, L124/​36). A microenterprise is defined as an enterprise that employs fewer than ten people and whose annual turnover and or annual balance sheet total does not exceed EUR 2 million. 42   Regulation 531/​2012, Art 15(3) and Regulation 531/​2012, Art 15(2a) as amended by Regulation 2015/​2120. 43   Universal Service Directive, Recital 30.

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and on standard terms and conditions, in respect of access to ‘publicly available telecommunication services’ (PATS), was available to end-​users and consumers. Details of what information had to be published were set out in Annex II to Article 21. Article 21(2) required NRAs to encourage the publication of information aimed at enabling end-​users and consumers to make an independent evaluation of the cost of alternative usage patterns, by means of, for instance, interactive guides. This was aimed at encouraging independent organizations to publish comparative information on different services, for example, via price comparison websites. The amendments made by the Citizens’ Rights Directive gave NRAs powers to require all undertakings providing public ECNs and ECSs to publish information themselves.44 Amended Article 21 also specifies a wider range of information, including information on: • • • •

Tariffs for numbers or services subject to particular pricing conditions. Change of access to emergency services or caller-​location information. Changes to conditions limiting access or use of services and applications. Procedures to measure and shape traffic and how they could impact on service quality. • Subscriber rights to include their personal data in a directory. • Products and services designed for disabled subscribers. A particularly important change here was the requirement that obliges operators to inform consumers, before contracting, of any service restrictions, which would include caps on bandwidth or connection speed.45 Also, price comparison continued to be a concern in 2007 so, under the amendments, where comparator guides are not made available by the market, NRAs are now obliged to make them available, either themselves, or through third parties; and, to support this, third parties have a right to use published information free of charge to provide such guides. Member States can also require undertakings to distribute public interest information on how ECSs can be used for unlawful activities or to disseminate harmful content, including infringements of copyright and related rights and their legal consequences, and on means of protecting personal data when using ECSs. Under the European Commission’s 2016 proposals, Article 21 is to be replaced. Under the Code, national regulatory authorities are obliged to ensure that end-​ users have access free of charge to at least one independent comparison tool, and the Code sets out requirements for the comparison tool itself.46   Citizens’ Rights Directive, Art 1(14).   2016 Proposals, at Art 96.

44 46

  See further Chapter 3, at Section 3.2.3.

45

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9.2.3  Quality of service NRAs were given powers to ensure QoS in the ONP Voice Telephony Directive, which allowed them to require alterations to the conditions of contracts.47 However, the European Commission did not consider that these sorts of powers of intervention were appropriate in a competitive market. In its 1999 Review,48 the European Commission noted:  . . . good quality services are more likely to be provided as a result of competition between suppliers than from regulation, and consumers may demand services of different quality at different prices. (at 4.5.5)

But the Commission concluded: It is considered prudent to maintain some reserve powers for NRAs to take action in the event of market failure, particularly to deal with issues of end-​to-​end quality in a multi-​network environment where no single operator has overall control.

The latter reference is clearly applicable to the growth of the internet as a communications environment. Article 22 of the Universal Service Directive as originally drafted enabled NRAs to require providers of publicly available ECSs to publish comparable, adequate, and up-​to-​date information for end-​users on the quality of their services, and set out parameters, in Annex III, that NRAs may use. The amendments to Article 22 made by the Citizens’ Rights Directive49 extended this to providers of publicly available ECNs. It also introduced a new right for NRAs to set minimum QoS requirements on an undertaking providing public communications networks, in order to prevent the degradation of the service and the hindering or slowing down of traffic over the networks. This had become relevant in the context of the internet, particularly as higher volumes of data in the form of moving images, for example, via the BBC’s iPlayer, which launched in December 2007, were being transmitted, causing traffic to slow where the bandwidth was not large enough to cope. These are reserve powers, which enable NRAs to introduce regulation where they consider that market players are not using their commercial freedom in an effective way to satisfy users’ and consumers’ demands, which could be detrimental to consumer choice and, by extension, competition in the market. Under the European Commission’s 2016 proposals, stricter requirements are placed on NRAs to enable more comparability between service providers including across the whole EU.50 Under the proposals, NRAs are under a requirement to 48   Directive 95/​62/​EC, Art 7(3).   COM(1999) 539, November 1999. 50   Citizens’ Rights Directive, Art 1(14).   See Recital 243 and new Art 97.

47

49

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specify QoS parameters. In doing so, they have to take account of guidelines to be produced by BEREC. NRAs would also have to specify the applicable measurement methods and the way the information should be published including possible quality certification mechanisms. NRAs can, where appropriate, use the parameters, definitions, and measurement methods set out in the Annex.

9.2.4  Switching provider Being able to switch provider easily is an important aspect of a competitive market, and a commitment to a lengthy contract could hinder this. The amendments made to the Universal Service Directive by the Citizens’ Rights Directive introduced into Article 30 restrictions on the terms of consumer contracts, so that providers of ECSs cannot require consumers to sign up to an initial commitment period that exceeds 24  months, and must always offer a contract option with a maximum duration of twelve months.51 In addition, conditions of termination must not act as a disincentive against changing service provider. In the European Commission’s 2016 proposals, there are new provisions allowing a consumer to terminate where a contract or national law provides for a fixed duration contract to be automatically prolonged. 52 End-​users also have the right to terminate without cost on notice of any changes in their contractual conditions unless the proposed changes are exclusively to the benefit of the end-​user or required by law.

9.2.5  Number portability Number portability, the facility that allows customers to keep their telephone number when they change provider, was first introduced for fixed-​l ine services by the Numbering Directive,53 with effect from 1 January 2000, although the facility was available in some instances before then. Number portability is seen as a key facilitator of consumer choice and effective competition54 because, without it, the inconvenience of having to switch phone numbers would have the potential for discouraging subscribers from switching provider. However, number portability is only available when subscribers switch between services using the same number range as set out in national telephone

52   Citizens’ Rights Directive, Art 1(21).   2016 Proposals, at Art 98.   Directive 98/​61/​EC of the European Parliament and of the Council of 24 September 1998 amending Directive 97/​33/​EC with regard to operator number portability and carrier pre-​selection, OJ L 268/​37, 3 October 1998. 54   Universal Service Directive, Recital 40. 51

53

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numbering plans, for example, mobile services, or fixed-​line services with the same geographic area code. Article 30 of the Universal Service Directive sets out a right to number portability for all subscribers of PATS, including mobile services. The right is restricted in the case of geographic numbers to numbers within the same location, or exchange. Following the amendments made by the Citizens’ Rights Directive, numbers must be ported within the shortest possible time and, once there is an agreement with a subscriber to port a number, the number must be activated within one working day. NRAs can also order compensation in cases of abuse or delay in porting a number. The 2016 amendments proposed by the European Commission include a requirement that the switching and porting process should be led by the receiving provider. There is also a requirement that in the event of a failure of the porting process, the transferring provider must reactivate the number until the porting is successful.55

9.2.6  Bundled offers The European Commission’s 2016 proposals add a new provision on bundled offers intended to avoid unwanted lock-​i n effects, so that adding on additional services to a bundle cannot restart the overall contract period unless a special promotional price is available only on conditions that the existing contract period is restarted. Key provisions, such as the information requirements for contracts, maximum contract duration and termination rights, and switching rights, would apply to the entire bundle.56

9.2.7  Non-​discrimination For the first time, the 2016 proposals overtly take account of the fundamental rights and principles recognized by the Charter of Fundamental Rights of the European Union. This may have impacted the new requirement that providers of electronic communications networks and services must not apply any discriminatory requirements or conditions of access or use on end-​users based on nationality or place of residence unless such differences are objectively justified and the introduction of a fundamental rights safeguard.57

55

  2016 Proposals, at Art 99.

  Ibid, at Art 100.

56

57

  2016 Proposals, at Arts 92 and 93.

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9.3  UK PROV ISIONS The UK regime for providing consumer protection in relation to telecommunications services is mainly contained in the GCs,58 which implement the consumer-​ protection measures in the Universal Service Directive. The amendments to the Universal Service Directive made by the Citizens’ Rights Directive led to amendments to the Communications Act 2003 through the Electronic Communications and Wireless Telegraphy Regulations 2011/​1210 and consequently to amendments to the GCs. Ofcom can make GCs that relate to end-​user and domestic and small business customers’ interests under ss 51 and 52 of the Communications Act 2003. Other regulation, for example, in relation to advertising telecommunications services, also plays a part (see Section 9.3.1.2). The rest of this chapter looks at how the specific consumer protection measures for telecommunications services apply in the UK, by looking at how the rules apply to marketing services, contractual arrangements, and dispute resolution. In September 2017, Ofcom published a replacement set of GCs to take effect from 1 October 2018.59 The new conditions are divided into three, with Part A containing network functioning conditions, Part B containing numbering and technical conditions, and Part C containing consumer protection conditions.

9.3.1 Marketing When consumers are considering signing-​up for a new communications service, or switching providers, the main information they need to know is what service they should expect to get and how much it will cost them. With an increasing range of telecommunications services available via different technologies and packaged in different bundles, getting the right information about service options can be a challenge for consumers. Competition, which creates more supply-​side options, may have an adverse effect on demand, because it can create confusion among consumers who find themselves faced with such a myriad of options, it may be hard to understand which service would best suit their needs. The Citizens’ Rights Directive sought to deal with this, by giving national regulatory authorities the right to publish their own price comparison guides, where the market has not provided them.60 For the UK’s approach, see Section 9.3.1.5.   See further Chapter 6.   Ofcom, ‘Review of the General Conditions of Entitlement, Statement and Consultation’, 19 September 2017. See further Chapter 6. 60   Citizens’ Rights Directive, Recital 32, and Universal Service Directive, Art 21(1), (as amended). 58 59

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9.3.1.1  Quality of service Ofcom has varied its approach to QoS over the last few years. GC21 required providers of public electronic communications services to publish comparable, adequate, and up-​to-​date information for end-​users on the quality of their services, where directed by Ofcom. In January 2005, Ofcom published a Direction requiring most fixed-​line communications services (operating at £4 million in net revenues per quarter and handling 100 million minutes of calls to end users per quarter) to publish QoS information.61 At the time, Ofcom considered that the voluntary schemes for providing QoS information applicable at that time, the ‘Comparable Performance Indicators’ schemes, were not entirely effective at providing adequate QoS information to consumers. Relatively few consumers were aware of the schemes or regularly made use of the information provided. Ofcom considered that QoS information should be provided to consumers in both the fixed-​line and the mobile markets, but that a formal direction was only needed for the fixed-​line market, where, at the time, there was a growing number of CPS62 providers, and WLR63 was about to be introduced, facilitating market entry.64 The Direction required communications providers to publish information on supply time for initial connection, fault-​rate per access line, fault repair time, and bill-​correctness complaints according to standards set by the European Telecommunication Standards Institute (ETSI), plus the time for end-​user complaints received by the communications provider to be resolved. Ofcom also required a co-​regulatory industry group to be set up to gather and publish the QoS information required by the Direction, and, as a result, a website to provide this information was established by the communications providers concerned. However, by 2009, Ofcom concluded that this system was not working and withdrew the Direction. Subsequent research led Ofcom to conclude in July 2010 that there was no case for further intervention to require communications providers to supply QoS information at that time.65 Research had also helped to isolate what QoS information consumers were particularly interested in, and it became clear that network performance was a particular issue for consumers, particularly in the context of broadband.66 Following the 2009 amendments to the Universal Service Directive, Ofcom has a right to set minimum QoS requirements on network operators.67

  Ofcom Direction under General Condition 21.1 on quality-​of-​service, 27 January 2005. 63   Carrier pre-​selection.   Wholesale line rental. 64   See further Chapter 8, at Section 8.3.4.3. 65   Ofcom statement about research report by GfK, 13 July 2010. 66   Ofcom research document: Provision of quality of service information, 30 January 2009. 67  Communications Act 2003, s 51(2), as amended by the Electronic Communications and Wireless Telegraphy Regulations 2011, SI 2011/​1210, Sch 1, para 27. 61

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However, Ofcom’s recent approach has been to regulate by using existing competition tools and consumer transparency options, rather than imposing minimum QoS requirements,68 an approach which is supported by the government.69 To improve transparency for consumers, since 2011, Ofcom has published complaints data, periodically,70 and has taken action to improve the way in which consumer complaints are handled by the communications industry, for example by ensuring that consumers have an increased awareness of their rights to use ADR.71 In July 2010, Ofcom introduced new rules to require communications providers to improve awareness of dispute resolution services.72 Ofcom has the power to require communications providers to provide Ofcom with information to enable it to carry out comparative overviews of services.73 In order to improve the availability of comparative information on quality and prices, the government has recently granted Ofcom a new express power to carry out and publish wide-​ranging comparative overviews.74 Further new provisions set out the scope of Ofcom’s powers to require communications providers to collect, generate, and retain information for publication and these represent stronger powers than Ofcom had previously to require information from communications providers.75 In revising the GCs, Ofcom has removed the power in GC21 to make directions relating to quality of service, as this is now redundant.76 In April 2017, Ofcom launched an online interactive tool to allow consumers to compare QoS between providers.77 At the same time, Ofcom published its first annual report comparing QoS between providers, which addressed in particular call waiting, complaints handling, and reliability.78 9.3.1.2  Advertising broadband speeds and ‘unlimited’ services The advertising of telecommunications services is regulated by the codes published by the Committee of Advertising Practice (CAP) and the Broadcast Committee of Advertising Practice (BCAP), which are enforced by the Advertising Standards Authority (ASA).79

  See Ofcom discussion document on traffic management and ‘net neutrality’, 24 June 2010.   See speech by Ed Vaizey, ‘The Open Internet’, FT World Telecoms conference 2010, 17 November 2010. 70   See Ofcom Telecoms Complaints papers, 21 April 2011, 22 September 2011, and so on. 71   Ofcom quality of service research report, 13 July 2010. 72   See Ofcom statement: A review of Consumer Complaints Procedures, 22 July 2010, and GC C4 and Annex to C4 (GC14.4 and Annex 4 to GC14 in the GCs that apply up to 1 October 2018). 73 74   Communications Act 2003, s 136.   Ibid, s 134D, inserted by Digital Economy Act 2017, s 83. 75   Ibid, ss 137A and 137B, inserted by Digital Economy Act 2017, s 86. 76   Ofcom, ‘Review of the General Conditions of Entitlement:  Statement and Consultation’, 19 September 2017, at paras 8.13–​8.14. 77  . 78 79   Ofcom report, ‘Comparing service quality’, 12 April 2017.  . 68 69

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CAP and BCAP have published guidance on the use of ‘unlimited’ claims in telecommunications and broadband advertising.80 The guidance says that when describing services as ‘unlimited’, advertisers must only use the term where the user incurs no additional charge or suspension of service as a consequence of exceeding a usage threshold associated with a fair-​usage policy, a traffic management policy or similar, and where limitations that do affect the speed or usage of the service are moderate only and are clearly explained in the advertisement.81 Following a review in November 2017, CAP published new guidance on broadband speed advertising applicable to residential broadband services, which came into effect on 23 May 2018.82 Claims about broadband speeds now have to be based on the speed available to at least 50 per cent of customers at peak time (8pm–10pm), which must be described as ‘average’. The previous position was that advertised ‘up to’ speeds were acceptable if they were available to at least 10 per cent of customers. The guidance also contains a recommendation that speedchecking facilities should be promoted in advertisements wherever possible. The review followed publication of a report by the Advertising Standards Authority that indicates that consumers do not correctly understand claims made in advertising about broadband speeds. In particular, the review found that most consumers believe they are likely to receive a speed at or close to the headline speed claim, although for many people this is unlikely to be the case.83 CAP believes that the new standard will help consumers better understand what is available when deciding to switch providers and to appreciate that there are a range of factors that will affect the broadband speed they receive (location, technology, number in their household using broadband). Most of the major fixed-​line ISPs have signed up to a voluntary code of practice on broadband speeds published on the Ofcom website, but initiated by the Broadband Stakeholders Group, under which they are required, among other things, to give specific information on broadband speeds at the point of sale and on their websites. An update in 2015 gave consumers improved rights to leave their broadband contract if speeds fell below an acceptable level.84 A similar code was published for business customers in 2016. Amendments to both codes that come into force on 1 March 2019 require speed estimates given at point of sale to reflect the speeds customers are likely to experience at peak times

80  Guidance on making ‘unlimited’ claims in advertising for telecommunications services. See also Chapter 14. 81   See, for example, ASA Adjudication on UK2 Group (29 February 2012), in which the ASA upheld a complaint in respect of an advert stating that a Business Cloud package offered ‘unlimited’ storage space. 82  . 83   ASA News item: ‘ASA calls for a change in the advertising of broadband speed claims’, and research report by GfK. 84   Voluntary code of practice: broadband speeds, version 3.0, June 2015.

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(8–​10pm for residential services and 12–​2pm for business services). A  minimum guaranteed speed and the right to exit connected to this speed must be given at point of sale. The right to exit will also apply to bundled products. There will be a thirty-​calendar day limit to the time providers have to improve speeds before they must offer the right to exit, and providers will be required to make after-​sale information about the right to exit more prominent and clearly link it to the minimum guaranteed speed. Because the codes will measure customer speeds at peak time, they can apply to all types of access technologies.85 In 2016, the Broadband Stakeholder Group established an ‘Open Internet Code’ to clarify the rules on internet traffic management. It brought together the BSG’s early Traffic Management Transparency Code, its 2012 Open Internet Code, and the requirements of the 2015 Regulation. The new Code is built round four ISP commitments: • Supporting access to the Open Internet as the norm. • Clarifying the ability of ISPs, under certain conditions, to deliver managed or alternative services (such as Internet of Things applications). • Permitting the deployment of traffic management tools under certain conditions and not on the basis of commercial rivalry. • Ensuring that traffic management practices are transparent and communicated effectively to the user. All the major ISPs have signed up to the Code, representing 90 per cent of UK subscribers on fixed and mobile contracts. 9.3.1.3  Transparency and information provision Under Ofcom’s revised GCs, it has consolidated all the information publication and transparency requirements, which currently exist across a number of GCs, into a single condition, C2, and has aimed to simplify and clarify the requirements where possible, particularly in relation to price transparency. The requirements are also extended from PATS providers to all providers of public electronic communications services.86 These provisions implement Article 21 of the Universal Service Directive and set out minimum information communications providers must publish about their standard prices and standard terms and conditions. The amendments made by the Citizens’ Rights Directive to Article 21 of the Universal Service Directive on transparency have been implemented in the UK by

  Ofcom statement, ‘Better broadband speeds information—​Voluntary codes of practice’, 1 March 2018.   Ofcom consultation, ‘Review of the General Conditions of entitlement: Consultation on the general conditions relating to consumer protection’, 20 December 2016. 85

86

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amending Section 51 of the Communications Act 2003, to allow Ofcom to impose a general condition that requires undertakings to provide information of a specified kind to end users.87 Section 146A was added into the Communications Act, to implement the amendments to Article 21(2), giving third parties a right to use published information for interactive price comparison guides, free of charge.88 9.3.1.4 Price In its March 2016 budget, the government noted that broadband pricing can be opaque and asked for industry to act to improve clarity. Accordingly, since 31 October 2016, the ASA has required that, in order to comply with ASA rules, broadband adverts that include price claims must convey a consumer’s full commitment required to purchase the service. The ASA has determined that, if followed, the following three ‘key principles’ should produce advertisements that are in line with the advertising code: • The advertisement presents all compulsory elements of the total financial commitment (up-​f ront costs, ongoing costs, and contract length) together, avoiding undue emphasis on any one element. • The advertisement presents one inclusive price for compulsory up-​front costs and an inclusive price for a consumer’s ongoing monthly cost (combining the line rental and broadband cost where line rental is offered by the provider). • The advertisement makes clear if an introductory discounted price for one/​some of the elements applies and, if so, for how long.89 9.3.1.5  Comparing bundles In the UK, a number of price comparison websites exist to help consumers understand what they are getting when they buy a ‘bundle’ of telecommunication services. Consumers can make savings from taking a number of services from one provider (for example, fixed-​line voice, mobile, pay TV, and broadband), and are billed for all the services they receive on one bill. However, the risk for consumers is that an individual service provided within a bundle does not actually meet their requirements, or that other aspects of the deal, such as the length of the minimum term, are disadvantageous. Ofcom’s approach to being given increased rights to take control of the publication of comparable information90 has been to operate an accreditation scheme to ensure that these comparison websites operate effectively, by providing accurate,   Electronic Communications and Wireless Telegraphy Regulations 2011, SI 2011/​1210, Sch 1, para 27(b).   Ibid, Sch 1, para 88. 89   ASA advice online: Compulsory charges: Telecommunications, 7 July 2016. 90   Universal Service Directive, Art 21 (as amended). 87

88

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up-​to-​date, and accessible information. Ofcom subjects the comparison sites to an independent audit, and once accredited, these companies can display the Ofcom Price Accreditation Scheme logo on their websites and in any publicity campaigns. Following a review in 2013, Ofcom introduced ‘spot-​checks’ to monitor compliance between audits, and introduced a requirement for accredited price comparison websites to have fair and timely processes for complaints handling.91 At the time of writing, Ofcom has accredited eight providers:  broadbandchoices.co.uk, simplifydigital.co.uk, broadband.co.uk, broadbanddeals.co.uk, billmonitor.com, mobilephonechecker.co.uk, ctrlio.com, and handsetexpert.com.

9.3.2  Contractual arrangements 9.3.2.1  Contract requirements The GCs set out a number of requirements for consumer contracts. In the revised GCs, these are contained in C1.92 C1 requires providers of public electronic communications networks and public electronic communications services to include certain minimum information in contracts. The following is a summary: • Name and registered address of the provider. • Description of services provided, including whether access to emergency organizations and caller location information is being provided. • Any other conditions limiting access to or use of services and applications. • Minimum service quality levels including the time for initial connection. • Information on any traffic management procedures and their impact on service quality. • Maintenance services and customer-​support information. • Restrictions on the use of terminal equipment supplied. • Options on including personal data in directories. • Prices, tariffs, and payment methods. The revised GCs contain more detailed requirements on the explanation of pricing than the previous version. • Duration of the contract and conditions for renewal or termination including any minimum usage to benefit from promotional terms, charges for portability of numbers, and termination charges. • Compensation or refund arrangements if quality service levels are not met. • How to initiate dispute settlement.

91   Ofcom statement, ‘Accreditation scheme for price calculators: Decision on changes to the scope and operation of the Scheme’, 6 November 2013. 92   In the version of the GCs that applies up until 1 October 2018, this information is set out in GC9.

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• Action that might be taken by the provider in reaction to security or integrity incidents or threats and vulnerabilities. The 2015 Regulation introduced new provisions affecting contracts that include IASs and that are concluded or renewed from 29 November 2015. Such contracts must also include the following information: • Information on how traffic management measures applied by that provider could impact on the quality of the IASs, the privacy of end users, and the protection of their personal data. • A clear and comprehensible explanation as to how any volume limitation, speed, and other quality of service parameters may in practice have an impact on IASs and, in particular, on the use of content, applications, and services. • A  clear and comprehensible explanation of how any services referred to in Article 3(5) (services other than IASs which are optimized for specific content, applications, or services, or a combination thereof, where the optimization is necessary in order to meet requirements of the content, applications, or services for a specific level of quality) to which the end-​user subscribes might in practice have an impact on the IASs provided to that end-​user. • A clear and comprehensible explanation of the minimum, normally available, maximum and advertised download and upload speed of the IASs in the case of fixed networks, or of the estimated maximum and advertised download and upload speed of the IASs in the case of mobile networks, and how significant deviations from the respective advertised download and upload speeds could impact the exercise of the end-​users’ rights laid down in Article 3(1) (the right to access and distribute information and content, use and provide applications and services, and use terminal equipment of their choice, irrespective of the end-​user’s or provider’s location or the location, origin or destination of the information, content, application or service, via their IASs). • A clear and comprehensible explanation of the remedies available to the consumer in accordance with national law in the event of any continuous or regularly recurring discrepancy between the actual performance of the IAS regarding speed or other quality of service parameters and the performance indicated in accordance with the points above.93 In addition, contracts for IASs should take into account provisions in Article 3 of the Regulation on safeguarding open internet access: end-​users have the right to access and distribute information and content, use and provide applications and services, and use terminal equipment of their choice, irrespective of the end-​user’s

93

  Art 4(1).

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or provider’s location or the location, origin, or destination of the information, content, application, or service, via their IAS. Agreements between providers of IASs and end-​users on commercial and technical conditions and the characteristics of IASs such as price, data volumes or speed, and any commercial practices conducted by providers of IASs, shall not limit the exercise of these end-​user rights. The EU Regulation requires NRAs to monitor compliance with the requirement in the Regulation to safeguard open access, publish annual compliance reports, and promote the continued availability of non-​d iscriminatory IAS at levels of quality that reflect advances in technology. NRAs may impose requirements concerning technical characteristics, minimum quality of service requirements, and other appropriate and necessary measures. NRAs must publish annual reports on their monitoring and findings. NRAs can request information on compliance. BEREC was required to issue guidelines on the implementation of the obligations of NRAs. The EU also gives Member States leeway to impose ‘effective, proportionate and dissuasive’ penalties. The UK government implemented these requirements through the Open Internet Access (EU Regulation) Regulations 2016. 9.3.2.2  Term and termination The GCs94 also set out a number of requirements on communications providers that are aimed at ensuring that subscribers are not unreasonably tied to a contract whose terms could be a disincentive to switching provider. Providers of fixed line or broadband services to domestic or small business customers must not renew fixed commitment periods without express consent. Consumers must not be required to sign up for a contract that is excessive in length, and must be given an option of a contract that does not exceed 12 months in duration. Fixed commitment periods for user contracts cannot exceed 24 months. Communications providers cannot include conditions or procedures for termination that act as disincentives against end-​users changing provider. Communications providers must give subscribers at least one month’s notice of any contractual modification likely to be of ‘material detriment’ to the subscriber, and allow subscribers to withdraw from the contract without penalty.95 Ofcom previously published guidance clarifying what was meant by ‘material detriment’. In the revised GCs, this is included within the condition itself, which says that material detriment is likely to mean any increase in the core subscription price during the fixed commitment period.96 Details of what could be meant by an increase in the core subscription price are set out.97 In

94

  C1 in the revised GCs and GC9 in the version in force until 1 October 2018. 97   GC C1.7.   GC C1.8.

96

95

  GC C1.6.

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March 2018, Ofcom published new guidance on the procedures for terminating contracts.98 9.3.2.3  Rollover contracts An automatically-​renewable or ‘rollover’ contract (ARC) automatically rolls forward to a new minimum-​contract period, unless the subscriber actively opts out of the renewal. During the minimum-​contract period, a subscriber is usually subject to an early termination charge if they want to end the contract and switch supplier. Research has shown a direct link between ARCs and reduced levels of consumer switching. Ofcom initially banned these contracts for fixed-​line and broadband services to residential customers and small businesses with no more than ten employees99 and extended this in the new GCs to all public electronic communications services.100 9.3.2.4  Number portability and handset locking The GCs set out the method for communications providers to provide number portability to their subscribers, and incorporate the requirements of Article 30 of the Universal Service Directive, as amended, that relate to number portability.101 Communications providers must provide number portability within the shortest possible time and on reasonable terms and conditions. Subscribers can port their mobile numbers by requesting a PAC (Porting Authorization Code) from their current provider, which the current provider must give them immediately over the phone where possible or by SMS within two hours of the request, or by another reasonable method agreed. The subscriber gives the new provider the PAC and the number must be ported and activated within one business day from the receiving provider’s receipt of the PAC. Non-​mobile numbers must be ported and activated within one business day once all necessary validation processes have been completed, the network connection is ready for use by the subscriber, and the donor provider has received a request to activate the porting of the number from the recipient provider. Communications providers must have a compensation scheme to compensate subscribers that suffer from abuse of or delay in porting numbers, and publish information on how subscribers can access compensation.102 In the government’s March 2016 budget, it said it would consult and consider legislating on ending the practice of handset locking for consumers outside any

98   Ofcom statement on emergency planning direction, number withdrawal and guidance on contract termination, 26 March 2018. 99 100   Ofcom statement on automatically renewable contracts, 13 September 2011.   GC C1.3. 101   GC B3 in the revised GCs and GC18 in the version that applies up to 1 October 2018. 102   See further Chapter 3, at Section 3.4.1.

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initial contract period, if voluntary action by telecommunications companies did not deliver results.103 A ‘voluntary solution’ was agreed in October 2016. 9.3.2.5  Misselling of mobile and fixed-​line services In 2009 and 2010, Ofcom introduced GCs to regulate the sales and marketing of mobile and fixed-​line services respectively, following problems with cases of misselling in both areas. Problems with misselling began to arise in the fixed-​l ine industry once British Telecommunications PLC no longer had a monopoly, and competition in the market began, particularly using CPS and WLR. These services were in many cases sold using direct marketing techniques such as doorstep-​selling, unsolicited telephone calls, and selling in public places such as shopping centres, and were often sold through independent retailers. The main practices customers complained of included the following: • Omitting relevant information or providing false or misleading information, for example, on tariffs, potential savings or offers or gifts that do not materialize. • Applying unacceptable pressure on a customer to change provider by, for example, using threatening or intimidating behaviour or refusing to leave until the customer signs a new contract. Also, refusing to allow, or making it difficult for a customer to change provider. • Slamming, that is, switching a customer to another fixed-​l ine provider without their knowledge. This was done in a number of different ways. For example, a representative of one company might pass himself off as representing another company to obtain information from a customer, which then allowed him to switch the customer. A customer might also be told that they are only signing up to receive information about a service, rather than entering into a new contact. Slamming also involves forging customer signatures.104 There were also problems with cashback schemes. A cashback scheme is a form of promotion offered by independent retailers promising a payment or, for example, a mobile handset in exchange for signing up to a service contract. Ofcom received complaints on the following issues: • The independent retailer refused to honour the cashback promise on the basis that the contractual terms of the offer had not been met, although these were often designed so that it was difficult to claim successfully.

  HM Treasury: Budget 2016, para 2.341.   Ofcom statement and consultation, Protecting citizen-​consumers from misselling of fixed-​l ine telecoms services, 22 November 2004. 103

104

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• The independent retailer was unable to honour the cashback offer because it had gone out of business. Ofcom started taking action against misselling in April 2004, when it published a consultation on misselling in the fixed-​line market. At that time, there were a number of applicable consumer-​ protection measures in place. For example, Section 52(2)(e) of the Communications Act 2003 gave Ofcom the power to set GCs on any matter appearing to Ofcom to be necessary for securing effective protection for the domestic and small business customers of public communications providers, but at the time Ofcom said that it would only use this power if it was persuaded that there was evidence that there was a serious problem and that current safeguards were not effective. There was also an industry-​agreed CPS and WLR customer transfer process in place between the fixed-​l ine telecommunications industry and consumer representatives aimed at preventing misselling and, in particular, slamming.105 It required a switchover period of ten working days before a customer order could be fully processed during which time both the transferring and the receiving provider would send the customer a ‘notification of transfer’ letter, to ensure that the customer was not being transferred without its knowledge and consent. Also, at this time, voluntary guidelines on sales and marketing had been agreed between the industry and consumer representatives, and Ofcom had published a consumer guide to using alternative phone companies.106 There were also a number of applicable non-​ telecommunications-​ specific consumer protection laws in place at the time, which variously prohibited false, inaccurate, or misleading descriptions about goods and services;107 made it an offence for a person in the course of business to give a consumer a misleading indication of the price of services;108 protected consumers against unfair standard terms in contracts they made with traders;109 prohibited unfair (misleading) commercial practices;110 allowed consumers to cancel contracts made on their doorstep;111 and required consumer rights information to be provided when orders were made online or over the phone.112 Ofcom is also a designated ‘enforcer’ under Part 8 of the Enterprise Act, which means that it can get an enforcement order from the courts against anyone who breaks consumer protection legislation.113 106 107  Ibid.  Ibid.   The Trade Descriptions Act 1968.   Consumer Protection Act 1987. 109   Unfair Terms in Consumer Contracts Regulations (SI 1999/​2083). 110   Control of Misleading Advertisements Regulations (SI 1988/​915). 111   Consumer Protection (Cancellation of Contracts Concluded Away from Business Premises) Regulations (SI 1987/​2117). 112   Consumer Protection (Distance Selling) Regulations (SI 2000/​2 334). 113   Enterprise Act 2002, s 213(5A). 105

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9.3.2.6  Codes of practice In light of the responses to its April 2004 consultation, Ofcom concluded that the existing consumer safeguards did not provide adequate consumer protection against fixed-​line telecommunications service misselling. Although the evidence of whether misselling of fixed line services was a serious problem was mixed, Ofcom had seen evidence of it as a growing problem since the publication of the consultation document. Ofcom considered that, given the evidence and the risk of not being able to take effective enforcement action should a serious problem arise, it should introduce additional regulatory safeguards. Its solution was to introduce a requirement on communications providers selling and marketing fixed-​line services to small businesses and domestic customers to establish and comply with a code of practice on sales and marketing. This was achieved through an amendment to GC14. The codes were to be drawn up in accordance with guidelines, which were published by Ofcom in April 2005, and were based on the existing industry-​agreed guidelines on sales and marketing, updated in light of the issues that had emerged from the April 2004 consultation. The revised GC14 came into effect on 26 May 2005, and was intended to lapse after two years unless a positive need could be demonstrated for it to be continued, because Ofcom felt that this would cover the period when most problems were likely to occur as CPS and WLR were rolled out. Ofcom hoped that beyond this period, these formal requirements could be replaced by self-​regulatory mechanisms. However, when, in 2007, Ofcom reviewed the system, it concluded that insufficient progress had been made for it to relax the restrictions.114 It had had to open several investigations against communications providers who had not complied with the requirements, and there continued to be unacceptably high cancelled orders using the Cancel Other mechanism (see Section 9.3.2.7). Ofcom decided to maintain the requirement for communications providers to establish codes of practice on sales and marketing for the time being, and at the same time extend it to local loop unbundling (LLU).115 Although sales of LLU were in their infancy at the time, and complaints about misselling of LLU were low, the process for switching to LLU was the same as for fixed-​line telecommunications, so there were the same opportunities for misselling.

  Ofcom statement, Protecting consumers from misselling of telecommunications services, 21 May 2007.   The requirement for communications providers to establish codes of practice on sales and marketing was contained in GC14, Annex 3, which, until December 2009, was Annex 4. The extension to LLU was achieved by amending the definition of ‘fixed-​l ine telecommunications service’ in GC14.9(h) so that instead of covering a specific list of fixed-​l ine services, it covered all types of fixed-​l ined services, so capturing LLU (see Ofcom statement, Protecting consumers from misselling of telecommunications services, 21 May 2007, para 3.19). 114

115

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In 2007, the mobile network operators introduced their own voluntary code to tackle misselling.116 9.3.2.7  Cancel Other At the same time as Ofcom introduced the requirement for communications providers to establish codes of practice on selling and marketing, it also published a draft proposal for resolving a dispute between BT and a number of communications providers relating to BT’s use of the ‘Cancel Other’ function. BT used this to cancel orders for CPS and WLR in certain circumstances, including where a customer had been slammed. At the time the dispute arose, BT was subject to a Direction issued in 2003 specifying the circumstances in which BT was permitted to use Cancel Other. However, it only applied to CPS because it was made before WLR was introduced. The alternative providers were concerned that under the 2003 Direction BT could inappropriately cancel transfers and that the system limited their ability to address allegations of slamming, because a customer who believed he had been slammed was not required to contact the service provider that placed the transfer request. The alternative providers wanted customers who wanted to cancel a transfer to be required to contact the gaining provider (the one that placed the transfer request) first, while still allowing the losing provider to cancel in certain circumstances. They also argued that the system should apply to all providers, not just BT, as customers might want to transfer between alternative providers. In January 2005, Ofcom published a new Cancel Other Direction to BT,117 the detail of which was further amended in July 2005.118 The Direction set out the circumstances in which BT could use Cancel Other. BT could continue to use the Cancel Other function in cases of slamming but was required to provide more information to alternative providers on its use of Cancel Other. Ofcom also provided further guidance on the definition of slamming, and expected that the Direction would lead to a reduction in the number of cases in which BT used Cancel Other. Ofcom resolved to reconsider BT’s use of Cancel Other before the anticipated two year period for the sales and marketing codes of practice under GC14 ended. If slamming was no longer a problem at that stage, the role of Cancel Other as a consumer protection mechanism would also be reduced, and Ofcom thought it might remove BT’s ability to use Cancel Other at this point.

  Code of practice for the sales and marketing of subscriptions to mobile networks, 31 July 2007.   Ofcom Direction under section 49 of the Communications Act 2003 and Condition AA1(a) imposed on British Telecommunications plc as a result of the market power determinations made by the Director General of Telecommunications that BT has significant market power, 20 January 2005. 118   Ofcom Direction modifying a Direction, 28 July 2005. 116 117

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9.3.2.8  Sales and marketing of mobile telephony services By March 2008, Ofcom considered that the voluntary code for mobile sales and marketing was not working sufficiently well. Ofcom’s review of the effectiveness of the code indicated that although its introduction had brought about some positive changes in practices by mobile-​service providers and retailers, these changes had not been uniformly applied and had not brought about an adequate reduction in consumer complaints or consumer harm. Introduction of the code had caused some mobile-​service providers to review their sales and marketing procedures and those of independent retailers, and some retailers had ceased trading following the application of new rules under the code requiring cashback terms to be fair. However, Ofcom had found that the extent of monitoring and compliance activity varied between mobile-​service providers and that the focus had remained on cashback and slamming problems rather than more general misselling. Ofcom concluded that the continuing high level of complaints (which were higher in January and February 2008 than in July 2007) meant that the code did not provide adequate protection for consumers. Ofcom therefore introduced GC23 on the sales and marketing of mobile telecommunications services, which came into force on 17 September 2009, and was tougher than the voluntary code of practice. Under GC23, when selling or marketing their services, mobile service providers must not engage in dishonest, misleading, or deceptive conduct, engage in aggressive conduct, or contact the customer in an inappropriate manner. This prohibition is removed from the revised GCs and replaced with requirements that information provided to customers is not misleading and that providers offer the information in a ‘durable medium’ (eg paper or email).119, 120 Because so many of the misselling problems were caused by independent retailers, mobile service providers must ensure that those selling their products on their behalf do not engage in such behaviour and must ensure that retailers are trained to comply with the GC, monitor their compliance and, where appropriate, sanction non-​compliance. Mobile service providers and third parties acting on their behalf have to carry out due diligence on independent retailers. Mobile service providers must ensure that customers entering contracts are authorized to do so, intend to contract, and are provided with key information about the terms of contract. Where the contract is made during a sales call, the mobile service provider must use reasonable endeavours to ensure that the

  GC C8.2.  The phrase ‘durable medium’ originally came from the Consumer Protection (Distance Selling) Regulations 2000, SI 2000/​2 334. These were replaced by the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013/​3134 in relation to contracts entered into on or after 13 June 2014. 119

120

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information is sent to the customer in a durable medium. Retailers, whether the mobile service provider themselves, or independent companies, have to create and keep records about the sale for six months, and potentially longer in relation to sales-​i ncentive121 deals. The terms and conditions of sales incentives, where the customer does not benefit immediately, must not be unduly restrictive and the customer must be given written information about the details of the sales incentive. This provision was a response to the cashback problems mentioned above. 9.3.2.9  Sales and marketing of fixed-​line services In 2009, Ofcom concluded that the codes of practice on sales and marketing for fixed-​line providers were not working and proposed regulating the sales and marketing of fixed-​l ine services directly through the GCs. Ofcom introduced what was then GC24 with effect from 18 March 2010. This included an extension of the Cancel Other rules to all fixed-​line providers, and Ofcom removed the Cancel Other Direction. In December 2013, the rules for switching fixed-​line and broadband provider were amended again so that the customer only has to contact the gaining provider to initiate the switch. The former requirement for the customer to obtain a migration authorization code (MAC) was abolished. These provisions were included in GC22 on service migrations and home moves and at the same time the provisions on the sales and marketing of fixed-​l ine services that had been included in GC24 were incorporated into GC22 and GC24 was deleted. Under the revised GCs, the obligation to prevent misselling is included in GC C7, Switching. Unless stated otherwise, the remainder of this Section 9.3.2.9 sets out the rules as they will apply from 1 October 2018. The GC applies where a domestic or small-​ business customer switches fixed-​l ine or broadband service to one offered by the same provider or a different provider, but only applies where the migration takes place within Openreach’s or KCOM’s access networks. As with the provisions on the sales and marketing of mobile services, the GCs that apply from 1 October 2018 no longer contain a prohibition on engaging in dishonest, misleading, or deceptive conduct, and so on, and focus instead on a requirement to provide customers with accurate and not misleading information and to offer to provide it in a durable medium. In addition, there is a specific prohibition on slamming.122

121   Sales incentives are described in GC C8.11 (GC23.10 in the version of the GCs that applies until 1 October 2018), and are incentives from which the customer does not benefit until he has entered into the contract for the mobile service. The terms and conditions of such offers must not be unduly restrictive and the customer has to be provided with certain information about the deal. 122   GC C7.3 in the version in force from 1 October 2018 and GC22.3 in the old version.

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Communications providers that engage representatives such as sales agencies must make sure such representatives comply with the GC, and must train all staff and sales agency representatives to comply with the GC. The gaining provider must take all reasonable steps to ensure that before entering into a contract, the customer transferring the line is authorized to do so, intends to enter the contract, and is given the information about the contract specified in the GC. The customer must be provided with a description of the key charges; payment terms; the existence of any termination right, termination procedures and the customer’s right to cancel at no cost from the point of sale to the completion of the transfer period; the arrangements for provision of the service, including the order process and, as accurately as possible, the likely date of provision of the service and any minimum fixed contract period. Both the gaining communications provider and the losing communications provider must send the customer a dated letter stating that the customer is transferring their service, the communications services that will be transferred, any calling line identification and include relevant contact details. In addition, the gaining provider’s letter must include the customer’s right to terminate before completion and the losing provider’s letter must include all services it provides that the provider reasonably expects to be affected or unaffected by the transfer, and a reasonable estimate of the migration date.123 The losing provider’s letter must also include an explanation of the transfer process, which includes information about any early termination charge and information about the final bill. Ofcom has removed the ‘reactive save’ prohibition, which prohibited losing providers from trying to induce the customer to remain with them. It has noted that the UK courts have found that the provision in the GCs124 restricting the use by one provider of information acquired from another in confidence during the process of negotiating network access can apply to certain switching scenarios. It also notes that the prohibition is less necessary now that most customers do not have to contact their losing provider, and in some cases customers who do contact their losing provider may be able to obtain a better deal from doing so. Ofcom also says that it does not intend to make the enforcement of the provision on information obtained during negotiations for network access, insofar as it applies to reactive save activity, an administrative priority.125 The customer has a right to terminate the contract from the point of sale until the completion of the transfer period (ten working days as set out in the definition of ‘Transfer Period’), without charge.

  GC C7.9 and C7.10 in the version in force from 1 October 2018 and GC22.10 and GC22.11 in the old version.   GC A1.3 in the version that applies from 1 October 2018. GC1.2 in the old version. 125   Ofcom consultation, ‘Making switching easier and more reliable for consumers’, 29 July 2016. 123

124

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The gaining provider must have procedures in place to enable the customer to terminate their contract without unreasonable effort, including by telephone, email, and post. Gaining providers also have to keep sales records for at least six months and records of consent for not less than twelve months.126 The requirement to keep records of consent aims to reduce the incidence of slamming by enhancing Ofcom’s enforcement capabilities.127 Gaining providers are under an obligation to ensure that where they have elected to coordinate a migration of broadband and fixed-​line over the same line, they submit an order to Openreach or KCOM as applicable for the simultaneous transfer with minimal loss of service of both communications services.128 Where the switch involves a company not using the Openreach or KCOM access network, such as a cable company, consumers will sometimes have to contact the losing provider: a process known as ‘cease and re-​provide’. 9.3.2.10  Switching provisions going forward The Digital Economy Act 2017 amended the Communications Act 2003 by adding into section 51 a new matter to which GCs may apply.129 Ofcom can now specify requirements in relation to arrangements that enable an end-​user to change communications provider on request. Although it seems as though such provisions were already contained in the GCs, the intention of this provision was to give Ofcom the power to require communications providers to coordinate switching and for Ofcom to be able to help consumers make more informed decisions about which communications provider to use.130 Between 2016 and 2017, Ofcom reviewed the rules on switching. For switching between mobile providers, Ofcom consulted on proposals to address difficulties arising from the interaction of switching processes with charges imposed on mobile consumers pursuant to notice periods. It subsequently decided to prohibit providers from charging for notice beyond the date when a consumer switches and/​or ports their mobile number. Ofcom also decided to implement an ‘auto-​s witch’ system, whereby consumers will be able to request and automatically receive a PAC or cancellation code by text or through their online account. Mobile providers will be subject to additional requirements to provide consumers with clear information about the switching and porting process.

  GC C7.6 and C7.7 in the version in force from 1 October 2018 and GC22.7 and GC22.8 in the old version.   Ofcom statement, ‘Consumer switching, A statement on the GPL NoT+ elements’, 20 December 2013. 128   GC 7.13 in the version in force from 1 October 2018 and GC22.14 in the old version. 129   Digital Economy Act 2017, s 2. 130   Queen’s Speech 2016 background briefing notes, 18 May 2016. 126 127

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Both changes are implemented through amendments to GC7 and take effect from 1 July 2019.131 Ofcom also looked at introducing rules on switching between providers who operate on different platforms, for example, switching landline, broadband, and pay TV between the Openreach, KCOM, Virgin cable, and Sky satellite platforms. It consulted on two options. The first was an enhanced cease and re-​provide process that would give consumers flexibility in how they contact their old provider to cancel their existing services. The new provider would be required to offer to organize the switch on the consumer’s behalf. The second was a gaining provider-​ led process.132 However, ultimately, Ofcom decided not to take any regulatory action.133 Instead, it considered that it could better further consumer interests by increasing its focus on helping consumers navigate the communications market; subsequently, it published a call for inputs to inform a new project on customer engagement.134 9.3.2.11  Billing limits for mobile phones The Digital Economy Act 2017135 introduced a new requirement in the form of an amendment to the Communications Act 2003136 preventing mobile phone providers from entering into customer contracts unless the customer has been given an opportunity to specify a billing limit in the contract. This is intended to help protect consumers against the risk of ‘bill shock’. At the time of writing, this provision is not in force. It can only be brought in by statutory instrument.

9.3.3  Dispute resolution Competition tends to bring with it increased potential for disputes, because of a higher number of market players, a wider range of services, and an increased range of technologies by which services are provided. A well-​f unctioning dispute resolution mechanism is therefore important to support a competitive environment, and necessary, because the normal procedural route through the courts would be too slow and costly to provide an effective constraint on suppliers’ behaviour. A  dispute resolution system needs to provide quick and clear results

131  Ofcom consultation, ‘Consumer switching:  Further proposals to reform mobile switching’, 29 July 2016, Ofcom consultation, ‘Consumer switching: Proposals to reform switching of mobile communications services’, 19 May 2017 and Ofcom decision on reforming the switching of mobile communications services, 19 December 2017. 132   Ofcom consultation, ‘Making switching easier and more reliable for consumers’, 29 July 2016. 133   Ofcom statement, ‘Decision on switching landline, broadband and/​or pay TV between different platforms’, 14 July 2017. 134   Ofcom call for inputs, ‘Helping consumers to engage in communications markets’, 14 July 2017. 135 136   Section 102.   Section 124S.

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and incorporate an appeals process. A dispute system that allows consumers to achieve resolution quickly and easily will tend to support a competitive market by limiting the resources being diverted to dispute resolution and providing certainty and confidence in the market for consumers. The system in the EU and UK is loaded towards identifying and solving disputes at an early stage, and avoiding the courts. 9.3.3.1  Complaints handling Ofcom has a duty to set GCs to ensure that communications providers establish and maintain procedures to handle complaints and resolve disputes between them and their domestic and small business customers, where the complaint relates to contractual conditions, or to the performance of a supply contract. Procedures established and maintained for complaints-​handling and dispute resolution must be easy to use, transparent, non-​d iscriminatory, and effective, and domestic and small business customers must be able to use them free of charge.137 Until January 2011, communications providers were required to have and comply with a complaints code of practice that they drafted themselves but that was approved by Ofcom under GC14.4. But an Ofcom review of consumer-​complaints procedures, started in December 2009, found that a significant proportion of consumers were having a very poor experience when pursuing a complaint with their provider. In particular, 30 per cent of complaints were still unresolved after 12 weeks; the majority of consumers who could not resolve their complaint promptly were having difficulty getting their provider to recognize that they were making a complaint and in finding out about the complaints process; and those consumers who were unable to resolve their complaint within 12 weeks were much more likely to suffer financially or through stress. Ofcom considered that the evidence suggested that incentives on providers to compete on the basis of customer service were not proving sufficient to ensure that individuals would receive satisfactory treatment from their provider when they try to pursue a complaint. Ofcom therefore replaced the requirement for communications providers to have complaints codes of practice approved by Ofcom, with a set of minimum standards for complaints-​handling procedures, to apply directly to communications providers set out in a Code for complaints handling.138 As already mentioned, Ofcom also imposed an obligation on communications providers to increase awareness of ADR by providing additional information to domestic and small business customers about the right to take unresolved complaints to ADR.139   Communications Act 2003, s 52.   Annex 4 to GC 14 in the version that applies until 1 October 2018 and Annex to GC C4 in the version that applies from 1 October 2018. 139  Ibid. 137

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9.3.3.2  Ofcom code for complaints-​handling Following concerns about the scope and clarity of the current rules and low awareness by customers of their communication provider’s complaints-​ handling procedures and their rights to complain,140 the new version of the code that will apply from 1 October 2018 includes strengthened provisions on the transparency of the complaints process, strengthened requirements on the provision of information to consumers at different stages of the process, more effective signposting of access to ADR when complaints become deadlocked, and improved record keeping and monitoring requirements for communications providers. The new code, like the old one, requires a communications provider to have a written customer complaints code for domestic and small business customers, which must comply with the detailed requirements in the Ofcom code and must be well publicized as specified in the Ofcom code. There must also be clear time frames for resolving complaints. All bills, except those sent by text, must contain information about how to access ADR. Customers whose complaints have not been resolved within eight weeks must be sent written notification about their right to go to ADR if they have not been sent one before. The new code has also been expressly extended to include complaints about customer service. Communications providers must accept complaints lodged at least by any of the following means: phone, letter, email, or webpage, and must proactively inform the complainant about the process and timeframe for dealing with the complaint. The code contains specific instructions about how staff should be trained in dealing with complaints. 9.3.3.3  Complaints about IASs In addition to complying with Ofcom’s complaints-​handling code, providers of IASs are also required by Article 4(2) of the Regulation on Open Internet Access and Roaming to put in place transparent, simple, and efficient procedures to address complaints of end-​users relating to their rights to open internet access141 and their contractual rights142 Ofcom has been empowered under the Open Internet Access (EU Regulation) Regulations 2016143 to impose requirements to ensure compliance. So far, at the time of writing, Ofcom’s compliance activities have focused on monitoring.144

140   Ofcom review of the General Conditions of Entitlement, ‘Consultation on the general conditions relating to consumer protection’, 20 December 2016. 141 142 143   2015 Regulation, Art 3.   Ibid, Art 4(1).   Reg 7. 144  Ofcom, ‘Monitoring compliance with the EU Neutrality regulation:  A report to the European Commission’, 23 June 2017.

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9.3.3.4  Dispute resolution schemes Before the Communications Act 2003 came into force, the Director of Oftel was developing the idea of an Ombudsman scheme as a way to resolve disputes without the parties involved having to use the courts. In September 1999, Oftel consulted on possible ways forward in relation to the resolution of consumer complaints. The responses to the consultation showed no clear consensus. There were those who argued for improvements to the arbitration schemes that existed at the time, to ensure they were fit for purpose, leaving complaints which were not then satisfactorily dealt with to go to the regulator’s own consumer representation staff for resolution. Others argued that arbitration was inappropriate, time-​consuming, and inaccessible. The Director General considered that an Ombudsman service would command wide support and confidence amongst the public, whilst ensuring that disputes were dealt with fairly for all parties, and that its presence would give operators greater incentive to improve customer care and their own complaint handling.145 When the Communications Act was introduced, it was not specific about the type of dispute resolution system communications providers had to operate. Ofcom has powers to set GCs for public communications providers and their domestic and small business customers, to resolve disputes.146 Any procedures established must be easy to use, transparent, non-​d iscriminatory and effective; and must be free to domestic and small business customers.147 Any dispute resolution GCs must require public communications providers to establish and maintain procedures for resolving disputes, and have these approved by Ofcom,148 and Ofcom is required to approve all dispute resolution procedures.149 Ofcom has accordingly established GCs requiring all providers of public ECSs to domestic and small business customers to be a member of an alternative dispute resolution scheme that has been approved by Ofcom.150 There are two approved dispute resolution schemes. One is an ombudsman service, called Ombudsman Services: Communications (formerly called Otelo),151 and the other is a customer adjudication service operated by CISAS.152 Ombudsman Services is a not-​for-​profit private company that runs four national ADR schemes in different market sectors. CISAS was set up in 2003 and is administered by the Centre for Effective Dispute Resolution (CEDR), a private company. CEDR provides conflict management and resolution consultancy worldwide and also operates   Oftel consultation, ‘Developing a telecommunications ombudsman’, March 2001. 147 148   Communications Act 2003, s 52(2)(b).   Ibid, s 52(3).   Ibid, s 52(5). 149   Ibid, s 54. 150   GC C4.3 in the version in force from 1 October 2018 and GC14.5 in the old version. 151  . 152  . 145

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the ADR scheme for the postal sector. The fact that one is an ombudsman and the other is a consumer adjudication service makes the two schemes fundamentally different in their approach to dispute resolution, although the fact that providers can choose between schemes also effectively creates a competitive market in dispute resolution schemes. The ombudsman scheme offers a high degree of customer support. This includes helping consumers to fill out their dispute resolution application form and providing advice on any evidence that a consumer may wish to consider submitting. An investigations team examines the allegations and submissions from the communications provider and will contact either party to seek further information on any points. The process is an iterative one and each party has the opportunity to make submissions on the provisional conclusion before it is passed to the ombudsman for a final decision (if one or other party does not accept the provisional conclusion). As the operator of an adjudication scheme, CISAS places great weight on treating consumers and communications providers equally. It will not help either party to put their case together and will not advise either of them on what evidence they would need to support their case, although it does publish guidance including evidence checklists for enquirers and consumers. Consumers can complete applications online or by post. On request, CISAS staff will guide and assist applicants on completing their application. CISAS does not investigate consumer complaints, but consumers are provided with an opportunity to comment on the communication provider’s response to their claim. Adjudicators have the ability to request further information from either party in order to help them to make a fair determination of the claim. Adjudicators apply legal principles to determine whether the consumer has proven, on the balance of probabilities, that their communications provider has breached the contract or their code of practice. Neither consumers nor communications providers have a right to challenge an adjudication, although the complainant can choose to accept or reject the decision. Ofcom has to secure consistency in standards between the schemes,153 and undertakes reviews periodically. Some differences are an inevitable by-​product of having two schemes, and some are a direct result of differences in scale. However, where those differences mean that consumers will receive a lower standard of treatment depending on which ADR scheme their communications provider belongs to then Ofcom has to take steps to ensure an appropriate degree of alignment. Any significant discrepancies between the two schemes could potentially create concern about whether the ADR schemes are meeting the needs of consumers and

  Communications Act 2003, s 53(5)(b).

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could also create incentives for the communications providers to choose to belong to a particular ADR scheme if there is a perception that dispute resolution under one scheme is more likely to favour them than under another. The Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015 introduced requirements for businesses to provide information about certified ADR providers to consumers. Ofcom has certified four schemes:  Ombudsman Services, Centre for Effective Dispute Resolution, Promediate, and The Retail Ombudsman. 9.3.3.5 Compensation In March 2017, Ofcom proposed the introduction of a system of automatic compensation for consumers and smaller businesses when things go wrong with their communications services.154 However, a voluntary initiative was proposed by industry, which Ofcom decided to accept instead of pursuing regulatory action.155 The scheme contains automatic compensation for the following failures: • Delayed repair following loss of service. £8 per day if the service is not repaired after two working days. • Delayed provision. £5 per day. • Missed appointments. £25 per missed appointment if the engineer does not turn up or the appointment is cancelled with less than twenty-​four hours’ notice.156 Ofcom was given an express power to require a communications provider to pay compensation to an end-​user on failure to meet a specified standard or obligation by an amendment to section 51 of the Communications Act 2003 in the Digital Economy Act 2017.157 9.3.3.6  PRS customer enquiry and complaints code PRSs offer content, products, or services that consumers can buy by charging the cost to their phone bills and pre-​pay accounts. The charges for PRSs comprise an access charge, which goes to the phone company, and a service charge, which goes to the organization the consumer is calling. The cost of making a call to a PRS is usually significantly higher than the cost of a standard landline or mobile call.

154   Ofcom Consultation, ‘Automatic Compensation: Protecting consumers from service quality problems’, 24 March 2017. 155   Ofcom Statement, ‘Automatic Compensation: Protecting consumers from service quality problems’, 10 November 2017. 156  These amounts were less than originally proposed by Ofcom, which provided for £10, £6, and £30 respectively. 157   Section 3.

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Originating communications providers who provide PRS are required to comply with certain requirements. Under the GCs that apply until 1 October 2018, providers must establish a code of practice for handling customer enquiries and complaints about PRS according to the guidelines set out in Annex 1 to GC14.158 The code of practice must include information on pricing, and a number of other specific issues that relate to PRS and that can cause problems for consumers. It must also refer to the code of practice operated by the Phone-​paid Services Authority (formerly PhonepayPlus), the PRS co-​regulator, with which PRS providers must comply. From 1 October 2018, the requirements on providers are set out in the GCs themselves rather than in an annex159 and only apply to controlled premium rate service providers. Providers no longer have to have a code of practice for handling customer complaints and queries, they just have to follow the requirements of the GC in making information available.160 9.3.3.7  Unbundled tariff and personal numbers information publication requirements Unbundled tariff numbers161 are used as a micro-​payment mechanism for a wide variety of value-​added services. A  significant proportion of retail call revenues from these numbers is passed on to service providers receiving the call. Because of issues particularly over the transparency of pricing, Ofcom introduced regulation to improve customer information. Until 1 October 2018, this comprises a requirement for these services to have a code of practice for the publication of prices of such calls, drafted to comply with Ofcom’s guidelines.162 This requirement was first introduced in relation to what were known as number translation services in 2006 after Ofcom identified a number of consumer-​ protection issues in relation to these types of services, and subsequently extended to 0870 calls and personal numbers in 2009. Under the version of the GCs in force from 1 October 2018, the requirement to publish information about pricing is included in the GC itself163 and the obligation to maintain a code of practice has been removed. The Phone-​paid Services Authority (PSA) also regulates these services and numbers.164 9.3.3.8  Complaints outside Ofcom’s jurisdiction Some issues fall outside Ofcom’s jurisdiction, such as mobile phone hardware and therefore complaints about faulty handsets. The Consumer Protection Partnership made repairs and redress in the mobile phone sector a priority for its work in 2017–​18.165 159 160  GC14.2.   GC C2.   See further Chapter 14, at Section 14.7. 162   Non-​geographic numbers starting 084, 087, 090, 091, 098, and 118.   In Annex 2 to GC14. 163 164   GC C2.4–​2 .9.   See further Chapter 14, at Section 14.7. 165   Consumer Protection Partnership: fourth report, October 2017. 158 161

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9.3.4  Regulation of VoIP services VoIP services can look and feel like traditional telephone services, but may not be able to deliver the features consumers have come to expect as standard, because of the technological differences in the way they are delivered. In particular, services may cease to function if there is a power cut because, unlike the PSTN, which derives its power through the telephone lines or from the telephone exchange, VoIP telephones require connection to a local power source in order to function.166 Some VoIP services do not provide access to emergency calls, or, if they do, their reliability could be affected by a power cut. Also, VoIP services may not be able to offer number portability. In May 2007, to deal with issues with VoIP services, Ofcom introduced a requirement for service providers to ensure that their domestic and small business customers were informed about any feature or limitation to the service that differs from a PATS. This requirement was contained in the code of practice in Annex 3 to GC14. In the version of the GCs that applies from 1 October 2018, this Annex and much of its contents have been removed. Two requirements have been retained and moved to the main body of the GCs.167 These are the requirement for providers to inform their domestic and small business customers that access to emergency organizations may cease if there is a power failure or failure of the internet connection, and the requirement to recommend that its domestic and small business customers register their location so as to help emergency organizations identify the location of a caller making an emergency call. Ofcom considered that the other requirements it had formerly imposed on VoIP providers now go beyond what is necessary to achieve the original policy objectives of providing additional information to VoIP customers in order to ensure they were aware of the characteristics of the service they were buying, because users are now widely familiar with this technology. The position may change again once the EU Electronic Communications Code is adopted, because the current proposals will also apply additional rules to ‘interpersonal communications services’.

166   This is also a problem for FTTP (fibre to the premises) networks, as optical fibre networks do not continue to operate during a power failure. Ofcom published Guidelines on the use of battery back-​up to protect lifeline services delivered using fibre optic technology on 19 December 2011 but announced in its statement to its Strategic Review of Digital Communications (25 February 2016) that it was withdrawing this and would proceed by assessing what operators were doing on a case-​by-​c ase basis and keeping under review the resilience of operators’ networks. 167   GC A3.3 and A3.6(c).

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9.4  CONC LUDING R EM A R K S It appears that consumer protection measures in the telecommunications market are here to stay. Ironing out national differences in regulation of the sector across the EU does not remove the need for consumer protection. There is still a need to ensure a universal service for basic telecommunications services (and, as internet access becomes increasingly important to everyday life, extending this to broadband services), and a need to stimulate competition by creating demand through informing consumers. Indeed, the European Commission’s 2016 proposals to reform the regulatory framework show no watering down of consumer protection measures. The proposals reveal a couple of main aims for consumer protection. They update the rules to take account of technological advances, for example, by changing in the definition of ‘electronic communications service’ to clarify what rules apply to software-​based services, and extend universal service provision to basic broadband. They also propose increased harmonization of consumer protection provisions with a view to improving cross-​border access to services. However, whether these proposals will be implemented in the UK, given the UK’s withdrawal from the EU, remains to be seen.

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10 COMPE TITION L AW AND TELECOMMUNIC ATIONS Vincent Smith and Lorna Woods

10.1 Introduction: Applying Competition Law to Electronic Communications  10.2 Competition and Regulation  10.3 Restrictive Agreements in Electronic Communications  10.4 Abuse of Market Power in Electronic Communications  10.5 Competition Law and Electronic Content  10.6 Competition Law Control of Concentrations  10.7 Shaping the Market—​Competition Market Investigations  10.8 UK Competition Law: Enforcement and Appeals in the Electronic Communications Sector  10.9 Conclusions 

533 535 538 553 566 574 582 591 596

10.1  INTRODUC TION: A PPLY ING COMPE TITION L AW TO EL E C TRONIC COMMUNIC ATIONS Telecommunications regulation was born from the need to police the removal of state-​owned telecommunications monopolies in Europe from the 1980s onwards. Indeed, the telecommunications sector is not a market which has developed naturally. Instead it was a response to governmental choices, originally to create a state monopoly and, in the late twentieth century, to move to market provision, ultimately to be controlled by general competition law. This chapter introduces these competition rules and illustrates how they have been applied in the telecommunications context. Since competition law applies across all sectors, the law and practice developed in competition cases from other areas also plays an important role in deciding how competition law applies to telecommunications operators.

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The move to a market driven approach has not been entirely successful, with former monopolists continuing to hold substantial market power in some markets, often reflecting how the market was originally formed (whether on the basis of substantial state intervention or not), as well as a trend towards horizontal consolidation. It is too simplistic, however, to suggest a one-​way trend, as technological developments (eg development of mobile as a substitute for fixed line services), as well as policy changes (eg the removal of the prohibition on BT operating in the content market) provide opportunities for market entrants who then change the structure or nature of the market. Whilst competition law may now be the preferred tool to control the behaviour of private actors acting, alone or in concert, to distort competition, regulation remains relevant and our discussion takes place against the background of the regulatory framework for electronic communications. In contrast to previous editions, this chapter includes material on content provision and competition law. In a text dealing with telecommunications, this may, at first glance, need explanation. Convergence (according to which transmission technology is service neutral, allowing the same service to use different transmission technologies and the same transmission technology to distribute different types of service) may be seen to entrench the divide between transmission (telecommunications) and electronic content (including broadcasting and interactive services such as gaming). This divide, however, was never as clear as policy documents viewed it, and market changes have led to: a race towards building up gatekeeper positions at the different levels of trade, both platforms and content, with the danger of the monopolization of large parts of the sector.1

Content providers were always aware of the importance of having access to distribu­ tion systems: access determines the possibility of access to the audience. Content is similarly important for telecommunications companies. There has been signifi­ cant vertical integration between content and transmission markets. To take one example,2 in 2014 Liberty Global (a TV, broadband, and mobile service provider) acquired shares in production company All3media (the UK’s largest independent producer), free-​to-​air broadcaster ITV, De Vijver Media (a Belgian production and free-​to-​air television company),3 and Ziggo (a Dutch cable TV

1   Ungerer, H, ‘The Reasons for Intervention through Competition Policy’ in Donders, K, Pauwels, C, and Loisen, J, (eds), The Palgrave Handbook of European Media Policy (Basingstoke: Palgrave Macmillan, 2014), 405. 2   Other examples include Telefonica/​DTS in Spain, and Vivendi/​Telecom Italia. 3   European Commission, Mergers: Commission clears Liberty Global’s acquisition of controlling stake in De Vijver Media, subject to commitments, Press Release, 24 February 2015.

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operator),4 the year after it acquired Virgin Media.5 Content now is not just about television, but includes a range of services provided  across the internet. The relationship between actors in each of these fields is becoming increasingly intertwined. The chapter is structured as follows. After identifying the distinction between competition and regulation (Section 10.2), we begin with consideration of the prohibition on restrictive agreements and concerted practices in Article 101 TFEU (and s2 Competition Act 1998 in the UK) (Section 10.3) before considering Article 102 TFEU—​unilateral abuse of market dominance (Section 10.4). As well as looking in more detail at how different competition law tools have been applied in telecommunications markets, we will consider how competition rules have been used to control anti-​competitive outcomes in the interface between transmission and content provision. Particular competition issues may arise at the interface where regulated transmission services and the provision of (‘unregulated’) content meet, and these are discussed at Section 10.5. Our merger control section (Section 10.6) focuses on the EU and UK approach to international telecommunications mergers, to avoid infrastructure monopolies being created. We also briefly consider media plurality rules in merger control. Market investigations (Section 10.7), both at EU and UK level, have played an important role in UK telecommunications over the last decade. We conclude with a short section on enforcement and appeals in the ‘concurrent’ UK competition law enforcement architecture, which sits alongside the regulatory structure for electronic communications (Section 10.8). Although the role of the state has been important in shaping the telecommunications market, this chapter does not cover Article 106 TFEU nor the rules on State aid.6

10. 2  COMPE TITION A ND R E GUL ATION Regulatory intervention in the telecommunications sector addresses the question: what do we want electronic communications markets to look like? By contrast, competition law—​at least as far as it looks to sanction anti-​competitive behaviour—​asks the question:  what should the market have looked like if the

4  European Commission, Case COMP/​ M.7000, Liberty Global/​Ziggo, OJ [2015] C 145/​ 7; European Commission, Mergers: Commission clears acquisition of Dutch cable TV operator Ziggo by Liberty Global, subject to conditions, Press Release 10 October 2014. The Commission decision was the subject of successful appeal to the General Court for failure to state adequate reasons: Case T-​394/​15, KPN v Commission, judgment 26 October 2017, ECLI:EU:T:2017:756. 5   European Commission, Case COMP/​M.688, Liberty Global/​Virgin; Mergers: Commission approves acquisition of UK cable operator Virgin Media by Liberty Global of the US, Press Release 15 April 2013. 6   See further Chapter 4, at Section 4.4, and Chapter 8, at Section 8.5.7. See also Rose, V and Bailey, D, (eds), Bellamy & Child, European Union Law of Competition (7th edn, Oxford University Press, 2013), ­chapters 11 and 17.

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behaviour had not occurred? As a general rule, competition law analysis is retrospective, regulatory analysis is prospective. Competition law addresses business deals or practices which misuse (or threaten to allow the misuse of) market power to restrict or distort competition, ultimately harming consumers of services. The consumer harm can be felt through higher prices than necessary, or lower quality or choice of service—​or often a combination of these. There are four ways in which competition law looks to prevent (or at least minimize) distortion of competition: • control of restrictive agreements, both between competitors (‘horizontal’ agreements) as well as between suppliers and resellers or licensors and licensees of services or intellectual property (‘vertical’ agreements); • control of abuse of market dominance (by a company acting alone or jointly with others (oligopolies)); • merger control safeguarding the structure of the market; and • investigations into anti-​competitive market structures. The two competition law controls which do not fit quite so neatly into a framework which sees competition law as a retrospective and behavioural matter—​merger control and market investigations—​have been used by both EU and UK authorities to prompt desired structure changes in electronic communications markets where regulatory and behavioural competition powers alone may not be sufficient. These structural controls have been particularly used to prevent the formation of ‘converged’ firms which would be able to leverage market power from content to transmission or vice versa (see Sections 10.5 and 10.6).

10.2.1  Competition law in a regulated sector There is considerable potential for overlap between enforcing competition law in the electronic communications sector and the electronic communications regulatory framework. The two systems can apply in parallel and their rules run side by side. However, they serve different purposes and have different enforcement structures and outcomes. Privatization and the forced break-​up of network monopolies by divestment or opening of access to third party service providers—​were (and largely remain) beyond the scope of the ‘general’ competition enforcement system. Market investigation and (to a lesser extent) merger control have assisted in shaping the market, but the majority of the ‘architecture’ of telecommunications markets is set using sector specific legislation. What should happen if competition law and electronic communications regulation apply inconsistently in a particular case? The EU’s electronic communications

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legislation is expressly ‘without prejudice’ to the application of competition law in an individual case. Further, the Court of Justice of the EU (CJEU) has held that compliance with regulation does not release an operator from the duty to comply with competition law as far as it is able to do so within the regulatory structure.7 Competition law is, then, often said to take precedence over sector regulation—​ although in most cases this statement is too simplistic. It is probably better to view competition law as applying where electronic communications regulation does not directly mandate a particular outcome.

10.2.2  National communications regulators and competition law enforcement Enforcement of competition law in the EU also differs from the way in which EU electronic communications regulation is enforced. National regulatory authorities (NRAs)—​whether acting alone or in partnership (through BEREC and other bodies)—​a re the predominant enforcers of sector regulation. The European Commission sets and supervises the EU electronic communications framework but does not directly enforce electronic communications regulation against operators in Member States. In the UK, Ofcom is the enforcer of electronic communications regulation. In contrast, enforcement of competition law in EU Member States may be carried out by a number of different bodies. The European Commission’s competition Directorate General has its own investigatory and enforcement powers which can be directly used across the EU in any case where the suspected competition case may affect trade between Member States—​ or for mergers having a ‘community dimension’8. National competition authorities (the Competition and Markets Authority (CMA) for the UK) may also enforce EU competition law (but not EU merger control) in their Member States. Alongside EU competition law, the CMA also enforces UK competition legislation—​primarily contained in the Competition Act 1998 and the Enterprise Act 2002. Ofcom also has the power to apply both EU and UK competition law—​w ith the exception of merger control—​to anti-​competitive behaviour in the electronic communications sector. The intention behind this system—​k nown as ‘concurrency’—​ is to allow Ofcom to move away from sector regulation in a phased manner and apply the general competition law regime to the telecommunications industry as it becomes ‘normally’ competitive. The UK concurrency system therefore fulfils a

  Case C-​2 80/​0 8P, Deutsche Telekom v Commission [2010] ECR I-​9555.   Art 101(1) Treaty on the Functioning of the EU (TFEU); Regulation EC 1/​2003 [2003] OJEU 1/​1, Art 4; Regulation 139/​2004 (‘Merger Regulation’) [2004] OJEU L24/​1, Art 1. 7 8

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similar policy function to the EU system of periodic review of ‘significant market power’ (SMP) under the EU electronic communications Directives. The system aims to ensure that sector regulation is targeted where it is needed, leaving other business practices to be dealt with under general competition rules. National courts are also important enforcers of both UK and EU competition law. Businesses and (more rarely) consumers are entitled to bring court claims for compensation for harm caused to them by competition law infringements and for court orders requiring anti-​competitive behaviour to cease. The EU treaty articles containing the basic competition prohibitions are directly effective in the courts of EU Member States and compliance with the (identically worded) prohibitions in the UK Competition Act 1998 is a statutory duty—​breach can give rise to a right of action for damages.9 The European Commission has had a policy for some years of encouraging competition actions for compensation where EU competition law has been infringed and the level of competition litigation in the English courts has increased substantially in the last decade. The UK has a specialist competition court—​t he Competition Appeal Tribunal (CAT). As well as hearing appeals against decisions of the CMA and Ofcom, the CAT has jurisdiction (since 2015) to hear damages claims based on competition infringements and to grant injunctions requiring businesses to cease breaching competition law.10 The CAT does not have exclusive jurisdiction over competition claims—​the civil courts in the UK (in England, the High Court and the county court) retain jurisdiction—​but there are significant advantages to proceeding in the CAT in a competition case. In particular, and unlike the general courts, the CAT is usually composed of a three-​person expert panel at least one of whom will normally be an economist. For telecommunications cases, the CAT also has panel members who are specialist in the industry.

10.3  R E S TR IC TIV E AG R EEMENT S IN EL E C TRONIC COMMUNIC ATIONS 10.3.1 Overview Competition infringements carried out by two or more businesses in collusion with each other are prohibited under both EU law (Article 101 TFEU) and UK statute (Competition Act 1998, s 2). The prohibitions are (deliberately) identically

  Competition Act 1998, s 47A.   Consumer Rights Act 2015, Sch 8, amending the Competition Act 1998.

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worded. EU law will apply where the agreement or collusion may have an appreciable effect on trade between Member States.11 Where there is no appreciable effect on inter-​state trade, but trade within the UK is affected, the Competition Act 1998 will apply to any restrictions in the agreement.12 UK authorities and courts are obliged to apply EU competition law if inter-​state trade is appreciably affected13—​we will look at how the EU and national competition law systems interact in Section 10.7. Certain ‘agreements’ are prohibited. To be prohibited, the agreement • • • •

must be between two or more undertakings; have as its object or effect; the prevention, restriction, or distortion of competition; and not satisfy the conditions for exemption.

The parties to the agreement can be fined—​either by the European Commission or by the UK CMA. The restrictive parts of the agreement are void and unenforceable and damages may be awarded to those harmed by its effects. ‘Agreement’ extends to the much broader concept of ‘concerted practice’. The agreement can be either express or implied by conduct and acceptance may be merely tacit.14 What is important is a ‘concurrence of wills’ to pursue a common aim. Purely unilateral conduct cannot amount to an agreement—​even if the conduct appears to follow a market norm.15 ‘Concerted practice’ catches an arrangement which falls short of an ‘agreement’ as defined above, but which . . . knowingly substitutes practical co-​operation between the undertakings for the risks of competition16

So a response to market conditions would not be an infringement, but collusion to influence future market conditions could be. There is a presumption that changes in markets in line with a (prior) agreement or concerted practice are caused by it. Decisions of associations of undertakings (eg trade associations or standard setting bodies) are also within the scope of the prohibitions if they restrict competition between members or with non-​members, for example by recommending prices.17

  Art 101 Treaty on the Functioning of the EU [2016] OJEU C202/​47. 13   Competition Act 1998, s 2(1)(a).   Regulation 1/​2003, n 8, Art 3(1). 14   C-​2 and 3 /​01P, BAI and Commission v Bayer [2004] ECR I-​2 3. 15   Case 107/​82, AEG Telefunken v Commission [1983] ECR 3151; C-​74/​0 4P, Commission v VW [2006] ECR I- ​6585. 16   Case 48/​69, ICI v Commission (Dyestuffs) [1972] ECR 619, para 64. 17  See Bellamy & Child, n 6, paras 2-​0 81–​2 .084. 11

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‘Agreements’ between legal persons forming part of the same economic group (undertaking) will not be caught by competition law—​they are considered to be part of the internal workings of a single undertaking.18 Where, however, ‘functional’ separation of different parts of the same undertaking is required by an NRA to ensure competition in network markets, it is possible that the agreements between the parent and the functionally separated business could be subject to competition law scrutiny. An ‘undertaking’ is any form of business—​any ‘entity’ engaged in an ‘economic activity’.19 This can include companies (groups of companies under common control can be treated as a single undertaking)20 and partnerships, as well as individuals carrying on business.21 An economic activity is the offering of goods or services onto a market—​it is not necessary that the activity is profit making.22 But the offering must be on an economic basis, so some kinds of state activities fall wholly or partly outside the scope of the prohibition.23 In modern electronic communications markets, all network operators will now be undertakings. The ‘object or effect’ of the agreement must be to restrict competition. An agreement will have the ‘object’ of restricting competition if it would reduce the independent action of the parties on the market.24 A  cartel or other resale price fixing agreement is a clear example. The test is objective: it is not necessary to show that the parties actually intended to restrict competition in the particular case.25 Nor does the anti-​competitive object necessarily need to be the only reason for the agreement.26 Many agreements having legitimate overall aims (eg network interconnection) can nevertheless be infringements if their terms are restrictive (eg they attempt to fix downstream pricing). If an agreement is restrictive by object, there is no need to demonstrate an actual effect on competition. In all other cases, there must, with a reasonable degree of probability, be an appreciable effect either on actual or on potential competition arising from the agreement. The CJEU has insisted that there is, in each ‘effect’ case, some definition of the relevant market in which the effects are said to occur.27

  Case C73/​95P, Viho v Commission [1996] ECR I-​5 457.   Case C-​41/​9 0, Hofner and Elser v Macrotron [1991] ECR I-​1979.    20  Viho, n 18. 21   Case C-​309/​99, Wouters [2002] ECR I-​1577—​i ndividual members of the Dutch bar were undertakings. 22   Case 209/​78, Van Landewyck v Commission [1980] ECR 3125. 23   Bellamy & Child, n 6, paras 2.014–​2 .016. 24   Case 56/​65, Société Technique Minière v Maschinenbau Ulm [1966] ECR 235. 25   Joined cases 56 and 58/​6 4, Consten and Grundig v Commission [1966] ECR 299, at 342. 26   eg Case C-​2 35/​97P, Montecatini v Commission [1999] ECR I-​935, at para 122. 27   Case C-​2 34/​89, Delimitis v Henninger Brau [1991] ECR I-​935, at paras 15–​16. 18

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The European Commission has published guidelines describing how this exercise should be carried out.28 An agreement will have an anti-​competitive effect in the market if it causes the pattern of competition to develop differently from undistorted competition in that market.29 Where related parties enter into a network of similar agreements, the cumulative effect of the restrictions operated by the whole network will need to be considered together—​even if a single one of the agreements alone would not have an appreciable market effect.30 ‘Exemption’ from the prohibition, for restrictive agreements which nevertheless have countervailing economic benefits, is available (under TFEU, Article 101(3)) where the agreements: • improve the production or distribution of goods or promote technical or economic progress; and • allow consumers a fair share of those resulting benefits; and • do not impose on the undertakings concerned restrictions on competition which are not indispensable to attaining those benefits; nor • give the possibility of eliminating competition in respect of a substantial part of the products in question. Exemption can be considered either on an individual basis31—​after a careful examination of the relevant facts—​or by bringing the agreement within the scope of a ‘block exemption’. Block exemptions are made by European Commission Regulation and grant an ‘automatic’ exemption to certain categories of agreements provided they comply with the criteria in the exemption. Although there are no ‘block’ exemptions specifically for electronic communications markets, several of the more general ‘sector neutral’ exemption regulations will be relevant to electronic communications related markets. We consider these in more detail below. Agreements in electronic communications markets will often give rise to economic ‘efficiencies’ of a kind within the scope of the exemption criteria. The use of non-​economic criteria is much more problematic and generally these can only be taken into account in exceptional cases. So, the EU General Court has held that certain restrictions in the statutes of the European Broadcasting Union could not

28   Commission Notice on the definition of the relevant market, 9 December 1997 [1997] OJEU C 372/​5. We consider this in more detail in the discussion of Article 102 (abuse of dominance) at Section 10.4 below. 29 30   Société Technique Minière, n 24.   Delimitis, n 27. 31   The Commission has produced guidance on how the exemption will be applied in practice: Commission Guidelines on the application of Article 81(3) [now Article 101(3) TFEU], 27 April 2004, [2004] OJEU C101/​97.

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be justified solely on the basis of the EBU members’ public service broadcasting mission to provide cultural, scientific, and minority programmes.32 The term ‘consumers’ has been widely cast to include all users of the products in question.33 In general, where the restrictive effect on competition is not large, and the parties to the agreement or their distributors do not have a high degree of market power, there will be an assumption that customers and consumers will ultimately benefit from the efficiency gains. Restrictions will normally only be considered ‘indispensable’ where, in the absence of the restriction, the efficiency gain would not occur. If there are feasible alternative arrangements which are less restrictive, the agreement will not benefit from exemption. 34 This requirement applies not only to the strength of the impact on competition but also on its duration. 35 For example, a non-​ competition covenant between the parents and a new joint venture may be indispensable for the period they each remain shareholders, but not indefinitely. 36 Similarly, if the parents’ covenants extend to products which the joint venture is not producing, it is unlikely that the restrictions they accept will be considered indispensable. 37 Finally, competition should not be ‘eliminated’ for a substantial part of the market for products supplied under the agreement.38 This is only likely to be an issue where the market power of the parties to the agreement (their market shares are usually a good indicator) are high. Competition must be eliminated in a substantial part of the market: it is not enough for an isolated third party to complain that he cannot get supply.39 Even where the parties have market power, if there is the potential for competition from third parties, for example in markets where technological change can ‘tip’ the competitive balance fairly rapidly, a finding of ‘elimination’ of competition may be unlikely.40 In the remainder of this section we look at how the framework we have just described applies to some common agreements in electronic communications markets.

32   Case T-​528/​93, Metropole Television v Commission [1996] ECR II-​6 49, paras 116–​123. The General Court (formerly the Court of First Instance) is the first-​t ier court hearing appeals against European Commission competition decisions. 33 35   Exemption Guidelines, n 31, para 84. 34  Ibid, para 75.   Ibid, para 81. 36   eg Commission decision M.852 BASF/​Shell, para 49—​a two-​year post term restrictive covenant was not justified. 37   eg Commission decision COMP/​39736, Areva/​Siemens, 18 June 2012: commitments accepted permitting a non-​compete clause with a joint venture on condition that it applied only to specified core products made by the joint venture. 38   Exemption Guidelines, n 31, paras 105–​115. 39  Case C-​75/​8 4, Metro II [1986] ECR 3201, para 64. 40   See the analysis in the Exemption Notice, n 31, paras 114–​115.

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10.3.2  Network interconnection agreements The competition law prohibitions apply fully to network interconnection agreements. However, where a network owner refuses to allow access to the network (or does so only on unreasonable terms) the prohibition on abuse of a position of market dominance (discussed in Section 10.4) will normally be applied instead of the prohibition on restrictive agreements. In general, access agreements, which open networks to use by third parties and so to providing competing services to users, are pro-​competitive. But network access and interconnection agreements can also have terms which infringe the prohibition on restrictive agreements. Most terms in access agreements will be reviewed not by competition authorities but by telecoms NRAs under the Access Directive. In the UK, Ofcom has the power to apply both EU and UK competition law in the electronic communications sector.41 However, it must act within the framework of EU law—​both sector regulation and competition law. The Commission’s SMP guidelines have some advice as to how best to do this.42 The 1998 Commission Notice on the application of competition rules to access agreements in the telecommunications sector—​a lthough adopted before both the current EU electronic communications Directives and the ‘modernized’ EU competition procedure in force from 2004—​a lso still has useful pointers on how the competition rules apply to access and interconnection.43 So: • sector regulation and competition law should be applied consistently with each other, but they pursue different aims. Mainstream competition law looks at what has happened, whereas regulation looks towards shaping what might happen in the future;44 • EU competition laws apply ‘in the normal way’ to access agreements which have been approved or authorized by NRAs or to terms which have been approved after inclusion by agreement between the parties.45 In Deutsche Telekom (an abuse of dominance case, see below Section 10.4.3) the CJEU confirmed that the fact that a general ‘wholesale’ interconnection tariff had been approved by the German NRA did not absolve DT from complying with competition rules to avoid a ‘margin squeeze’ on competing downstream operators;46 • non-​exclusive access agreements are ‘in principle’ unlikely to be restrictive provided that there are proper safeguards (as also required under the EU regulatory   Competition Act 1998, s 54(1)(a) and Sch 10.   Commission guidelines on market analysis and the assessment of significant market power under the Community regulatory framework for electronic communications networks and services, 11 July 2002 [2002] OJEU C165/​6 (‘SMP guidelines’), paras 22–​32. 43 44   ‘Access guidelines’, 22 August 1998, [1998] OJEU C265/​02.   SMP guidelines, n 42, para 22. 45 46   Access guidelines, n 43, para 60.   Deutsche Telekom v Commission, n 7. 41

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regime) to prevent the misuse of confidential commercial information (on pricing etc.)—​supplied by downstream operators to the network owner—​so as to prevent distortion of competition;47 • however, where the interconnection agreement has an anti-​ competitive object—​for example, where the agreement allows both parties to share markets rather than engage in network competition—​a full exemption analysis would be required.48 But if, for example, network or infrastructure sharing is needed to bring new services to territories where neither party alone could build that infrastructure, it is likely that an exemption would be available—​a nd in certain cases the agreement might not restrict competition at all;49 • access agreements which exclude third parties who may wish to use the network—​ t hrough absolute exclusivity clauses, or through exclusionary pricing methods (eg discount structures)—​w ill also need to be justified on the exemption grounds.50 For example, in CEPT 51 the Commission found that a recommendation from CEPT (an international body for coordination of telecommunications services), that its members impose a 30 per cent surcharge on access charges for interconnecting traffic carried by international leased lines, was a restrictive decision of an association of undertakings likely to be prohibited under EU competition law. As noted, there is no EU block exemption specifically for telecommunications access agreements—​a nd the guidance in the 1998 Notice on access agreements is now partly out of date. However, and although not absolutely binding on competition authorities, it is likely that NRA regulatory practice in approving access and interconnection agreements will be followed by national competition authorities (NCAs) and the courts except in the most obvious cases of error. In the UK, under the ‘SMP’ regulatory regime introduced to implement the EU communications package, Ofcom has progressively withdrawn from detailed regulation of interconnection, and now very few markets have operators in them which are subject to SMP regulation.52 Non SMP network operators in the UK must comply with the relevant requirements of the General Conditions of Authorisation. The requirement in General Condition 1, to negotiate interconnection with other telecommunications operators within a reasonable time, does not impose any detailed regulatory requirements as to the content of the agreement.

48   Access guidelines, n 43, paras 132 and 139.   Ibid, paras 136 and 141. 50  eg O2 UK/​T-​Mobile UK (3G) [2003] OJ L200/​59.   Access guidelines, n 43, paras 140 and 143. 51   European Conference of Postal and Telecommunications Administrations: Commission Press Release IP/​9 0/​188 6 March 1990. 52   See SMP guidelines, n 42. 47

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Most interconnection is carried out on the main operators’ standard terms—​ for the UK fixed network this is likely to be BT’s standard interconnection agreement. Disputes over network access under these agreements, which are often resolved under Ofcom’s regulatory powers, may nonetheless include competition related issues.53 Since Ofcom is required to act consistently with competition law principles when resolving the dispute under its regulatory powers, and since any appeal against its regulatory decisions is made to the UK CAT—​t he specialist competition tribunal in the UK—​i n practice the choice of powers by Ofcom (or the complainant) makes little substantive difference to the underlying analysis used. Competition concerns should be adequately addressed in Ofcom’s interconnection decision. And a material part of the CAT’s caseload is composed of cases in electronic communications appeals—​on both competition and regulatory grounds.54

10.3.3  Infrastructure sharing agreements From a competition law perspective, infrastructure sharing agreements—​for example for mobile communications masts—​w ill be treated in a very similar way to interconnection agreements. Where infrastructure sharing is necessary to allow network operators to provide services to consumers who might not otherwise be reached, and the agreement does not contain restrictive terms which are outside the scope of the network sharing required to do this, it is unlikely to infringe the restrictive agreements prohibition.55 In contrast, infrastructure sharing agreements between existing competitors, which could effectively lead to one of them withdrawing from a network market, may be prohibited.56 In some circumstances complex infrastructure sharing arrangements may be treated as ‘concentrative’ joint ventures and examined under EU merger control (see Section 10.6.2). NRAs have the power to require network infrastructure sharing in certain circumstances.57 Where this requirement is imposed, operators should nevertheless ensure that any terms included in the agreement which go beyond what is mandated by the NRA comply with the competition rules.

10.3.4  Roaming and similar agreements Roaming agreements allow customers of one network operator to use the network of another where their ‘home’ network does not have (full) coverage (eg in

  eg the dispute on BT’s SIA on charge change terms: CW/​01083/​01/​12.   Of the 23 open cases at the CAT as of 15 August 2017, four were related to electronic communications. 55   Commission Decision, O2 UK/​T-Mobile UK (UK Network sharing) [2003] OJEU L200/​59. 56   See eg T-​Mobile Deutschland (network sharing Germany) [2004] OJEU L75/​32. 57   Framework Directive [2002] OJEU L108/​33 Art 12; and Access Directive, [2002] OJEU L108/​7, Art 5. 53

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another country). In a similar way, a mobile service provider (MVNO)—​such as Virgin Mobile in the UK—​w ill use a network owned by another operator under a ‘virtual network’ arrangement. B2B roaming and similar agreements are thus likely to raise comparable competition issues to network interconnection agreements and have been the subject of a number of European Commission competition decisions—​notably in the roll-​out of 3G mobile networks. Mobile roaming agreements to allow end users to use their mobile phones in other EU countries are common, and a simple non-​exclusive roaming agreement between network operators with no geographic overlap would not infringe the ‘restrictive agreements’ competition prohibition.58 The EU ‘roaming’ Regulation also sets out detailed conditions for mobile roaming provided to consumers across the EU59 (see Chapter 8). In the UK 3G network sharing case,60 O2 and T-​Mobile UK, two of the four ‘2G’ mobile network operators (MNO) agreed to share each other’s networks (in both the UK and Germany). However, both parties retained control of the terms on which they offered their services to downstream customers and the amount of infrastructure sharing was not so great that either of them became completely dependent on the other. After some minor amendments by the parties, the European Commission concluded that the arrangement—​designed to accelerate the spread of superior 3G services to both parties’ customers—​d id not infringe the Article 101 prohibition. In the parallel German 3G case61 on similar facts, however, the Commission took the opposite view. It cleared the physical infrastructure sharing aspects of the arrangement. But it found that, in the circumstances of the German market, the degree of reciprocal roaming provided for each party over the other’s network—​ which had been declared compatible with regulatory requirements by the German NRA—​d irectly limited both networks’ ability to compete with each other and also had downstream effects, as the parties were each dependent on the other for the quality of services they would provide. Resale of roaming capacity to third party MVNOs was also partly restricted. Nevertheless, the Commission found that the agreement—​which enabled O2 to roll out 3G services in Germany faster than otherwise—​was capable of exemption, but only for a limited period of five years. However, the General Court partly annulled the Commission decision.62 It found that the Commission had improperly assumed that reciprocal roaming

  eg case T-​328/​03, O2 Germany v Commission [2006] ECR II-​1231, at para 109.   Council Regulation 531/​2012, 13 June 20102, roaming on public mobile communications networks, [2012] OJEU L172/​10; Commission Regulation implementing Regulation 531/​2012, 14 December 2012, [2012] OJEU L347/​1. 60 61 62   n 55.   n 56.   O2 Germany (n 58). 58 59

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agreements restricted competition without considering how competition might have developed in the absence of the agreements.63 This is particularly necessary in fast-​moving markets.64 Since the Commission had not shown that the agreement could in fact restrict competition against this ‘counterfactual’, the exemption decision was not well grounded. It appears from these two cases that EU competition law takes a relatively favourable attitude towards roaming agreements. However, it would be unwise to assume that an agreement which—​for example—​had the effect of excluding third party operators from using a network, would not need to be examined for competition compliance before it is concluded, particularly in markets (such as mobile voice telephony) which have now matured substantially since these Commission decisions were made.

10.3.5  Intellectual property licensing in communications industries Intellectual property (IP) licences may be required in a wide variety of situations in electronic communications—​for example, in agreements for manufacturing smartphones, for using interface protocols with devices or networks, and for the use of content. Licensing of IP rights normally increases competition as it permits a wider application of technical innovation. A simple (non-​exclusive) IP licence will therefore not normally infringe competition law. Even where a licence is granted exclusively—​for example for a particular territory or for a certain field of use—​it may not fall within the competition prohibition. Again, the question to be addressed is what the position would have been if the licence on those terms had not been granted. If a manufacturing licensee will only take on the risk of a new product under an exclusive licence, then the exclusivity will not restrict competition.65 Without the exclusivity protection there would be no competition to restrict. Many interface protocols and other IP used in electronic communications are developed or adopted as standards by relevant international standard setting bodies—​i n particular ETSI, for EU services. The agreement under which the standard setting body operates to set standards may be capable of restricting competition. Where a standard is adopted which includes information in which there are IP rights, the right owner may be in a position to restrict or prevent others using the standard unless they are able to obtain a licence from him on reasonable terms. The circumstances when this might be a competition law infringement are considered at Section 10.3.6 below.

64   Ibid, paras 68–​69, 109.   Ibid, para 72.   Case 258/​78, Nungesser and Eisele v Commission [1982] ECR 2015.

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Even if a licence could fall within the ‘restrictive agreements’ prohibition, there are two relevant EU ‘block’ exemptions—​for ‘technology transfer’ licences66 and for ‘vertical’ agreements67 (which can apply—in particular—to software copyright licences). The ‘technology transfer’ block exemption, and Commission guidelines accompanying it, apply to IP licences whose primary purpose is for the licensee to ‘produce’ a product (including services).68 IP here also includes recorded confidential technical ‘know-​how’, provided the know-​how is substantially valuable in producing the services licensed.69 In contrast, straightforward licences for the resale of a service—​a lready produced including the rights—​fall within the ‘vertical’ exemption. Drawing a bright line between these two scenarios in many electronic communications agreements is not straightforward. An agreement where an originating company licences a manufacturer to produce mobile devices for sale to consumers involves ‘technology transfer’. An agreement between the same originating company and a retail chain allowing the retailer to sell the same devices under the originator’s trademark would be a ‘vertical’ agreement. But the electronic communications sector has a large number of licences in the ‘grey’ area between the two exemption regulations. For example, a licence of IP (eg brand rights) for an MVNO to run a new service over a mobile network could be seen as ancillary to the resale of capacity on the network owner’s system (a ‘vertical’ agreement). Or, it could be characterized as necessary to allow the MVNO to produce (new) services for consumers incorporating the software, know-​how, branding etc. needed to supply the innovative service (likely to be a ‘technology transfer’). In these borderline cases, much will depend on a closer analysis of the agreement, the importance and type of IP included, and other surrounding circumstances. Both block exemptions only apply to agreements where the parties have a moderate share of relevant product and territorial markets. For the vertical agreements block exemption and those technology transfer agreements where the parties are not already competitors, neither party should have a share of more than 30 per cent in any market.70 For technology transfers where the parties are competitors, their combined share of any market should not exceed 20 per cent. Beyond these market share thresholds, an individual assessment of the technology licence against the competition rules will be required. These market share requirements need to be read alongside the Commission’s guidance on when agreements are presumed not to restrict competition

  Regulation 316/​2014, [2014] OJEU L93/​17 (technology transfer). 68   Regulation 330/​2010, [2010] OJEU L102/​1 (vertical agreements).   Art 1(1)(c). 69 70   Art 1(1)(i).   Regulation 316/​2014, n 66, Art 3; Regulation 330/​2010, n 67, Art 3. 66 67

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appreciably—​a lso based on market share thresholds. Vertical agreements (between non-​competitors) are presumed not to have an appreciable effect on competition where no party has a market share of 15 per cent or more:  agreements between competitors will have an appreciable effect on competition where the combined market share of the parties reaches 10 per cent.71 Neither of the exemptions nor the de minimis guidance apply, however, if the agreement fixes resale prices charged by any party or restricts output quantities or allows market sharing which would eliminate competition.72 A detailed commentary on the technology transfer exemption is outside the scope of this book,73 but the following points may be of particular relevance to licences in electronic communications markets: • as an exception to the ‘market sharing’ ban, licensees may—​i n most agreements falling within the scope of the Regulations—​be prevented from actively promoting services in EU territories which are reserved to the licensor or licensed to other licensees.74 But a total ban on sales outside their allocated territories in response to an unsolicited request from end-​users is prohibited. This can be particularly difficult to apply in markets where electronic sales (eg over the internet) are important: Commission guidance gives some pointers to what is and is not allowed for controlling cross border internet sales;75 • licensing a technology for only one ‘technical field of use’ is permitted.76 But the Commission is concerned to make sure that this is not used as a means of dividing up customers on territorial grounds. The technical field must be properly described in the agreement and must be based on objective factors unrelated to the nationality or residence of the final customer. Again the Commission guidelines give more detail; • there should be no restrictions in the agreement on the use licensees may make of rights in their own inventions;77 • licensing (or, more correctly, charging royalties) on ‘IP’ which is not valid or not owned by the licensor is generally prohibited;78 • ‘no challenge’ clauses in IP licences may only bind the licensee not to challenge the validity of the IP during the term of the licence. It must always be open to the licensee to mount a challenge—​otherwise dubious IP rights could be maintained

72   Commission Notice on agreements of minor importance, [2014] OJEU C291/​1.   Ibid, para 13.   See eg Bellamy & Child, n 6, 736–​750. 74  Regulation 316/​2014, n 66, Art 4(1)(c)(ii); Guidelines on the application of Article 101 to technology transfer agreements (‘TT guidelines’), [2014] OJEU C89/​3, paras 105–​114. 75   Commission guidelines on vertical restraints (‘Vertical guidelines’), [2010] OJEU C130/​1, paras 52–​5 4. 76 77 78   TT guidelines, n 74, paras 113–​114, 208–​215.   Ibid, para 115.   Ibid, paras 184–​188. 71

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by contract through signing potential challengers as licensees—​but the licensor is allowed to terminate the licence as soon as the challenge is made.79 If the main purpose of the licence is not the ‘production’ of services, so that the IP is a secondary part of a wider resale arrangement, the ‘vertical’ agreements exemption may be available. This is most likely to be the case for agreements relating to trademarks and some forms of copyright. This exemption only applies to agreements between non-​competitors in the ‘resale’ market, and—​as noted above—​ only where the reseller has less than a 30 per cent share of that market. The prohibitions in the ‘vertical’ exemption Regulation on resale price maintenance and on absolute territorial protection for distributors—​m irroring the technology transfer exemption—​apply to products incorporating the IP used for marketing them.80 Again the Commission has produced detailed guidelines on how the ‘vertical’ block exemption should be applied which also guides firms whose distribution arrangements may be a close, but not exact, match for the terms of the exemption.81 Although the main purpose of a vertical agreement is the distribution of products, the use of IP rights in connection with the distribution is also exempted on the same terms—​for example, where a franchisee uses the trademarks of his supplier in a retail context.82 The IP licence must be directly related to the resale of the goods or services—​if it is not necessary for this purpose then it will not be automatically exempted and an individual assessment of competition compliance will be required.83 Licences of software—​i n Europe, protected by copyright—​may pose particular competition compliance issues. If the software licence is a secondary aspect of an overall ‘vertical’ agreement or technology transfer licence, the relevant ‘block exemption’ will apply. However, ‘pure’ or self-​standing software licences do not have their own competition block exemption and may not come within either the ‘vertical’ or ‘technology transfer’ block exemptions—​t he technology transfer block exemption focuses on licences of patents and know-​how. Many software agreements may need individual assessment for compliance with the competition rules.84 EU legislation goes some way to harmonizing the scope of protection for IP in software so as to underpin competitive markets. In particular, the Directive on copyright protection for software—​g iven on the same basis as a literary work—​ does not apply to the part of the program which interfaces with other programs

80   Ibid, paras 133–​134, 242–​2 43.   Vertical guidelines, n 75, paras 31–​38. 82 83   Ibid, esp. at paras 60–​6 4.   Ibid, paras 43–​45.   Ibid, para 31(d). 84   Commission Guidelines on technology transfer agreements, 28 March 2014 [2014] OJEU C89/​3, paras 62–​ 63. However, the Commission here appears to imply that most software licensing can fit within one of the two block exemptions. 79 81

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so as to operate properly with them.85 These interface protocols must be freely available to third parties who wish to develop compatible (but not copy) programs and a licence agreement which attempted to prevent this would infringe EU software copyright law.86 Competition law principles would also apply to strike down a term of the licence which attempted to restrict interoperability with competing programs, as seeking to eliminate competition. In practice, these issues are most likely to arise where the licensor is in a position of market dominance—​t he leading case is Microsoft, discussed in Section 10.4.3.

10.3.6  Standard setting agreements Standards for communications networks and related services are often set by groups of operators—​sometimes including actual competitors in markets related to those where the standards will be used. But—​particularly in telecommunications—​ standards are vital for networks to function at all, and cooperation to improve standards is necessary to ensure improved services to customers. Without standards, networks could not work. How then does competition law seek to draw the line between what could easily be characterized as a cartel on the one hand, and what is a vital industry function on the other? Firstly—​a nd rather obviously—​compliance with standards mandated by national or EU legislation is not a breach of EU competition law.87 A distinction needs to be made between the mandatory standards and state recommended standards (where competition compliance may still be an issue). Where standards are set by a standards body made up of industry participants, the association’s decision to adopt a standard may need to comply with EU competition principles. However, far from all standards body recommendations restrict competition—​these are not competition infringements ‘by object’ (see Section 10.3.1)—​so, an actual or potential effect on competition arising from the decision of the standards body will need to be shown.88 Commission guidance89 indicates that the ‘restrictive agreements’ prohibition will not be relevant where: • there are no restrictions on who may take part (in some capacity) in the standard setting process;

  Directive 2009/​2 4 legal protection of computer programs, [2009] OJEU L111/​16, Art 1(1).   Ibid, Art 6(1). 87   On the competition law consequences of State compulsion, see Bellamy & Child, n 6, paras 11.004–​11.008. 88   Ibid, paras 6.084–​6.086. 89   Commission guidelines on horizontal co-​operation agreements, [2011] OJEU C11/​1, paras 280–​2 83. 85

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• the standard setting process is transparent—​so that anybody with an interest in the outcome may comment; • there is no obligation (whether legal or in fact) to comply with the standard; and • access to the standard is available to all on fair, reasonable, and non-​ discriminatory (FRAND) terms. Where a standards body’s procedures do not meet these criteria, exemption may nevertheless be available. However, where the standard can in fact only be used by a closed group of major industry operators, or where alternative standards cannot be developed (ie there is a degree of exclusivity in the standards process), exemption is not likely. This is particularly true if a standard is adopted in these circumstances which becomes the ‘norm’, so that effective market entry cannot take place without it. FRAND access to standards is an important principle of competition compliance.90 This insistence on the FRAND requirement causes particular issues where IP rights (often patents) overlap with the specification of a standard. This can mean that the standard cannot (continue to) be used by third parties unless royalties are paid to the IP owner. If the existence of the IP right is not known to the standard setting body at the time the standard is made, and only becomes apparent after the standard has been widely adopted, the assertion by the IP owner of his right can seriously impede competition in the (new) market(s) which depend on the use of the standard. The Commission has insisted in the past that standard setting bodies take steps to reduce this risk of ‘patent ambush’. ETSI agreed to amend its procedures to strengthen the requirement on ETSI members to disclose as early as possible any IP rights which might read onto a telecommunications standard being considered by ETSI. This could then mean, in particular, that ETSI could decide whether to adapt the proposed standard to avoid the infringement or to negotiate FRAND royalty terms in advance of adoption with the right holder(s).91 Although the position of the Commission would appear to cover all kinds of standard setting procedures, it is worth noting that ETSI is designated as the institute responsible for telecommunications standards harmonization in the EU, which perhaps explains the Commission’s particular concern that it should take steps to avoid ‘patent ambushes’.92 Where a standard is adopted which incorporates one or more IP rights and use of the standard then becomes essential for competitors on one or more downstream markets, the Commission has taken the view that the owner of such ‘standard

91   Bellamy & Child, n 6, para 6.087.   Commission Press Release IP/​05/​1565.   Directive 2002/​21 Electronic Communications Framework Directive, n 57, Art 17(1).

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essential patents’ (SEPs) automatically has a dominant position on the downstream markets in question.93 We will consider the Commission’s mobile telecommunications abuse of dominance cases against Samsung and Motorola, brought on the basis of their IP position in a standard mobile network protocol technology, in the next section.

10.4  A BUSE OF M A R K E T P OWER IN EL E C TRONIC COMMUNIC ATIONS An agreement or concerted practice is not the only means through which competition may be restricted and competition law infringed. Unilateral behaviour can also restrict competition—​either by excluding competitors from the market94 or by exploiting market power to raise prices or reduce service levels to customers.95 This kind of behaviour by one operator is only likely to be successful in restricting competition where the undertaking carrying it out has a significant degree of market power. This is essentially why the EU’s e-​communications regulatory regime—​in large part—​now only applies to operators having ‘significant market power’ (SMP). EU competition law similarly only prohibits unilateral behaviour where it is carried on by a dominant undertaking in a market.96 Although there is a great deal of similarity between the two concepts of SMP for regulatory purposes and for competition law dominance—​t he wording in the Framework Directive adopts the language of Article 10297—​t hey may be applied differently. Telecommunications regulation seeks to prevent the most serious restrictions in electronic communications markets before they happen, whereas the prohibition on abuse of dominance only applies (at the earliest) where an individual undertaking behaves in a way which may fairly imminently restrict competition.98 We will consider the enforcement issues this creates below. The prohibition in Article 102 TFEU on abuse of dominance requires a three-​ step analysis: • what is the relevant market? • is the undertaking dominant in that market? • has it behaved to abuse that dominance in the market or a neighbouring one? 93   Commission Communication, Setting out the EU approach to Standard Essential Patents, COM(2017) 712 final, 29 November 2017. 94 95 96   Art 102 TFEU, paras (c) and (d) in particular.   Ibid, para (a).   Ibid, first para. 97  Framework Directive, n 57, Art 14(2)—​ ‘. . .  if  . . .  it [the operator] enjoys a position equivalent to dominance . . .’ 98   See, eg, case C-​2 80/​0 8P Deutsche Telekom [2010] ECR I-​9555; case C-​52/​0 9 Telia Sonera Sverige [2011] ECR I-​527; see also Bellamy & Child, n 6, at 10.059.

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Just as possessing SMP is not unlawful, simply being dominant does not infringe competition law: for infringement of the prohibition, the dominant undertaking must abuse that dominance.99 We will look later in this section at abusive practices which are particularly relevant in telecommunications but first we consider the definitions of the relevant market and of dominance (contrasting them with SMP). The European Commission has issued two important Notices relevant to abuse of dominance: its Market Definition Notice100 and the Notice on its Enforcement Priorities for Article 102 cases,101 both of which give substantial guidance on how the Article 102 prohibition will apply in practice.

10.4.1  Defining the relevant market A ‘market’ in the (economic) sense used in EU competition law has two main dimensions: the products or services in it and the territory over which it extends.102 The market definition must capture all services which are regarded as substitutes by customers—​either in terms of their product characteristics or of the area where they are available—​a nd which therefore compete with one another for the same customer needs. The Commission’s market definition Notice covers market definition for abuse cases, merger control, and other competition law purposes in the same way.103 Market definition for SMP in telecommunications markets is dealt with in a different set of Commission guidance104 but essentially follows the same principles. Commission practice uses the so-​called ‘hypothetical monopolist’ (or SSNIP) test to define a market105—​in common with most competition enforcement agencies worldwide. The analysis starts with the service under consideration (A) and the area in which it is sold (tA). The likely reaction of a customer for A in tA to a ‘small but significant, non-​transitory increase in price’ (SSNIP) for service A is considered. If the customer would switch to service B or to buying service A from territory tB then B (or tB) are considered as part of the relevant market with A (or tA). The experiment is continued until the customer is found no longer to switch to alternative services or territories, at which point the limits of the relevant market are reached. The ‘non-​transitory’ price increment used for this experiment is usually in the range 5–​10 per cent. It is also important to bear in mind the threat that potential competitors—​ particularly in neighbouring service markets—​w ill also enter in response to a

100   Case C-​322/​81, Michelin v Commission [1983] ECR 3461, para 57.   [1997] OJEU C372/​5. 102 103   [2009] OJEU C45/​7.   Market Definition Notice, n 28, para 9.   Ibid, para 1. 104   [2002] OJEU C165/​6. The European Commission is currently (mid 2017)  consulting on revising these guidelines. 105   Market Definition Notice, n 28, para 11. 99

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sustained price increase, even where it is small. This is likely to be a particular feature of telecommunications markets where innovation by competitors regularly changes the type, price, or quality of services available to consumers, as can be seen in the entry of mobile data services (discussed in Section 10.4.2). Potential market entry (‘supply-​side substitution’) will tend to reduce the market power of incumbents. But the possibility of potential (future) competition is not normally used as a factor in defining the relevant market.106 Rather, it can be an important factor in assessing market power once the market has been defined. This market definition process is the same as that used for identifying markets for sector regulation of telecommunications networks by national regulatory authorities.107 However, because the purpose of the market definition analysis is different under the two regimes, any market definition for regulatory purposes is ‘without prejudice’ to a different view being taken in any individual competition case.108 In addition, the Commission has recommended that certain markets be particularly carefully considered by NRAs.109 NRAs are required to review at regular intervals which operators in their countries might possess SMP—​at least in the markets identified by the Commission.110

10.4.2 Dominance The definition of the relevant market sets the background for the next step in the analysis—​whether the undertaking under investigation is dominant. A  dominant position will exist where the undertaking has: . . . a position of economic strength . . . which enables it to hinder the maintenance of effective competition on the relevant market by allowing it to behave to an appreciable extent independently of its competitors, customers and ultimately of consumers.111

As a proxy for this test, the (sustained) market share of the undertaking in the relevant market is often used. The CJEU has held that there is a presumption of dominance where the undertaking has a persistent market share of 50 per cent or more.112 Persistent market shares of 40 per cent or above are generally taken as being a strong indicator of dominance.113

107   Ibid, para 24.   SMP guidelines, n 42, paras 40–​43.   Framework Directive, n 57, Art 15(1); SMP guidelines, n 42, paras 26–​27. 109   Commission Recommendation 2014/​710/​E U of 9 October 2014 on relevant product and service markets within the electronic communications sector, OJ L 295/​79, 11 October 2014. 110 111   See Chapter 4, at Section 4.6.   Michelin, n 99, para 30. 112   Case C-62/86, AKZO v Commission [1991] ECR I-​3359, para 61. 113   Although not conclusively; see Case 27/​76, United Brands v Commission [1978] ECR 207, paras 108–​112. 106 108

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If the market, defined using the SSNIP test, is a narrow one, it is quite likely that there will be high market shares. The question of supply substitution will then become very relevant—​w ho else can enter the market in the short to medium term? For telecommunications markets, where technology often rapidly changes the method of supplying a service to a market, a strong position in the market can be quickly eroded by such innovation. ‘Voice-​over internet’ services have, for example, become substitutes—​for many consumer services at least—​to using fixed voice telephony infrastructure. Previous regulatory monopolies—​reserving certain telecommunications services to state-​controlled enterprises—​have also now been removed as a consequence of national and EU regulation.114 Although only sustained high market power leads to a finding of dominance, there is no firm rule as to how long the allegedly dominant undertaking must have held that position. But, where a high market share has been held for less than about three years—​e ven in the electronic communications sector, characterized by a high degree of dynamic innovation—​t hat is unlikely alone to demonstrate dominance. In contrast, a high and stable market share sustained over a longer period (eg five years) would normally be sufficient to prove dominance.115 Market shares and other ‘traditional’ methods of measuring market power may be a poor method of assessing dominance in markets characterized by bidding for a limited number of large value contracts for inputs needed to supply downstream services.116 This issue arises particularly in content markets where rights owners—​for example to sporting events—​regularly invite tenders for longer term licences of rights. We consider the particular issues raised by ‘convergence’ between telecommunications (transmission) markets and content provision in Section 10.5. Some telecommunications markets show little prospect of competitive entry even after more than two decades of liberalization. A prominent example is in supplying fixed ‘local loop’ infrastructure connecting domestic premises to the core fixed communications network. The former incumbent telecommunications operators—​who by and large own this infrastructure element—​may not face any realistic short-​term threat of competition in supplying local loops. The cost of installing a parallel fixed loop from the local exchange to a consumer’s home is high and unlikely to be recouped in the short to medium term from the revenues for services using it. For this reason there was a concerted effort in the 2000s

  See Chapter 4, at Section 4.4.   Ibid, para 10.027.

114

116

115

  See discussion in Bellamy & Child, n 6, para 10.026.

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to open up this market by allowing competing operators to connect to the consumer at the exchange and then use the incumbent’s local loop for the ‘last mile’ of infrastructure—​a process called ‘local loop unbundling’ (LLU). Although some LLU abuse of dominance cases were brought against incumbents,117 the issue was finally addressed by regulatory means, through the EU LLU Regulation.118 Even in cases of dominance apparently as clear cut as this, technical change may mean that a former monopoly becomes redundant over time. For local loops, mobile voice calls have largely replaced fixed voice calls as the main way of having a conversation—bypassing the fixed local loop. So the dominant position in local loops should no longer be determinative for findings of abuse in downstream voice communications markets. Local loops are, however, still the most important way of transmitting data to and from homes: so the local loop ‘bottleneck’ (dominance) still affects downstream (fixed) data service providers. Dominance also features as a concept in the telecommunications regulatory regime. SMP is defined119 as a ‘position equivalent to dominance’ in any market, held by an operator either alone or jointly with others. But this does not in itself mean that an SMP designation (by a national regulatory authority) in respect of a market results in the undertaking holding a dominant position in that market when the competition rules are being applied to it—​by a national competition authority (or the Commission)—​in an individual case.120 The competition enforcer must consider the question of dominance in each case before an infringement of Article 102 (or national equivalents) can be found.

10.4.3  Abuse of a dominant position We have noted that holding a dominant position in a market is not contrary to competition law.121 Dominance may arise through superior innovation—​possibly turned into IP rights—​which competition law and policy should encourage. Only if the undertaking holding the dominant position abuses it, does its commercial behaviour become unlawful. There is no legislative definition of abuse, and the CJEU has held that the types of behaviour which may be an abuse can never be limited.122 The best ‘definition’ available is that abusive behaviour is conduct which would not be possible in an effectively competitive market:123 the dominant undertaking has a

  Deutsche Telekom, n 7.   Originally provided in Regulation 2887/​2000, [2000] OJEU L336/​4, now replaced by Directive 2002/​ 19 ‘Access’ Directive, [2002] OJEU L108/​7, Art 12(1)(a). 119 120   Framework Directive, n 57, Art 14(2).   SMP guidelines, n 42, para 30. 121 122   Michelin, n 99.   Case 85/​76, Hoffmann-​La Roche v Commission [1979] ECR 461, para 91. 123  Ibid. 117

118

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‘special responsibility’ not to further impair effective competition in the relevant market.124 This is not, however, helpful in practice since a market with a dominant undertaking in it will never be effectively competitive. This section therefore considers three aspects of abuse in telecommunications markets. First we look at pricing abuses—​both those which simply exploit customers (eg by overcharging) and those which attempt to exclude competitors. Secondly, we look at the related issue of how abuse of dominance and sector regulation of pricing interact. Finally we consider the issue of access to ‘essential’ infrastructure and when refusal to allow access may be an abuse of a dominant position. 10.4.3.1  Price abuses in telecommunications The distinction between exploitative pricing and exclusionary pricing noted in the previous paragraph may be more theoretical than practical. In practice, competition authority cases are largely aimed at exclusionary pricing practices, with simple exploitation infringements being rare. The main reason for this is that the test for exploitative pricing is a fairly high one. Pricing will only be an exploitative abuse—​t hat is, unlawful in cases where there is no evidence that competitors will be excluded from a relevant market—​if the price charged to customers bears no reasonable relationship to the dominant firm’s costs. For example, in ITT Promedia,125 Belgacom unlawfully exploited its dominant position in the supply of telephone subscriber data in Belgium. ITT Promedia wished to provide a telephone directory in Belgium which competed with Belgacom’s own (revamped) directory service. Belgacom was the only source of the raw data needed to compile a comprehensive directory. Instead of charging a (non-​d iscriminatory) cost based amount for access to the subscriber data, Belgacom instead charged according to expected revenues from ITT’s directory service. The Commission had no difficulty in finding this was an exploitative pricing abuse—​t he amounts payable for the data inputs bore no relationship to Belgacom’s cost of providing them.126 Pricing to exclude competitors can be done in one of two ways. A dominant firm can price below its own costs for a while—​long enough to drive out a competitor—​ and then raise prices to customers to recoup the lost revenues (price predation). Or, where the dominant firm supplies an input to a downstream customer and also competes in the same downstream market—​a common situation in telecommunication services markets—​it can favour its own downstream business by charging

  Case C-​202/​07P, France Télécom v Commission [2009] ECR I-​2 369, para 105.   Case T-​111/​96, ITT Promedia [1998] ECR II-​2937, esp at para 26. 126   Commission Press Release, 11 April 1997, IP/​97/​292. 124 125

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an input price to the competitor which (implicitly) advantages its own business by not allowing the competitor a reasonable margin on sales (‘margin squeeze’). In France Télécom/​Wanadoo,127 the European Commission found that Wanadoo (a subsidiary of France Télécom—​now Orange) had priced its ADSL services at below cost from 1999 to 2002. From 1999 to 2001, the Commission found that the service had been provided at below Wanadoo’s variable cost of supplying the ADSL service. From 2001 to 2002, the price covered Wanadoo’s variable costs, but not its total cost of supplying the ADSL service. On appeal—​a nd relying on earlier case law128—​the CJEU upheld the General Court decision,129 which found that supplying a service below the variable cost of producing it—​as Wanadoo had done in the earlier period—​is automatically an abuse of dominance.130 Where the price is above the variable cost but below the total (unit) cost, the price can be abusive if it is shown to be part of a plan to exclude competitors from the market (predation). Controversially, the CJEU upheld previous case law that it is not necessary for the Commission to show a reasonable prospect that the dominant undertaking could recoup the losses incurred during the period of predation by increasing its prices afterwards.131 EU case law is thus out of step both with US anti-​t rust case law (which has such a requirement) and with general economic thinking in this area. Also, the use of variable cost measures for the predation test may be difficult in telecommunications markets where the variable cost of producing many services is very low. For this reason, the use of ‘long-​r un incremental cost’ (LRIC) is preferred by NRAs for measuring unfair pricing132 and should also be considered when applying competition law to allegations of abusive predation in the telecommunications sector. In Wanadoo, the Commission found that, for the later period (2001–​2002), Wanadoo had priced below average total cost—​not including an appropriately allocated amount for fixed costs—​as part of a strategy to exclude competing suppliers of ADSL services from the market. The CJEU confirmed that this was also an exclusionary abuse of dominance. A margin squeeze will arise where a dominant firm ‘leverages’ its dominance into a neighbouring market—​i n contrast to predation, where the pricing practice relates to the market in which the undertaking is already dominant. For margin squeeze, where the difference in price charged for the input services and the (downstream) retail price for the consumer services supplied using the input are

  Commission Decision, Case COMP/​38.233—​Wanadoo Interactive [2005] 5 CMLR 5.   Set out in AKZO, n 112. 129   Case T-​3 40/​03, France Télécom SA v Commission of the European Communities [2007] ECR I-​117. 130 131   [2009] 4 CMLR 25.   Case C-​202/​07P, para 37. 132   eg Ofcom, ‘Consultation on LLU and wholesale line rental charge controls’, 20 April 2013. 127

128

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either negative or not sufficient to cover the costs which the downstream competitor has to incur to provide a competing consumer service (its variable or LRIC costs for that service), an abuse will occur.133 This may in particular happen where the undertaking which is dominant in the upstream market also competes in the downstream (consumer) market. Clearly the issues around pricing abuses may be closely linked to the regulatory regime in place for price controls. As regulatory price control has been drawn back, use of competition law to prevent distortions of competition in telecommunications markets becomes more likely. The interplay between pricing abuses under competition law and regulation is well illustrated by the Deutsche Telekom margin squeeze case, which we consider in the next section. 10.4.3.2  Regulatory price controls and abuse of dominance The interplay between competition enforcement in a particular case and regulatory price controls is particularly well illustrated in Deutsche Telekom.134 In May 2003 the Commission found that Deutsche Telekom (DT) was dominant in both the provision of wholesale local loop access and in the corresponding downstream markets for the provision of most retail telecommunications services to end customers.135 DT therefore competed in the downstream retail markets with those operators who purchased DT’s local loop services on wholesale terms to provide retail services to their own customers. DT was charging new downstream market entrants higher prices for wholesale access to the local loop than the price DT was charging its own retail subscribers to be connected to DT’s network. This resulted in DT’s downstream (retail) competitors not being able to make a margin—​t hey could not effectively compete with DT. DT was subsidizing its downstream retail activities through revenues made in the upstream (wholesale) market. DT argued that its conduct was not an abuse contrary to Article 102 because its wholesale prices were subject to sectoral regulation by the German telecoms regulator, RegTP—​t he wholesale prices had been set by a decision of RegTP. The Commission disagreed and imposed a fine (albeit lenient) of €12.6 million. On appeal, the General Court upheld the Commission’s decision that regulatory obligations are in addition to, not instead of, competition law obligations.136 DT further appealed to the CJEU: the Court rejected the appeal.137 It found that DT had effective scope to change its retail prices for services over local loops. The

134   Telia Sonera Sverige, n 98.   n 7.   Commission Decision relating to a proceeding under Art 82 of the EC Treaty, case COMP/​C-​1/​37.451, 37.578, 37.579—​Deutsche Telecom AG, OJ L 263/​9, 14 October 2003. 136 137   Case T-​27/​03, Deutsche Telekom AG v Commission [2008] ECR-​I I 477.   n 7. 133 135

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fact that RegTP had set the wholesale price for unbundled local loops at or near DT’s retail prices for telecommunications services did not relieve DT of the obligation to ensure that the margin between the wholesale price and its retail prices was sufficient to allow an equally efficient competitor to enter and remain in downstream retail markets. Although in practice this might mean that DT’s retail prices to its own end consumers would increase in the short term, the CJEU decided that, in the longer term, consumers’ interests were best protected by a competitive market for unbundled services provided by a number of retail suppliers. 10.4.3.3  Access to essential facilities: objective justification Pricing which exploits customers or excludes competitors is one of the main forms of abuse of a dominant position. However, non-​price abuses cover various other types of behaviour usually also aimed at disadvantaging or excluding actual or potential competitors. Where a dominant undertaking controls network elements necessary to supply downstream services, refusing access to them is capable of being an abuse of dominance.138 Although most physical infrastructure ‘bottlenecks’ are dealt with by regulation, non-​regulated services may be affected by refusals to supply access to content or IP rights.139 However, often the services or rights, to which access is said to be required, are the result of substantial innovation by the (now dominant) undertaking which owns them. As one of the main aims of competition law is to support innovation, it follows that (even where innovation has conferred a dominant position) refusal to allow access to use the innovative product will not necessarily be an abuse of dominance. It is difficult to draw the line between ensuring enough access to allow others to innovate, while permitting existing innovators to earn the reward for their ingenuity through charging for use of IP—​by licensing it, for example. EU competition law has developed a number of techniques for carrying out this balancing exercise. The starting point is that an abuse of dominance is conduct which is not ‘competition on the merits’—​t hat is, it would not be possible in an effectively competitive market.140 So, requiring a reasonable royalty for the use of IP, (usually) limiting the applications for which it may be used, and revoking licences where royalties are not paid or for other legitimate credit control reasons, are all outside the scope of the ‘abuse’. A second competition law technique—​particularly where access to an IP right is in play—​is to consider whether in fact the access is ‘essential’ to supplying

  Case C-​7/​97, Bronner v Mediaprint [1998] ECR I-​7791.   eg copyright in Case C-​4 81/​01, IMS Health v Commission [2004] ECR I-​5039. 140   Hoffmann-La Roche, n 122. 138 139

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the downstream service. Although the CJEU has insisted that there is only one standard for assessing dominance, in practice a type of ‘super-​dominance’ has been developed.141 Businesses which control an essential facility—​a nd so can be said to be ‘superdominant’—​may be required to allow access to that facility under Article 102 TFEU under certain circumstances. If the access is not ‘essential’—​we will consider what this means in a moment—​t hen a refusal to grant access can never be an abuse. Effectively this limited ‘essential facilities’ theory should stop market entrants taking a free ride on the innovative (but dominant) firm’s IP rights simply to introduce ‘me too’ services. The issue of ‘essential facilities’ can arise in a number of ways. Among the most common is the requirement for access to operating system software interfaces for potential entrants to make sure that their own new services can work together with the dominant firm’s operating system—​t he issue in the leading case Microsoft, discussed below.142 As noted at 10.3.6, standards play an important role in telecommunications markets. As well as ensuring that the agreements forming the standard setting body do not infringe the Article 101 prohibition,143 unilateral behaviour by members of the body may also be abusive contrary to Article 102. Where a standard setting body is creating a new standard, it may not be fully aware of all of the IP in the field—​particularly if it is not put in the public domain. Thus the new standard may inadvertently require users of the standard to adopt infrastructure or use software which infringes the IP rights of the dominant undertaking—and they will have to pay a royalty for this (a ‘patent ambush’).144 Access to such ‘standard essential patents’ (SEPs) may thus be required for a particular set of services: and refusal to allow access to them on FRAND terms may be an abuse. The decisions of both the European Commission and the General Court in Microsoft145 illustrate how the ‘essential facilities’ doctrine applies in innovative technology markets. Among other behaviour, Microsoft—​which at the time had over a 90 per cent share of all installed PC operating system software (when PCs were the main method of accessing online information etc)—​refused to allow access to the full set of interface information needed for rival programmers to create new products for use on PCs using Microsoft operating software. The General Court upheld the Commission’s infringement decision, finding that this was an abuse, and confirmed that—​a lthough refusal to license an IP right is not normally abusive for a dominant undertaking—​u nlawful abuse will nevertheless arise from a refusal to license if the following conditions are met:

142   eg in Bronner, n 131.   Case T-​201/​0 4, Microsoft v Commission [2007] ECR II-​3601. 144   See Section 10.3.   As in Commission decision COMP/​386.36, Rambus, 9 December 2009. 145   n 142; Commission decision of 24 March 2004 COMP/​C3/​37.792, [2007] OJEU L 32/​2 3 (summary). 141

143

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• the use of the right must be indispensable to market entry in the neighbouring (downstream) market; • the refusal to license excludes any effective competition in the downstream market; • the refusal prevents the emergence of a new product or service; and • there is a clear consumer demand for that product or service. Given Microsoft’s market position in operating systems, and the fact that it was itself offering downstream competing programs and services, the Court had no difficulty in upholding the Commission’s findings that these criteria had been met. The Court rejected Microsoft’s argument that forcing it to license its IP—​even in these limited circumstances—​would effectively remove all value from its IP by allowing any entrant a ‘free ride’ on its rights. The Court also noted that there was no need for the Commission to show that competitors had been already excluded from the market—​potential exclusion of competitors wishing to supply a new product was sufficient. Microsoft’s market position at the time was unusual—​but not unique in telecommunications markets—​as its PC operating system was in effect the industry standard. A similar set of issues arises in the ‘traditional’ standard setting context if IP rights are indispensable for the use of a standard and (if the standard is widely used) ‘essential’ for potential competitors. The Rambus case illustrates the way in which IP right owners can use the standard setting process to ‘ambush’ competitors and thus to charge abusively high (exclusionary) royalties on their SEPs.146 The Commission reached a provisional finding that Rambus had intentionally concealed the existence of various patents or patent applications during the process for setting the standard for DRAM micro-​processors. The case did not proceed to an infringement decision since Rambus gave binding legal commitments to the Commission to offer a bundled worldwide licence for each of its SEPs to potential users on FRAND terms and setting a maximum royalty rate for these licences.

10.4.4  Remedies for abuse of dominance What are the consequences of abusing a dominant position? As with Article 101 TFEU infringements, the main outcome of infringement proceedings by the European Commission is a fine for the infringer. For example, in the 2009 Intel

146   Case COMP/​38.636, Rambus, 9 December 2009 discussed Schellingerhout, R and Cavicchi, P, ‘Patent Ambush in Standard-​setting: the Commission Accepts Commitments from Rambus to Lower Memory Chip Royalty Rates’ (2010) 1 Competition Policy Newsletter 32.

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case, the Commission imposed a fine of €1 billion on Intel for abuse in the CPU market. It had used concealed payments to customers to exclude competitors.147 The Commission will also normally require abusive conduct to cease if this has not already happened. However, other remedies are also used—​particularly in cases of non-​pricing abuse. Remedies can be imposed both following an administrative competition investigation by the Commission (or a national competition authority) or by a national court in litigation of a competition dispute involving an abuse of dominance. 10.4.4.1  FRAND licensing of essential IP Both the European Commission and national courts have had difficulties with the setting of terms (including royalty rates) for licences which have been subject to a FRAND licensing remedy under the ‘essential facilities’ principle. The Rambus case concluded simply with a set of commitments offered by Rambus to cease its allegedly abusive licensing behaviour. In Qualcomm, the European Commission opened formal proceedings against Qualcomm after a number of complaints by device manufacturers that Qualcomm’s licensing terms for SEPs it allegedly possessed in 3G mobile network standards were not on FRAND terms. After two years of investigation, the Commission similarly closed its case without a formal finding, on the basis that its resources were better used elsewhere and that the complaints had been withdrawn.148 The Commission therefore reached no formal conclusion on the FRAND issues arising in either case. In Huawei v ZTE,149 the CJEU considered what is meant by FRAND. Huawei, the owner of SEPs which had been incorporated into the 2G and 3G ETSI mobile telecommunications standards, brought proceedings in the German courts. It claimed that ZTE should pay it royalties for use of the SEPs said to be infringed by ZTE’s marketing in Germany of devices using the ETSI standards. Huawei had given ETSI an irrevocable undertaking to license the SEPs to all comers on FRAND terms. The CJEU noted the high degree of protection given to intellectual property in EU law (including in the EU Charter of Fundamental Rights) and noted that the existence of the undertaking to license on FRAND terms could not remove those

147   Commission Decision 13 May 2009, Intel [2009] OJEU C 227/​13; Case T-​2 86/​0 9, Intel Corp v Commission [2014] 5 CMLR 9; Case C-​413/​14 P, [2017] 5 CMLR 18, which set aside the judgment in T-​2 86/​0 9 and remitted the case to the General Court. 148   Commission Memo 09/​516, 24 November 2009. However, Qualcomm was again notified in 2015 of a Commission investigation into its pricing practices for chipsets made using the SEPs—​Commission Press Release, 8 December 2015, IP/​15/​6271. 149   Case C-​170-​13, Huawei Technologies v Commission [2015] 5 CMLR 14.

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rights. However, it did impose certain obligations on Huawei in its negotiations of a reasonable royalty rate for its SEPs: • to make a specific written offer to the applicant on request; • to take account when doing so of the licensing terms it had already granted to other users of the SEP; and • to accept independent determination of the FRAND terms if they cannot be agreed with the proposed licensee. In practice, national courts may be better placed to apply these principles than a competition authority. They are often called on to resolve IP disputes, including as to royalty and other terms, and generally have greater expertise in doing so. The CJEU Huawei principles were applied in the English courts in the parallel case of Unwired Planet v Huawei.150 The Patent Court gave some guidance on how FRAND terms should be reached. It noted that the FRAND undertaking is an independent obligation to offer terms under French law (the governing law of ETSI) and does not depend solely on the possible existence of a competition law infringement. This obligation does not mean that the court can compel a contract on FRAND terms. If no agreement is reached, IP remedies are available: if the patent owner refuses to agree FRAND terms, the court should refuse to enforce his patent against the market entrant. If the entrant refuses to accept FRAND terms offered, and operates without a licence, then normal patent infringement remedies are available to the patent holder—​assuming of course that the patent in question is in fact infringed by the new entrant. As to the method of reaching FRAND terms, the court held that the starting point should be a licence which would be negotiated between a willing licensor and licensee in the absence of the FRAND undertaking. In order to reach that point, benchmarking against comparable licences or use of decisions of other courts in setting terms would be useful. In a later hearing, the court granted a final injunction requiring Huawei to enter a FRAND agreement, although the injunction could (unusually) be varied if circumstances changed significantly.151 10.4.4.2  Injunctions against infringers of IP rights The right of an IP owner to prevent unlawful use of his right is a fundamental part of the protection given to his innovation.152 In principle it cannot be prevented by competition law. However, where the IP is an SEP, competition law may nevertheless restrain the IP owner from obtaining an injunction—​at least for the time while bona fide FRAND negotiations are continuing.

  [2017] EWHC 711 (Pat), 5 April 2017.   Huawei, n 149.

150 152

151

  [2017] EWHC 1304 (Pat), 7 June 2017.

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In Motorola Mobility,153 the European Commission found that Motorola had abused its dominant position by seeking injunctions to enforce its SEPs in the ETSI GSM and GPRS standards. The injunction applications were made even though the users of the standard had indicated their willingness to take licences from Motorola on FRAND terms. However, since there was at that time no case practice of the Commission or the CJEU on this point, exceptionally no fine was imposed on Motorola in this case. The (later) Huawei decision of the CJEU154 did expressly address this question. In response to a question from the German referring court, the CJEU held . . . the proprietor of an SEP which considers that that SEP is the subject of an infringement cannot, without infringing Article 102 TFEU, bring an action for a prohibitory injunction or for the recall of products against the alleged infringer without notice or prior consultation with the alleged infringer, even if the SEP has already been used by the alleged infringer.155

This position appears sensible on its face. It may, nevertheless, put an SEP owner in a difficult position in deciding when the negotiations on FRAND terms for access to the ‘standard essential’ IP right have broken down, so that an application for an injunction by the right owner becomes permissible.

10.5  COMPE TITION L AW A ND EL E C TRONIC CONTENT 10.5.1 Introduction We have noted the impact of convergence in Section 10.1, which illustrates the difficulty of seeing telecommunications as entirely separate from content. Actors in one sector may affect the other sector. Bottlenecks may also occur where telecommunications providers offer content. Internet intermediaries may act as bottlenecks too; they are also now providing content, again  blurring the boundaries between content provider and intermediary. The boundary between telecommunications operator and intermediary is also unclear: some social media platforms offer messaging services and ‘voice chat’ (eg Steam). As noted, there is considerable vertical integration. A  consequent concern relates to triple play bundles—​ usually comprising fixed telephony, TV and (broadband) internet156 which have

154   Decision, 29 April 2014, press release IP/​14/​4 89, [2014] OJEU C344/​6.   n 149.   Ibid, para 60. 156   OECD, ‘Broadband bundling: Trends and Policy Implications’ Digital Economy Paper No. 175, (OECD Publishing: Paris, 2011), , at 5. 153 155

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almost entirely replaced the retail offers for individual retail services in electronic communications—​a nd now quad play (usually triple play plus mobile).157

10.5.2.  Definition of markets The definitions of telecommunications markets are assessed in the same way as they would be for any other sector.158 The definition of media markets, however, gives rise to particular difficulties. First, media markets are seen as double-​sided markets—​customers generate revenue both through direct payment for the service provided, but also through being an audience for advertising. It has been suggested that the position is even more complex as regards internet-​based services such as search tools and social media.159 Secondly, some of the tools for defining individual markets, notably the SSNIP test,160 do not work well in a market in which there is a mix of provision between public service providers and commercial operators, free-​to-​a ir, and subscription services. Thirdly, the idea of substitutability of service, which underpins the SSNIP test (Section 10.4.1), is difficult to apply in the context of very different genres of content.161 Fourthly, in the context of social media platforms, not only are the services provided without financial payment at point of end-​use, but a significant factor for would-​be users in choosing a platform will be the question of who else has joined that platform—​a form of network effect. Finally, both national intellectual property licensing and different content language versions may affect an assessment of geographic markets, in a way that might not arise in relation to telephony and other transmission services. A discussion of content markets themselves lies outside this chapter.162 Some content market definitions, however, are affected by the underlying transmission technology.163 With rapid changes in services and technologies, the precise position as regards delivery mechanisms has not been fully settled. The earlier case law was not clear-​cut, but the Commission accepted that the different broadcasting

157   Generally see, OECD, ‘Triple and quadruple-​play bundles of services’, 18 June 2015, . 158   The SSNIP test is very similar to that used in relation to defining markets within the Telecommunications Framework—​see Section 10.4. 159   Torsten Körber, ‘Common Errors Regarding Search Engine Regulation–​a nd How to Avoid them’, (2015) ECL Rev 239, 241. 160   Commission, Notice on the definition of relevant market, n 28. 161   Harrison, J, and Woods, L, European Broadcasting Law and Policy (Cambridge: Cambridge University Press, 2007), 147–​151. 162   See further Chapters 14 and 15. 163   See eg Cases COMP/​J V 37, BSkyB/​Kirch Pay TV, decision of 21 March 2000, OJ C 110, 15 April 2000, at 45; IV/​M.993, Bertelsmann/​Kirch/​P remière, decision of 27 May 1998, OJ L 53, 27.2.1999, at 1; COMP/​M.2211 Universal Studio Networks/​De Facto 829 (NTL) Studio Channel Ltd, decision of 20 December 2000, OJ C 363, 19. December 2001, at 31; COMP/​J V 57 TPS, decision of 30 April 2002, OJ C 137, 8 June 2001, at 23.

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platforms (or transmission technologies) were not interchangeable. There were significant switching costs between the different set-​top boxes, for example.164 These costs probably remain, at least in relation to some platforms—​smart TVs, mobile devices, and IPTV notwithstanding. Internet and mobile content distribution were viewed as probably constituting separate markets.165 Nonetheless, in a number of more recent cases, the Commission has taken the view that different delivery technologies do not create separate content markets166 and that price and content quality are more important attributes.167 However, delivery of some services may only be possible with certain transmission capabilities, or be especially suited to a particular technology: for example, mobile services will tend to favour ‘clip’ (highlights) services. Some services may be affected by the pricing models of the transmission systems (notably mobile devices with data caps). IP licensing practice now recognizes the difference between service delivery platforms, as the treatment of sports rights shows (see Section 10.5.3). In addition to the distinction between the production of content and its aggregation into packages, the Commission has recognized that there are differences between certain types of content. Sporting events—​which may be important in driving subscription to certain services—​may constitute a very narrow market due to the high ‘brand loyalty’ of the dedicated fan (leading to tolerance of high prices) and the lack of substitutability of one team for another.168 They are able to achieve high viewing figures and also reach an identifiable audience, which is especially targeted by certain advertisers, and are therefore generally viewed as being ‘premium’ content. Consequently, sports rights are able to act as a developer of a brand image of a channel,169 or a type of service. Whilst perhaps less extreme than (football) sporting rights, other premium content (such as the first broadcast of Hollywood films) may be similarly broken down into separate markets. With the development of technology influencing consumer preferences, the demand for and supply of services may mean market definitions also have to change. For example, the question yet to be addressed is whether triple or quad play packages should be treated as a distinct market or as bundles of the constituent services. Even in the relatively recent merger decisions of Vodafone/​Kabel Deutschland and

  Commission Decision, Case IV/​M.469, MSG Media Service, 94/​922/​EC OJ [1994] L364/​1.   Commission Decision COMP/​M.2876, Newscorp/​Telepiu. 166   Commission Decision 18 July 2007 Case M.4504, SFR/​Télé 2 France, para 46; Commission Decision 21 December 2010 Case M.5932, News Corp/​BSkyB, paras 103–​105; and Commission Decision 15 April 2013 Case M.6880, Liberty Global/​Virgin Media, para 44. 167   Liberty Global/​Virgin Media, ibid, para 47. 168   See eg Commission Decision COMP/​M.4066, CVC/​SLEC 20 March 2006. 169   European Commission Case COMP/​37.398, UEFA Champions League, Decision 2003/​778/​EC [2003] OJ L291/​25; Canal+/​RTL/​GICD/​J V. 164 165

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Liberty Global/​Ziggo, the Commission left the question open. A similar reluctance to engage with this issue can be seen in the UK.170 As noted at Section 10.4, the definition of a market may have significance for the issue of dominance (for Article 102 TFEU purposes, or even in the context of a merger).

10.5.3  Anticompetitive agreements and premium content A significant example of possible anti-​competitive practice can arise on the sale of the rights to broadcast certain sporting events. Demand for sporting events is such that the provision of this content can be used to drive up the subscription to other services, a fact recognized by large media conglomerates, as well as telecommunications operators moving into the content sector. Packages of rights to sporting events for distribution to viewers are offered by the relevant sporting bodies. The precise content of the package and its duration are designed to maximize revenues: ie to create a bidding war. The ability to compete in consumer markets will be determined by success in the relevant rights auction—​a nd the ability to compete may affect the underpinning telecommunications service. Effectively this is a winner takes all situation (see Section 10.4.2). The competition concern is clearly illustrated in the case of football rights. In the UK, Sky and BT fought over the Premier League rights in 2017. The result of this bidding war was that the price paid by bidders for the Premier League rights resulted in a significant increase on the equivalent price for the previous period. New opportunities for distribution arise with the development of new platforms, not just internet but mobile devices such as tablets and smart phones.171 In view of the value of the rights and because of their relative scarcity and lack of substitutability,172 access to premium content may become a bottleneck in which larger players with deeper pockets may have an advantage. This has led to enforcement action focussed on the joint selling of the broadcast rights by the relevant sports associations. The joint-​selling arrangement brings the matter within Article 101 TFEU,173 or the equivalent provision in the Competition Act.

170  Anticipated acquisition by BSkyB Broadband Services Limited of Easynet group plc, decision 30 December 2005 (published on 13 January 2006); OFT, Anticipated Merger of NTL Incorporated and Telewest Global Inc, decision 30 December 2005 (published 10 January 2006), para 17. For an analysis on quad play, see CMA report on the proposed BT/​E E merger, 15 January 2016. 171  Inquiry into e-​ Commerce, at , para 17. 172   See eg Commission Decision IV/​36.888, Football World Cup [2000] OJ L5/​55. 173   European Commission, Guidelines on the effect on trade concept in Articles 81 and 82 of the Treaty, [2004] OJ C101/​81, para 19; see also European Commission ABC/​G énéral des Eaux/​Canal+/​W HSmith (Case IV/​ M.110) [1991] OJ C244 on the transnational nature of sports broadcasting.

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The current position174 on whether joint selling arrangements are compatible with the Treaty is found in the UEFA Champions League decision.175 The Commission found that the joint selling agreements formulated through UEFA resulted in there being no competition between the clubs as to the price and conditions on which the right to broadcast a European match was sold.176 Significantly, the matches were sold in a single bundle on an exclusive basis to one broadcaster per Member State for a period of several years, which created risks of market foreclosure. Only bigger broadcasters were able to afford the rights, excluding competitors in neighbouring markets. Finally, a number of rights (notably IPTV and mobile rights) were not exploited by the deal. The Commission was thus concerned with both the upstream market for acquisition of rights, but also the impact in downstream markets with the exploitation of those rights. Nonetheless, the Commission noted that joint selling could be acceptable in some circumstances. It accepted that a single point of sale of media rights was an efficient trading method and that joint selling could also be an efficient way to promote a brand such as the Champions League. Following the Commission’s intervention, the broadcast rights were split into fourteen packages and the licensing agreements were limited to three years so that multiple broadcasters could, in theory, acquire the rights—​a lthough entities that could afford the packages would still be restricted to those with significant resources. The agreement was then exempted under Article 101(3) TFEU. Despite experience from the football rights cases, long content licensing agreements continue to be common,177 with even longer ongoing relations between the contractual partners, a fact which the Commission views as making it more difficult for new competitors to enter the market.178 The payment structures used, especially in respect of premium content (advance payments, minimum guarantees and fixed fees per product irrespective of the number of users) also favour established players rather than market entrants.179 These advantages are likely to continue as 5G mobile services are rolled out—​on the back of sports’ fans addiction to this content.180

174  For earlier approaches see Commission Decision, Case IV/​32.524, Screensport/​E BU [1991] OJ L63; Commission Decision Case IV/​32.150, EBU/​Eurovision [1993] OJ L 179, overturned on appeal in Case T-​528, 542-​3 and 546/​93, Metropole television SA (M6) v Commission [2002] ECR II-​3805. 175   European Commission Case COMP/​37.398, UEFA Champions League, Decision 2003/​778/​EC, [2003] OJ L291/​25. 176   On the feasibility of clubs selling separately, see Toft, T, Sport and Competition Law (Comp/​C .2/​T T/​hvds D(2005)), 5. 177   Film Distribution on Pay TV (Case AT.40023, Cross border access to pay TV) (C(2016) 4740 final), 26 July 2016. 178 179   Inquiry into e-​Commerce, n 171, para 69.   Ibid, paras 70–​71. 180   eg Intel’s work on virtual reality to give a more ‘immersive’ experience.

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10.5.4  Abuse of a dominant position There have been a number of cases concerning tying, which occurs where a seller links the provision of secondary  goods or services to the acquisition of another product or service for which there is stronger demand (the ‘tying product’). Tying is identified as problematic in Article 102 TFEU.181 Although it may lead to lower production costs, where a supplier has a dominant position on the market for the tying product, it may cause harm by excluding competitors from a neighbouring market, contrary to the dominant  undertaking’s ‘special responsibility’. Neither intent to harm nor actual harm is necessary to show abusive behaviour.182 Tying has been a recurrent problem in the technology sector where software is tied to a particular device. Currently, the Commission is investigating Google (and its parent company, Alphabet) in relation to Android, its mobile operating system. The question is whether Google abused its dominant position in the field of operating systems, applications and services for smart mobile devices by tying or bundling certain Google applications and services to the operating system. Notably, it is a condition of the Google Play Store app licence that Google Search and the Chrome mobile browser are pre-​installed. Consequently, Google Search is set as the default, or exclusive, search service on most Android mobile devices sold in Europe, entrenching Google’s dominant position in this market. The European Commission has put forward a case that competition harm is caused as these practices affect the ability of other mobile browsers to compete with Google Chrome—​using the argument first set out in Microsoft. Microsoft concerned the bundling of Microsoft’s operating system (WO/​S) with the Windows Media Player (WMP), a streaming media player. The Commission argued that even though WMP was supplied at no extra cost, other media player suppliers would be at a competitive disadvantage as linking WMP to WO/​S made WMP ubiquitous and the maintenance of an effective competitive market would be put at risk due to the network effects arising from WMP’s ubiquity. The Commission’s approach was supported by the General Court.183 A second concern raised by the Commission in the Android investigation is that Google requires device manufacturers of mobile devices to sign an ‘Anti-​ Fragmentation Agreement’ prohibiting the sale of mobile devices running on ‘Android forks’ (ie an operating system based on open-source Android but different from the Google version). This prohibition hinders the development of operating systems based on the ‘non-​Google’ versions of the Android open-source code and reduces the opportunities alternative operating systems would offer for the development

  Art 102(d) TFEU.   Case C-​95/​0 4P, British Airways EU:C:2006:133, paras 70–​71. See also Section 10.4. 183   Microsoft, n 142. 181

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of new apps and services. Here, the underlying concern is the threat to innovation. The Commission reached a preliminary conclusion that Google abused its dominant position. This  reflects its approach to tying and pre-​installation in Microsoft where both the Commission and the Court noted the impact of the need to use WO/​S standards on innovation and consumer choice.184 There are more subtle forms of exclusion, exemplified by the bundles offered to consumers: triple play and quad play. While such deals may benefit the consumer in the short-term, particularly through lower prices, there are concerns that the tendency to bundling favours the larger players—​which can offer the range of services—​ rather than smaller operators and new entrants to the market. Within this sector, as with Microsoft, there is the question about how sophisticated we expect a consumer to be. Is it reasonable for consumers to be expected to know about and to access alternative products which compete with individual elements of the bundle?185 Refusal to supply (as opposed to conditional dealing or tying) is another concern arising from a vertically integrated market, especially where certain types of content have been seen as a significant factor in successful market entry, as noted in Section 10.5.3. Can the essential facilities doctrine (discussed in Section 10.4.3) apply here, either as regards a telecommunications operator’s access to content or a content provider’s right to a distribution network? As regards access to content, the resulting new ‘product’ (as required by the CJEU jurisprudence) need only be something that is not a duplicate.186 As regards the requirement for customer demand, only potential consumer demand needs to be shown to satisfy the test.187 The answer to both of these questions might depend on whether the Commission and the Court would look at the specific content (ie the match, film, or series) or rather the genre or type of content (romantic comedies, documentaries) to assess the question of duplication. It seems likely that the latter approach would be taken, meaning that a content offering with the same type of content would not be new. It is more likely that showing the content in a new way—​for example a novel presentation of mobile clips of highlights of sporting matches—​would be considered ‘new’.188 It seems hard to argue, however, that premium content is

184   See generally, Ibáñez Colomo, P, ‘Restrictions on Innovation in EU Competition Law’, (2016) EL Rev 201. As at 1 January 2018, the Commission had yet to reach a final decision on these objections:  see Case COM40099, Google Android at . 185   For discussion of consumers see eg Tušek, I, ‘EU Competition Law Policy versus Intellectual Property Rights: A Study of the Microsoft Case’, [2010] CYELP 103, 121. 186   Case C-​418/​01, IMS Health v NDC Health [2004] ECR I-​5039. 187  Joined Cases C-241/91 P and C-242/91 P,  Radio Telefis Eireann (RTE) and Independent Television Publications Ltd (ITP) v Commission (‘Magill’) [1995] ECR I-​743. 188   Magill ibid—​t he listings were already available within newspapers—​w hat was new was the weekly guide.

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‘indispensible’, as other (even if not quite as attractive189) content may be readily available. As regards access to networks, in the Bronner190 case—​which concerned access to Mediaprint’s newspaper home delivery network—​t he CJEU suggested that ‘indispensability’ addresses whether it is economically vital to create a different network to be able to compete at all. If so, the existing network will be essential. Given that Bronner could distribute via other mechanisms, such as kiosks and shops, even if at significantly greater cost, access to Mediaprint’s network was not indispensable. In telecommunications markets, while some distribution channels may be preferred, it is not the case—​especially with the availability of the internet—​ that they cannot be replaced. Access to some networks—​particularly the internet—​may depend on dealing with an intermediary (a search engine or social media platform) rather than a network operator itself. Since 2010, the European Commission has expressed concerns about various aspects of Google’s business practices in the field of providing internet search. The initial investigation raised a number of types of concern: in particular that on its web search results, Google displayed its own specialized search services more prominently than services of competitors offering comparable products. In 2015, the Commission sent a Statement of Objections to Google in respect of its comparison shopping service reflecting this issue, resulting in a fine being imposed in 2017.191 The Commission’s concern was that Google systematically favoured its own comparison shopping product (now ‘Google Shopping’) over others. The abusive behaviour was that Google leveraged its market dominance in general internet search into a separate market, that of comparison shopping.192 By artificially diverting traffic from rival comparison shopping services, Google hindered the ability of those other services to compete to the detriment of consumers, because users were not necessarily seeing the most relevant results. The fact that Google was not competing on the merits of its service would stifle innovation. It seems that the Commission did not argue that competitors would be excluded from the market, which had typically been its previous concern. Rather,

189  See IMS Health, n 186, para 28, though note that Microsoft accepts indispensability for competition within the market—​see para 377 and note discussion by Ibáñez Colomo, n 184, at 213. 190   Bronner, n 138. 191   European Commission, Antitrust:  Commission fines Google €2.42 billion for abusing dominance as search engine by giving illegal advantage to own comparison shopping service—​Factsheet (MEMO/​17/​1785), 27 June 2017, . 192   Contrast Vesterdorf, B, ‘Theories of Self-​P referencing and Duty to Deal—​Two Sides of the Same Coin?’, (2015) 1(1) Competition Law & Policy Debate 4, ; and Petit, N, ‘Theories of Self-​P referencing Under Article 102 TFEU: A Reply to Bo Vesterdorf’ (29 April 2015), .

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the focus has shifted to a concern about the impact on innovation and the harm to competition as a consequence.193 This reasoning may be contrasted with the approach of the English courts in a case handed down before the Google decision: Streetmap v Google.194 Streetmap argued that Google bundled Googlemaps with Google Search. By using a display at the top of its search results of a clickable image from Google Maps, and no other mapping provider (including Streetmap), following geographic queries, Google was abusing its dominant position in the market for online search and online search advertising. In essence, this is a discrimination argument that Google was using its dominant position with the intent or effect of undermining competitors’ ability effectively to compete,195 by leveraging Google’s dominance in ‘search’ into a market (geographical services) other than that in which Google was dominant.196 In making its claim, Streetmap relied heavily on the reasoning in Microsoft. The English High Court disagreed with this approach. It held this case did not involve bundling in the sense of Microsoft because, although Google would provide the links to Google Maps, the user was under no obligation to click on those links. In Microsoft, although users could obtain alternative Windows Players, there were several barriers in their way to doing so. The Court also suggested that, following Microsoft, there should be a reasonable likelihood that harm would ensue.197 In the view of the Court, since the concern related to a neighbouring market rather than the market on which Google was dominant and where the market structure was already undermined, harm could not be assumed.198 The High Court accepted that it was Google’s intention to improve its search engine and increase user convenience rather than to damage competition. The impact on Streetmap was therefore a ‘by-​product’ rather than attributable to Google.199

10.6  COMPE TITION L AW CONTROL OF CONC ENTR ATIONS 10.6.1  Overview—​control of changes to market structure through merger The competition law considered so far in this chapter—​i n Articles 101 and 102 TFEU and national equivalents—​looks at market behaviour which has already taken place. But competition law also has methods of controlling the anti-​competitive

194   Ibáñez Colomo, n 184, 212.   Streetmap EU v Google Inc & Ors [2016] EWHC 253 (Ch). 196 197   Ibid, para 63.   Ibid, paras 59–​6 0.   Ibid, para 88. 198   In coming to this conclusion, the Court referred to Whish and Bailey, Competition Law (8th edn, Oxford University Press, 2015), 212; Faull and Nikpay, The EU Law of Competition (3rd edn, Oxford University Press, 2014), para 4.929. 199   Case C-​2 3/1​4, Post-​Danmark II, ECLI:EU:C:2015:651, para 47. 193

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effects of future changes to the structure of markets. Where a merger (or the creation of a new ‘independent’ joint venture) may lessen competition by weakening the number or relative strength of remaining competitors, national or EU merger controls may apply. As well as being different from behavioural competition law by looking (primarily) at market structure, merger control is necessarily also forward looking: in most cases the merger will not yet have taken place. It shares this characteristic with most of the electronic communications sector regulation applied by NRAs. Competition principles are applied to the authorities’ prediction of the likely market changes the proposed merger will cause. These two significant differences in approach between merger control and behavioural competition enforcement mean that merger control in electronic telecommunications markets has been applied rather differently from behavioural competition law examined previously. ‘Merger’ control (the ‘control of concentrations’ in EU law) operates both under EU law and under national merger control regimes, with the European Commission having the sole right to examine the largest mergers. The test which the Commission applies in deciding whether to block or approve a merger is whether it would lead to a significant impediment to (lessening of) effective competition in the EU. 200 In practice this means that, wherever there is a potential overlap in the parties’ activities and one undertaking has a market share of about 20 per cent or more, the parties should start looking carefully to see if the merger proposed has an adverse effect in its own or in related markets. Where national merger control applies, national competition authorities use their own rules. In practice these are very similar—​in most countries—​to those in the EU Merger Regulation. For example, in the UK the CMA also applies a substantive test modelled on that in the Regulation.201 Where there are differences between national and EU practice, these tend to be primarily procedural—​for example, under UK merger control law, Ofcom may be required to report to the Secretary of State on media plurality issues before the CMA makes a decision on some ‘mixed’ mergers in the electronic communications sector.202 There is no EU law requirement that national merger control procedures (including clearance timetables) are harmonized with those of the European Commission. There is of course significant cooperation between the Commission and national competition authorities in merger control matters, as there is with behavioural competition law enforcement.

  Regulation 139/​2004 [2004] OJEU L24/​1, Art 2(2).   Ibid, s 44A.

200 202

201

  Enterprise Act 2002, s 22(1)(b).

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A detailed explanation of the scope of the EU Merger Regulation, and its procedures, is outside the scope of this work.203 For our purposes, it is sufficient to bear in mind that: • The Merger Regulation only applies to the largest mergers in the EU—​where the combined turnover of all the parties involved in the concentration, in their last financial year,  exceeds €5 billion. • The Regulation does not apply to mergers whose economic effects are likely to be felt in just one Member State. Even if the combined turnover of the undertakings concerned exceeds €5 billion, the Regulation does not apply where at least two-​ thirds of the combined turnover of the parties within the EU (so, disregarding turnover elsewhere in the world) is earned in one and the same Member State. In that case only the merger control procedures of that Member State apply.204 The BT/​EE merger was dealt with by the CMA rather than the Commission as a result of the ‘two thirds’ rule. • To avoid the need for multiple merger clearances in several Member States the Regulation will also apply where the turnover in at least three Member States of at least two of the undertakings concerned in the merger is above certain thresholds, and the combined worldwide turnover of all the undertakings concerned exceeds €2.5 billion.205 • Member States may not apply their national competition rules to a merger falling under the Regulation—​so including national behavioural rules.206 They may, however, take measures under non-​competition legislation to protect their other ‘legitimate interests’ as a result of a merger.207 These interests include ‘public security’, ‘plurality of the media’, and ‘prudential rules’. The second interest is particularly important for Member States wishing to ensure a wide variety of choice in broadcasting and newspapers.208 This exception to the otherwise clear division of responsibility between Brussels and the Member States has had a significant impact on the approach to mergers in the broader electronic communications sector, with a number of mergers being subject to national intervention on media plurality grounds.209

204   See Faull and Nikpay, and Whish, n 198.   Art 21.2 and 21.3 Merger Regulation, n 8. 206   Art 1.1 Merger Regulation, n 8.   Art 21.3 Merger Regulation, n 8. 207   Art 21.4 Merger Regulation, n 8. 208   As for example in the (subsequently abandoned) proposed acquisition of BSkyB by News Corporation—​ see the Secretary of State’s statement in June 2011 at . 209  eg Twenty-​First Century Fox/​Sky plc:  European Commission clearance decision M8354, 7 April 2017, [2017] OJEU C238; UK intervention notice, 16 March 2017 but contrast the Liberty Global/​Z iggo (2014) merger where the request for national jurisdiction was turned down. European Commission Press Release IP-​16-​271, 3 August 2016. 203

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• So-​called ‘concentrative’ or ‘full function’ joint ventures (where the parties give up independent activity in the field of the joint venture) are normally dealt with under the Merger Regulation. In contract, where the parties both remain as independent suppliers in the same or related markets as the new joint venture, approval of the terms of the joint venture restricting the activities of the parents is dealt with under the Article 101 criteria.210 Articles 4(4) and 9(2) of the Merger Regulation permit the transfer of the merger investigation back to a national competition authority if the concentration threatens to affect competition  significantly  in a market within that Member State, which presents all the characteristics of a distinct market. In a number of mergers involving the mobile telephony sector, the national competition authorities have requested jurisdiction on this basis, but the European Commission has rejected the applications.211 This approach in the telecoms sector seems to go against the trend in relation to requests under Article 9 more generally. It may be that the political significance of the sector, as well as the likely complexity of the cases, are factors. Moreover, this does not mean that the national competition authority or regulators are excluded entirely: the Commission has noted in its final decisions the close degree of co-​operation between it and the relevant national body.212 The Commission has generally approved mergers in the telecommunications sector provided that access to network infrastructure for third parties is not unreasonably restricted.213 The dynamic nature of most telecommunications markets, and the regulatory regime requiring operators with SMP to allow infrastructure access on regulated terms, will often mean that a transaction can be cleared—​ possibly with some changes to address any specific European Commission or regulator concerns.214 Many mergers which are not between competing communications services providers do not give rise to substantial competition concerns.215

210   eg Commission Decisions 96/​5 46/​EC [1996] OJEU L 239/​2 3 (IV/​35.337—​Atlas), and 96/​5 47 [1996] OJEU L239/​57 (IV/​35.617—​Phoenix/​GlobalOne). 211   See eg Hutchison 3G Austria/​Orange Austria (2012); Telefonica Deutschland/​E-​Plus (2014); Hutchison 3G UK/​Telefonica UK (2016). 212   See eg letter from CMA to European Commission of 11 April 2016 in Hutchinson 3G UK/​Telefonica merger, . 213   An early case where a ‘pure’ telecommunications merger was, nevertheless, prohibited, is Case M.1741, MCI/​Worldcom/​Sprint, [2003] OJEU L300/​1. 214   See commentary in Bellamy & Child, n 6, para 12.066. 215   See eg the BT/​EE decision by the UK CMA, 15 January 2016, clearing the acquisition by BT (the UK’s largest fixed communications services provider) and EE (the largest mobile provider), at .

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For example, the merger of BT and EE was approved in 2016 despite concerns, expressed by competitors and others, that the combination would increase BT’s market power. BT and EE operated in largely separate segments of the telecommunications market—​fi xed line and mobile respectively—​a nd there was very little overlap in their respective businesses at the time of merger. Other concerns about the increase in BT’s power in telecommunications generally were not thought to be specific to the merger: the CMA noted that they could be addressed in Ofcom’s wider review of the UK telecommunications market.216 In contrast, the European Commission blocked the merger of two of the four main UK mobile networks—​Three and O2—​in 2016. It found that the merger would leave only three MNOs in the UK, which significantly reduced competition in the market and which would likely have resulted in higher prices for mobile services in the UK and less choice for consumers than without the deal.217 This merger illustrates that the Commission seems to have a preference for structural (divestment) remedies in MNO-​to-​MNO merger cases, so as to introduce a replacement entrant in the market. Thus in Wind/​H3G, the Commission accepted the merger between two out of the four MNOs operating in Italy because the parties offered remedies involving the divestment of certain assets necessary to enable a new competitor, the French operator Iliad, to enter the Italian market as a fourth MNO. The contrast between the approach in Three/​O2 and BT/​E E also reiterates the point that, as yet, while triple or quad play issues may be raised in merger procedures, they have yet to be a decisive factor. In BT/​E E they were not considered separately. The market is changing rapidly and it has been suggested that the Commission’s approach is developing to take into account the potential foreclosure effect of convergent mergers. 218 Commissioner Vestager suggested that, if anything, quad play is beneficial because it can operate to lower prices to customers. 219 In the cases that have come before the Commission there has been no evidence that quad play would squeeze standalone companies out of the market. Concerns have also been raised in other recent mobile-​mobile mergers that the number of competing MNOs in some EU Member States is falling below the level

  15 January 2016, n 215. See CMA press release in particular.  M.7612, Hutchison 3G UK/​Telefonica UK, 11 May 2015, [2015] OJEU C357/​15. 218  Manigrassi, L, Ocello, E, and Staykov, V, ‘Recent Developments in Telecoms Mergers’, (2016) 3 Competition Merger Brief 1, 6–​7. 219  Vestager, M, ‘Competition and investment in telecoms’, Speech to CERRE Dinner Debate, 28 November 2016, ; see also Curwen, P and Whalley, J, Mobile Telecommunications Networks:  Restructuring as a Response to a Challenging Environment (Cheltenham:  Edward Elgar, 2014), 208–​209. 216 217

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needed to ensure effective competition—​creating a potential ‘substantial impediment to effective competition’.220 The Commission’s decisions clearing mobile network mergers in Austria, Germany, and Ireland all imposed remedies on the merged entity designed to ensure an adequate choice of retail offerings to consumers in these countries.221 In each case, the European Commission required the merged firm to offer capacity on its network to third party MVNO operators either as a reference offer or at a fixed capacity and price.222

10.6.2  Full function joint ventures A ‘joint venture’ is not defined in EU merger control legislation,223 but European Commission guidance gives significant detail on the meaning of ‘full function joint venture’.224 In particular, a joint venture may be a concentration (merger) even where the business is not being carried on by a separate legal person—​purely contractual joint ventures may also be within EU merger control. A joint venture will be full function—​in brief—​where it has the resources and operational independence necessary to act autonomously from both parents and is not wholly dependent on its parents for inputs or customers.225 In electronic communications markets, the treatment of joint ventures has been particularly important in the competition assessment of (mobile) virtual network agreements and similar types of cooperation between infrastructure providers. Deciding if a network sharing or similar MVNO arrangement is a ‘concentration’ will have significant consequences both for the competition test to be applied to approving the formation of the joint venture and to the procedure used. Concentrations with a community dimension may not be implemented without prior approval from the European Commission—​which must be given within strict deadlines after compulsory notification.226 In contrast, joint ventures assessed solely under the Article 101 regime cannot be notified but may be implemented immediately—​a lthough the parents would be at risk of enforcement action if the terms of the joint venture restrict competition contrary to Article 101 and cannot be exempted.

  Mergers which create an SIEC must be prohibited under the Merger Regulation, n 8, Art 2.3.  M.6497, Hutchison 3G Austria, 12 December 2012, [2013] OJEU C224; M.6992, Hutchison/​Telefonica Ireland, 28 May 2014, [2014] OJEU C264; M7018, Telefonica Deutschland, 2 July 2014, [2015] OJEU C86. 222   See the discussion of these cases in European Commission Competition merger brief 1/​2104, 10 at . 223   Art3(4) Merger Regulation, n 8, simply stipulates that a joint venture may be a concentration: it does not define ‘joint venture’. 224   Commission Notice 16 April 2008, [2008] OJEU C95/​1 (jurisdiction Notice), paras 91–​109. 225 226   Ibid, paras 98–​101.   Merger Regulation, n 8, Art 4. 220 221

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The European Commission will be particularly concerned to make sure that, where the parents of a joint venture remain active in the same or related markets as the joint venture itself, they do not use its creation as a pretext to coordinate the market behaviour of their remaining businesses. The likelihood and impact of these ‘spill-​over’ effects will be assessed using the ‘appreciable restriction of competition’ test under Article 101 rather than the ‘SIEC’ test under the Merger Regulation.227 The SIEC test will only be applied to restrictions of competition on the parents of the joint venture which are directly related to and necessary for the implementation of the joint venture itself.228 An illustration of the difference in Commission decisional outcomes for commercially similar network sharing agreements (joint ventures)—​here analysed under the Article 101 tests—​is given by the Commission’s decision in the T-​Mobile UK and Germany network sharing cases.229 In the UK, the Commission found that each parent retained independent control over its own mobile network, since the amount of network sharing would not prevent each of them from providing differentiated downstream services. There was also no widespread exclusion of third parties from infrastructure sites (masts etc.) since there were alternative sites in most locations, and if necessary site sharing could be mandated by Ofcom.230 Certain changes were needed to the original agreement to remove Commission concerns over discriminatory pricing. On this basis the Commission decided that the UK network sharing agreement did not restrict competition—​t hat is, it did not fall within Article 101 at all. In contrast, in the German network sharing case, the Commission found that the more comprehensive extent of the MVN/​roaming arrangements envisaged in Germany did limit each of the parties’ ability to compete downstream. The parties were more dependent on each other’s networks for adequate coverage and the transmission needed to provide the advanced services intended. The arrangements as a whole therefore fell under Article 101—​a lthough the Commission did exempt much of the joint venture under the Article 101(3) criteria. On appeal, however, the General Court partially quashed these findings. The Commission had failed properly to consider what alternatives were available to O2 to enter the German market on a viable scale. It appeared to the court that these might be rather limited and the possibility that competition might not be restricted, as compared with the ‘counterfactual’, could not be excluded.231

  Ibid, Art 2(4).   Commission Notice, 5 March 2005, [2005] OJEU C56/​2 4 (‘ancillary restraints’), paras 31–​41. 229   O2 UK/​T-​Mobile [2003] OJEU L200/​59 and T-​Mobile Deutschland [2004] OJEU L7532—​on appeal Case T-​328/​03, O2 (Germany) v Commission [2006] ECR II-​1231. 230 231   See further Chapter 8.   T-​328/​03, n 229, para 109. 227

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The competition assessment of joint ventures is highly fact specific.232 But it is clear that, if a joint venture could be used as a focus for its parents to coordinate their activities where they should be competing with each other, or if one parent becomes too dependent on the other for an important part of its business, the Commission may intervene. Issues of dependence and leveraging of market power also feature strongly in many cases where telecommunications and media content businesses merge.

10.6.3  Media plurality The economic analysis of mergers between telecommunications operators and media businesses is in principle the same as for other kinds of mergers. The Commission will often consider that, where the merging parties are not actual or potential competitors with each other, no merger control issues arises. In Nokia/​ Navteq,233 Nokia acquired one of two providers of digital mapping databases in the EU and the Commission investigated to see whether a SIEC could arise from the combination of the database with Nokia’s (then) strong position in the EU mobile handset market. The concern was that Nokia could foreclose competing mobile handset suppliers from access to the Navteq mapping database. The merger was cleared after an in-​depth investigation: competing handset makers would be able to obtain mapping information from the other EU provider and Nokia had no economic incentive to refuse to supply to third parties after the merger. A loss of revenues from mapping data would not be offset by an increase in sales of Nokia handsets. This concern in ‘vertical’ mergers—​between suppliers of inputs (eg content) and communications infrastructure or service providers—​to ensure open access for competitors, mirrors the similar concerns in enforcing behavioural competition law and electronic communications regulation. The reasons for this are not only economic, however. Merger control may also take account of the democratic public interest in ensuring a diversity of media outlets—​so looking to block mergers by which media plurality is substantially reduced. However, this control is not exercised through the European Commission. Member States are entitled to take ‘appropriate measures’ to protect the public interest in plurality of the media.234 In the UK, this control is exercised by the

232   eg in Hutchison/​V impelCom (Wind)—​t he merger was only approved when commitments were offered by the parties to set up effectively a new mobile network in Italy, run by the French operator Iliad, to ensure sufficient competition on the Italian market: M7758, Hutchison Italy 3G/​Wind, 1 September 2016, [2016] OJEU C391/​7. 233 234   M.4942, decision of 2 July 2008, [2009] OJEU C13/​8.   Merger Regulation, n 8, Art 21(4).

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Secretary of State on the advice of Ofcom.235 This regime does not target vertical integration—​mergers involving media companies and telecommunications companies—​but includes other kinds of media mergers. Ofcom and the DTI (then responsible for media mergers, now DCMS) have published guidance on the factors to be taken into account when the Secretary of State is considering intervening in a merger on media plurality grounds.236 This applies whether the merger falls within EU or purely UK merger control. There are three measures for media plurality—​availability, consumption, and impact.237 These are assessed on a case-by-case basis. Separately from the merger control process—​but often linked closely to it—​t he Secretary of State may also consider if the acquirer is fit and proper to own the media outlet in question.238 The CMA reports both on any competition concerns arising from the merger and on the public interest (media plurality) concerns identified.239 However, unlike purely ‘economic’ mergers, it is for the Secretary of State to decide if any enforcement action will be taken in case of an adverse CMA report.240

10.7  SH A PING THE M A R K E T— ​C OMPE TITION M A R K E T IN V E S TIG ATIONS 10.7.1 General There are powers for the competition authorities to carry out investigations or inquiries into an economic sector at both national and EU level. While Article 101 and 102 (and the corresponding provisions of the Competition Act) look at anti-​competitive agreements or abuses of dominance by individual businesses, a market investigation aims to determine whether the process of competition is working effectively in markets as a whole. Market investigations tend to be used when the provisions regarding anti-​competitive agreements and those regarding abuse would be (or have been) ineffective. They may be appropriate, for example, in the case of non-​coordinated parallel conduct. The European telecommunications

  Enterprise Act 2002, s 42.   DTI, ‘Enterprise Act 2002: Public Interest intervention in Media Mergers’, May 2004, . Ofcom, ‘Measuring media plurality’, 19 June 2012, . 237   Measuring media plurality, ibid, para 1.5. 238   eg 21st Century Fox’s acquisition of control over Sky News, referred to the CMA for public interest review, 12 September 2017, . 239 240   Enterprise Act 2002, s 47.   Ibid, s 54. 235 236

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sector inquiry (discussed at Section 10.7.2 below) was noteworthy because until that point the Commission had not used its sector inquiry powers, perhaps because the powers under Regulation 17/​62 were focused on individual firms’ behaviour rather than the state of the market. The inquiry marked an increase in interest in use of this tool, even before Regulation 1/​2003 was enacted (and EU sector enquiries given a proper legal basis241),​in sectors where market structures were such that effective competition would be hard to sustain. The overarching objective is to allow the relevant body (national competition authority, telecoms regulator, or the European Commission) to understand a sector in which the market does not appear to be functioning effectively, and to identify the reasons why. The outcomes of such inquiries and investigations may vary considerably. The information gained may subsequently be used in competition enforcement against individual undertakings. It may also prove useful in other contexts, such as defining markets in the context of a merger. Therefore, market investigations and inquiries should properly be considered as forming part of the EU competition law enforcement tool-​k it.

10.7.2  The Commission and sector inquiries The European Commission has powers to carry out sector inquiries when it believes that a market is not working as well as it should, and also believes that breaches of the competition rules might be a contributory factor. Article 17 Regulation 1/​2003242 specifies the circumstances: [w]‌here the trend of trade between Member States, the rigidity of prices or other circumstances suggest that competition may be restricted or distorted within the common market, the Commission may conduct its inquiry into a particular sector of the economy or into a particular type of agreements across various sectors.

Since such an investigation would not change an individual undertaking’s legal position, it would not seem that a decision to undertake a sector inquiry is open to direct judicial review.243 The Commission is empowered to ask for information from market participants in accordance with Articles 18–​21 Regulation 1/​2003. These provisions confer wide investigative powers on the Commission which, in general, reflect those used in cartel proceedings. In particular, and as became apparent in the pharmaceuticals sector inquiry, the Commission may use its powers of inspection in this context as well as in under Article 101 and 102 TFEU.244 The significance of these powers is that undertakings are obliged to

241

242   Regulation 1/​2003, n 8, Art 17.   Formerly, Art 12 Regulation 17/​62. 244   Case 60/​81, IBM v Commission [1981] ECR 2639.   Regulation 1/​2003, n 8, Art 20.

243

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answer questions on documentation, although they cannot be required directly to incriminate themselves.245 The inquiry may result in public hearings, and the Commission may publish a report of its findings. The Commission has carried out a number of inquiries that are related to telecommunications: roaming (2001), leased lines (1999) and local loop (1999) together constituting a three phase inquiry into the telecommunications sector, and more recently 3G (2005), and the e-​commerce inquiry (less central to telecommunications) in 2015.246 The first three of these inquiries pre-​dated the formal introduction of the formal market investigation powers dating from 2004 in Regulation 1/​2003. The leased line sector was important in terms of the development of the information society because leased lines were used by new entrants to the fixed telephony market as well as mobile telecom operators, internet service providers, and large business users. The inquiry ran for just over two years. At a public hearing, it was claimed that the incumbent operators had charged their competitors excessive prices for the provision of leased lines and were deliberately delaying the delivery of leased lines to their competitors—​presumably in order to drive them out of the market. The inquiry resulted in a number of investigations into excessive prices in short distance leased lines (although these cases were passed on to NRAs for action under the ONP Leased Line Directive247). The Commission also opened cases in relation to pricing on international leased lines: these cases were closed because the undertakings concerned then significantly reduced their prices. The 2001 roaming inquiry also led to a number of possible instances of excessive prices. It became clear, however, that competition tools were inadequate for cases dealing with the ‘local loop’ bottleneck with the result that regulation was introduced setting maximum prices. The inquiry into access to the local loop ran at the same time as the regulation on the unbundling of the local loop was enacted.248 The Commission was concerned that the de facto monopoly of incumbent operators over the last mile of the public telecommunications network would impede the commercial take-​up of DSL services, specifically because of above-​cost pricing and discriminatory behaviour as a consequence of the vertically integrated nature of incumbent operators’ businesses. The inquiry resulted in cases being opened against France Télécom’s subsidiary Wanadoo, for an alleged predatory pricing strategy in relation to high speed internet access, and against Deutsche Telekom, for an alleged margin squeeze in local access resulting from the German 245   See eg Case 374/​87, Orkem v Commission [1989] ECR 3283; Case T-​112/​98, Mannesmannröhrenwerke v Commission [2001] ECR II-​729; legally privileged information is subject to an exception here too. 246  . 247   Directive 92/​4 4 on the application of open network provision to leased lines, [1992] OJ L 165/​27, as amended by Directive 97/​51. 248   See further Chapter 8, at Section 8.3.4.4.

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incumbent’s failure to rebalance line rental tariffs with their underlying costs (both cases discussed at Section 10.3). At the time of the 3G inquiry, the 2G mobile market was considered to be highly competitive. The 3G market—​which allowed the transfer of all kinds of data at high speeds by mobile networks—​was not equally so. The 3G market contained a number of problematic features, notably: • high sunk costs due to the cost of spectrum licences and costs associated with network roll-​out; • barriers to entry because of the limited amount of spectrum available; • strong incumbent operators including former 2G operators as well as fixed telephony operators; • oligopolistic market structure (in most Member States, there were between three and five network operators); and • economies of scale and network externalities. One of the key issues here was market definition. The Commission concluded that mobile and fixed platforms for content were distinct markets, as there was limited substitutability, especially given the physical characteristics of mobile handsets, costs of usage, and inability to watch as a group. Further, a driver for the uptake of 3G mobile was the availability of (audiovisual) content and the rights to the most desirable content were in the hands of a few key (media) operators.249 The inquiry identified four areas of particular concern: cross-​platform bundling of rights, excessively restrictive conditions on exploiting rights (ie in terms of transmission length and timing), joint selling, and exclusivity. As discussed above, the Commission has taken action in relation to long, exclusive sports rights packages. The inquiry noted that there were substantial costs involved in developing these new services and so some security of return was needed. The most recent inquiry was that into the e-​Commerce sector, which has led to a range of initiatives including some legislative proposals, as well as some enforcement action under Articles 101 and 102 TFEU.

10.7.3  The CMA, market investigations, and market studies In the UK, the Enterprise Act 2002 (as amended by the Enterprise and Regulatory Reform Act 2013 (ERRA)) provides for the CMA to make a reference for the carrying out of market investigations.250 The ERRA removed the two-​body referral process   Commission’s Press Release IP/​0 4/​134, 30 January 2004.   Enterprise Act 2002, s 131 (replacing the earlier provisions under the Fair Trading Act 1973 (FTA)); see generally OFT Market investigation references (OFT511) and Competition Commission, Guidelines for market investigations (CC3 (revised)), both as amended by CMA Market Studies and Market 249

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in place under the Enterprise Act, replacing it with a single body—​t he CMA. Prior to the ERRA, the initial consideration of the matter was carried out by the Office of Fair Trading (OFT), which could choose to refer a matter to the Competition Commission (CC) to carry out the market investigation  independently. Despite the change to a single body, the terminology from the old system remains—​so the CMA makes a reference to itself (which is carried out by a specially constituted board drawn from a pool of possible members). The ERRA also amended the provisions relating to public interest interventions and introduced a new category of cross-​market references. The CMA may also carry out market studies251 under its general powers in section 5 of the Enterprise Act. These are examinations into the causes of why particular markets may not be working well but are separate from a market investigation. Where a market study gives rise to reasonable grounds for suspecting that a feature restricts or distorts competition, and a market investigation reference appears to be an appropriate and proportionate response, the CMA may make a reference. Carrying out a market study is not a prerequisite to a market investigation, though a market study may allow the CMA to access information central to carrying out its market investigation. A recent example of a market study in the digital sector is that into digital comparison tools (DCT) (such as price comparison websites). The CMA published a report at the end of the study. In its final report it put forward a number of recommendations (including the need for legislative action) and stated that it will continue to keep some practices under review (eg non brand-​bidding, negative matching, and non-​resolicitation agreements). It opened an investigation into the behaviour of one comparison website under the UK Chapter 1 prohibition as well as Article 101 TFEU.252 In addition to the CMA, other public sector enforcers may be involved in triggering a market investigation. Ministers may, under section 132 of the Enterprise Act, make references for a market investigation. In addition to the criteria to which the CMA must have regard, a minister must either be ‘not satisfied’ with a CMA decision not to make a reference or, having brought information to the attention of the CMA, the CMA has not made a decision on whether to make a reference in a period that the minister considers to be reasonable. Investigations:  Supplemental Guidance on the CMA’s Approach, (CMA3) January 2014 (revised July 2017); for overview see eg Coscelli, A and Horrocks, A, ‘Making Markets Work Well: The U.K. Market Investigations Regime’, (2014) 10 Competition Policy International 24. 251   See generally, OFT Market studies:  Guidance on the OFT approach (OFT519), as amended by CMA Market Studies and Market Investigations: Supplemental Guidance on the CMA’s Approach, (CMA3) January 2014 (revised July 2017). 252  .

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Of more relevance in telecommunications is the role of certain sectoral regulators, including Ofcom. They may undertake market studies, and make market investigation references to the CMA for the constitution of a CMA group to carry out the market investigation. For example, Ofcom initiated the Pay TV investigation (discussed below) and has undertaken substantial work in relation to BT Openreach.253 The Openreach investigations work started in 2005 when Ofcom carried out a Strategic Review of the telecommunications market, which was complementary to the annual market power reviews carried out under the EU communications package. As a result of this review, the vertically integrated nature of BT was seen as problematic and Ofcom considered making a market investigation reference to the (then) Competition Commission. To avoid this, BT gave undertakings under the Enterprise Act to set up a separate division—​called Openreach—​to deal with BT’s physical infrastructure. As a part of the undertakings, BT agreed to a ‘functional separation’. Although Openreach remained in the BT Group and reported to BT, it was obliged to treat all its customers (including other BT businesses) on a non-​d iscriminatory  basis. The telecommunications market may have distinctive features in this context, because of Ofcom’s role as NRA under the EU Communications Package. Ofcom, in deciding whether to make a market investigation reference, considers whether it would be more appropriate to deal with the matters under sectoral regulation or under competition law. The fact that Ofcom may have dealt with a number of issues under the programme of market reviews derived from the EU regulatory framework may mean that a reference to the CMA is not appropriate, as this would lead to duplication. For example, although in 2005 BT gave commitments to Ofcom in respect of Openreach to avoid the market investigation reference, a different approach was taken when OfCom returned to the question in 2015.254 In its initial conclusions, Ofcom expressed the concern that the vertically integrated structure of BT inherently affects the way in which BT makes strategic decisions, and that functional separation had not worked. Openreach needed greater independence—​specifically as regards governance—​from the rest of the BT group. BT’s competitors (such as Sky and Talk Talk) called for a market investigation reference to be made to the CMA but Ofcom envisaged a different approach,

  See also Chapter 3, at Section 3.3.8.   Ofcom, ‘Strategic Review of Digital Communications: Terms of reference, competition and investment in converged communications infrastructure’, 12 March 2015, ; Ofcom, ‘Strategic Review of Digital Communications, discussion document’, July 2015; Ofcom, ‘Initial Conclusions from the Strategic Review of Digital Communications’, February 2016; Ofcom, ‘Strengthening Openreach’s strategic and operational independence Proposal for comment’. 253

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using regulatory powers.255 Finally, BT agreed to give commitments under s 89(3) Communications Act 256 to turn Openreach into a separate company. This made Ofcom’s market investigation proposals unnecessary—​though Ofcom has announced it will establish a dedicated Openreach Monitoring Unit, to monitor whether the new arrangements are implemented successfully.257 Market investigation references are more likely to be appropriate when issues affect more than one market. References may also be more appropriate in content markets—​which fall outside the EU telecommunications regulatory regime. Indeed, one explanation for Ofcom’s intervention in pay TV (discussed below) is that access to premium content (with the possible exception of premium sports rights) falls outside the regulatory regime258 and access complaints are unlikely to succeed under competition law.259 A market investigation may fill this gap. A market investigation will take place when there is a risk of adverse effects on competition (AEC) caused by a feature of the market being considered: that is, the feature ‘prevents, restricts or distorts competition’260 . The ‘relevant market’ is determined by the terms of the reference.261 It need not be the same as the ‘product market’, which may be used as part of the assessment of the functioning of competition and uses techniques similar to that in relation to prohibitions cases (Articles 101/​102 TFEU). Section 131(2) of the Enterprise Act states that a feature of a market is to be construed as a reference to: • the structure of the market concerned or any aspect of that structure; • any conduct (whether or not in the market concerned) of one or more than one person who supplies or acquires goods or services in the market concerned; or • any conduct relating to the market concerned of customers of any person who supplies or acquires goods or services. According to section 131(3), ‘conduct’ includes any failure to act (whether intentional or not) and any other unintentional conduct. The boundary between ‘structure’ and ‘conduct’ may not always be clear-​cut. In practice the approach has been to identify the relevant ‘feature’, rather than worry about how to categorise that

255   relying on ss 89A and 89B Communications Act which follows the requirements set out in Article 13a of Directive 2002/​19/​EC (‘Access Directive’), as amended; see notification, . 256  < https://​w ww.btplc.com/​U KDigitalFuture/​A greed/​i ndex.htm>. 257  . 258   See Ofcom’s imposition of WMO obligation on Sky:  Ofcom, ‘Review of the pay tv wholesale must-​offer obligation’, 19 November 2015, . 259 260   See discussion on essential facilities in Section 10.4.   Enterprise Act 2002, s 134(1). 261   Enterprise Act 2002, s 134.

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feature.262 A  market reference is not automatic where the criteria appear to be met: rather, the authority has discretion whether to act or not. Should a problem be found after investigation, the CMA may impose a wide range of legally enforceable remedies. In making its assessment, the CMA considers the market structure (including market shares of participants) and often considers: • the nature and characteristics of the relevant products or services and of any potential substitutes for these products; • the nature of the customer base—whether customers are businesses or final consumers, the extent of customer segmentation in a market, the demographic profile of the customer base, or the extent to which customers are informed about the products; • any applicable legal and regulatory framework; • industry practices; • the history of the market, such as recent examples of entry, expansion or exit or any anticipated significant changes; and263 • market outcomes—​t hat is prices, profitability, and innovation—​to understand any resulting harms. The CMA has a range of remedies which it can use if it finds an AEC as a result of a market investigation. In this respect, market investigations are different from both a market study and the Commission’s sector inquiry powers. They rely for remedies on using competition law mechanisms or on a call for new legislation. A market investigation may, however, also include recommendations to others, eg to change existing legislation. In this comparative sense, the market investigation provisions under the Enterprise Act can be said to have teeth. According to section 134 of the Enterprise Act, the CMA has to decide what action to take to remedy an AEC:  it should have regard to the need to achieve as comprehensive an outcome as is practicable. In particular, the CMA can order divestment (structural remedies) or behavioural remedies, such as price undertakings. Its preference is to adopt structural remedies rather than behavioural remedies, so as to avoid the difficulties of monitoring ongoing compliance with any undertakings given. It has, however, no power to fine companies under its market investigation powers. Prior to the ERRA, the CMA could make a market investigation reference under the Enterprise Act in relation to a single market (‘ordinary references’). ERRA added a second category which concern specific features or combinations of features that exist in more than one market,264 though this is limited to ‘conduct’ not 263   CC3 (revised), n 250, para 155.   Ibid, para 102.   Enterprise Act 2002, s 131(2A) and (6).

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‘structure’.265 The Secretary of State may also make a reference in cases that raise defined public interest issues. Under the Enterprise Act, the CMA would investigate competition issues, while the Secretary of State would have responsibility for investigating the public interest issues (now referred to as a ‘restricted public interest reference’). Under ERRA, there is a new type of reference which requires the CMA to investigate certain public interest issues together with the competition issues (‘full public interest reference’). National security is currently the only specified public interest consideration in relation to the markets regime, but the Secretary of State may introduce new public interest considerations. In contrast to the merger regime, media plurality is not listed. The most significant recent CMA market investigation relating to telecommunications is on the pay TV market. After receiving representations from a number of competing market participants, including telecommunications operators as well as consumer groups, Ofcom started an investigation into the pay TV market in 2007 (ie under the original Enterprise Act regime).266 Ofcom defined the pay TV market broadly, to include subscription and video-​on-​demand television services on all platforms. It took the initial view that distinct narrow economic markets existed for pay TV subscription channels containing premium sports content and movies, at both the wholesale and retail level. Sky was found to have market power in these markets. Ofcom argued that bundling efficiencies (eg phone services with audiovisual content) would mean that these markets may be prone to ‘tipping’ towards one retailer, particularly where a retailer on a particular platform has exclusive control over a core of premium content. Competition from other platforms would only be a viable constraint if providers on those platforms had access to comparable content. Ofcom referred the supply and acquisition of subscription pay TV movie rights and the wholesale supply and acquisition of packages which include core premium movies channels to the Competition Commission.267 In the end, the Commission found that there was no AEC. The pay TV market investigation is significant for a number of reasons. It is an example of competitors involving themselves in the regulatory and competition law process to try to effect an outcome of benefit to them. Concerns raised were partly related to the increasingly integrated nature of the telecommunications and   Ibid, s 131(1) and 131(2A).  Ofcom, ‘Pay TV market investigation’, . 267   Sports rights were dealt with under Ofcom’s sectoral powers in Communications Act 2003, s 316 to impose a wholesale ‘must offer’ obligation on Sky, an obligation which was successfully challenged before the courts, see Harrison and Woods, n 161. 265

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content sectors, and the impact that access to premium content, as well as bundling of other services, might have. It is also an example of an investigation where the Competition Commission came to a different conclusion from the sector regulator, albeit quite late in the process. In its provisional report, the analysis of the Competition Commission had been similar to that of Ofcom. The change in its view may have been in part because of market changes, specifically the establishment of ‘over-the-top’ (OTT) services (delivered over the internet, eg Lovefilm; Netflix) providing similar content to that of Sky, as well as changes to Sky’s own service. Significantly, to use OTT services, consumers did not have to buy new hardware—a fact facilitating rapid uptake of these services. This highlights the difficulty of assessing market power and behaviours going forward—​a nd consequently whether there is a need for intervention—​ in a context where technology and the market are changing swiftly. Indeed, in its pay TV Statement, Ofcom acknowledged that its investigation came at a time of ‘disruptive change’ in the way in which content was distributed, but while Ofcom expressed concern about the future of these services, the CC’s report, coming some time later, found a different landscape—​d ifferent even from that which existed at the time of its provisional report.

10. 8  UK COMPE TITION L AW: ENF ORC EMENT A ND A PPE A L S IN THE EL E C TRONIC COMMUNIC ATIONS SE C TOR 10.8.1 Overview From a public policy standpoint, telecommunications regulation and competition law enforcement may fill the same purpose—​ensuring that as far as possible markets are open so that consumers get services at the best possible choice, quality, and price. In most EU Member States, despite this overlap in purpose, competition enforcement and communications regulation are separately enforced by different bodies. This can lead to difficulties in coherent regulation of electronic communications services. This was exemplified in the Deutsche Telekom case268 where the regulator set a wholesale price above some of DT’s retail prices, allowing DT to claim—​albeit unsuccessfully—​that it was forced into the anti-​competitive margin squeeze. In order to reduce the possibility of this kind of incoherence in UK markets, the Competition Act 1998 introduced powers for some sector regulators, including the telecommunications sector regulator, to apply mainstream competition rules in

268   n 7. The German telecommunications regulator, RegTP had set a regulated interconnection price which moved at or above Deutsche Telekom’s own retail prices for some equivalent services.

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their respective sectors alongside their regulatory powers. In practice, the majority of administrative competition enforcement in the electronic communications sector in the UK—​w ith the exception of merger control—​has been done by Ofcom using this ‘concurrent’ competition power.

10.8.2  Scope and process for exercising competition powers concurrently Ofcom can use the domestic competition powers under the Competition Act concurrently with the CMA. Ofcom does not participate in the ‘parallel’ enforcement of EU competition law in the UK under Regulation 1/​2003 and the European Competition Network arrangements which give effect to it.269 However, where the case does not have an effect on trade between Member States—​or even where it does, if the European Commission is not taking action—​Ofcom has the same powers to enforce behavioural EU competition law (under Articles 101 and 102) in UK markets as the CMA would in the same circumstances. For competition enforcement in relation to changes in market structure, Ofcom’s remit is more limited. As we have noted, the formal role of Ofcom in merger control is primarily limited to those mergers which may raise media plurality issues. However, Ofcom often makes representations on mergers in the electronic communications sector, which are usually made public.270 In contrast, Ofcom does have the power to refer markets for investigation to the CMA under the market investigation provisions in the Enterprise Act 271 where it believes that there are features of a market which may restrict competition.272 We have discussed this power in Section 10.6 above—​its use has been seriously considered by Ofcom on several occasions, and a reference of the market for premium pay TV movies was made in 2010.273 Despite looking similar, market investigations under the Enterprise Act are not the same as market reviews under the EU electronic communications framework. In particular, the UK CMA has no power to make a finding on whether a communications operator has significant market power in any regulated market. Ofcom has therefore used the possibility of a market investigation reference to address issues which fall outside the scope of its behavioural regulatory powers—​for example

270   Competition Act 1998, s 54(2).   eg Three/​O2, 1 February 2016. 272   Enterprise Act 2002, 131 and Communications Act 2003, s 370.   Enterprise Act 2002, s 131. 273   4 August 2010, at . The Competition Commission subsequently found that there was no appreciable adverse effect on competition in any pay TV market:  report of 2 August 2012 (at 15), . 269 271

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market issues in content provision (eg pay TV)274—​or structural issues in a market which arise outside a merger context.275 Where anti-​competitive market behaviour is suspected in UK electronic communications markets, three enforcement choices need to be addressed. First, does EU competition law apply to the question? If so, then it must be used 276 and any outcome from parallel use of domestic powers must be consistent with it. Second, are regulatory requirements under the electronic communications legislation relevant—​for example, is the behaviour a breach of an interconnection agreement? And third, can UK competition law also apply to the behaviour? These choices overlap with the question of which authority should consider the issues. For example, where EU competition law applies, the European Commission may enforce the law directly—​a nd if it does so, then no national authority may act.277 In the majority of cases where anti-​competitive behaviour is suspected in UK markets, either Ofcom or the CMA will be able to act. How is this choice made? From 2013 the procedure was improved.278 There is now a statutory duty on Ofcom to consider if using its competition powers would be more appropriate in each case before it takes action under its regulatory (Communications Act) powers.279 In principle, Ofcom should use its concurrent competition powers before considering sector regulation. This new duty is backed up by a new power for the government to remove all concurrent competition powers from Ofcom if the Competition Act enforcement tools are not used sufficiently.280 Agreeing which of the CMA and Ofcom should act is likely to be straightforward. There are well developed communication channels to coordinate on these issues and where the competition issue is wholly within the scope of Ofcom’s other powers—​electronic communications, broadcasting (TV and radio), and postal services—​it is probable that Ofcom will take the investigation. The CMA and Ofcom have published a memorandum giving more detail on how they will allocate competition cases between them.281 The factors taken into account when allocating a case include relevant sector knowledge, effect of the market behaviour

  See Section 10.5.   See Section 10.6. In particular, Ofcom has used the possibility of a market investigation to prompt an offer of undertakings in lieu of a reference for BT to separate its wholesale business (Openreach) from its retail offerings, . 276 277   Regulation 1/​2003, n 8, Art 3(1).   Ibid, Art 11(6). 278   Enterprise and Regulatory Reform Act (ERRA) 2013, ss 51–​52 and Sch 14. 279   Communications Act 2003, ss 94 and 96A, as amended by ERRA 2013, Sch 14 paras 17–​18; for the broadcasting sector see s 317. 280   ERRA 2013, s 52. 281  17 June 2014, . 274

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on the electronic communications sector and previous experience dealing with either the undertakings involved or issues similar to those being investigated.282 If the case is allocated to Ofcom, it will investigate as the CMA would, although the memorandum notes that staff secondments and other support may be needed in some cases. Ofcom has produced guidance on how it will investigate cases under the Competition Act and there is also further guidance on how competition law in the UK dovetails with sector regulators’ other responsibilities.283 In addition to the initial allocation of cases, the ERRA formalized arrangements for ongoing co-​ordination of competition enforcement in the UK between the CMA and the regulators. The UK Competition Network (UKCN) was set up under the guidance of the CMA with all the UK concurrent competition regulators as members to allow a forum for dialogue and co-​ordination of policy and strategy.284 Although individual cases are investigated and enforcement action taken by a single authority (either the CMA or Ofcom in the case of telecommunications), information may be exchanged on case priorities and on whether a particular case should be treated under regulatory or competition powers.

10.8.3  Competition appeals in telecommunications The method and procedures for appealing competition decisions varies according to whether the decision was made by the European Commission or a UK authority. There is no ‘harmonized’ appeal procedure across the EU. Appeals against European Commission competition decisions (under Articles 101 and 102 TFEU) are made to the General Court of the EU.285 The powers of the General Court are those of an administrative court—​so it may wholly or partly quash a decision and remit it to the Commission, or it may vary the amount of penalty imposed (even where the decision is allowed to stand).286 General Court judgments may be appealed on a point of law to the Court of Justice of the EU.287 In contrast, UK competition decisions are subject to appeal as set out in UK legislation. Even in cases where Ofcom is applying EU competition law, there is no appeal from its decision to the General Court (though the CAT, hearing a challenge

  Ibid, para 30.   Regulated industries: Guidance on concurrent application of competition law to regulated industries, CMA 10, March 2014; Ofcom’s guidelines for the handling of competition complains and complaints concerning regulatory rules, July 2012. 284   United Kingdom Competition Network (UKCN) Statement of Intent (December 2013). 285   TFEU, n 11, Art 256. 286   Regulation (EC) 1/​2003 [2003] OJEU L1/​1, Art 31. For a more detailed description of the power of the General Court, see Bellamy & Child, n 6; Faull and Nikpay, n 198, paras 5.1125–​5.1200; Kerse, C and Kahn, N, EU Anti-​t rust Procedure (6th edn, Oxford University Press, 2012). 287   TFEU, n 11, Art 256(3). 282

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to Ofcom’s decision, could make a reference to the CJEU). As Ofcom and the CMA exercise the same powers in competition cases, the appeals regime for each of their decisions under the Competition Act is the same.  There is an appeal on the merits (both fact and law) to the CAT and, with leave, a further appeal to the Court of Appeal (or Court of Session for Scottish cases)288 and ultimately to the UK Supreme Court. Since the CAT also hears appeals from Ofcom regulatory decisions under the Communications Act,289 as well as appeals against CMA and other concurrent regulators’ decisions under the Competition Act, the CAT acts as the formal point of final decision of fact for both the Competition Act and Communications Act enforcement systems in the UK. The CAT sits as a panel of three—​a judge or legally qualified chairman and two others—​a nd the Tribunal’s members include several with experience in electronic communications markets. The procedure followed by the CAT when hearing appeals is different from the civil procedure rules used in general litigation.  The CAT Rules in particular require more information to be provided at the beginning of an appeal against an Ofcom decision than is usual in judicial review proceedings in the High Court.290 However, although the CAT rules differ from the general English civil procedure rules, the CAT has produced a Guide to Proceedings which gives detail on how the Rules will be applied in practice, which have the same force as a Practice Direction made under the general civil procedure rules.291 Since the CAT has the power to rehear a competition case on the merits, its order making powers also go beyond those of the Administrative Division of the High Court in England.292 As well as the power to remit the matter to Ofcom (or the CMA as the case may be), it also has the wide power under the Competition Act to make any decision which the CMA (and therefore Ofcom) could have made in the same case—​that is, it may overturn the regulator’s decision and substitute its own.293 Even if the CAT agrees with the operative parts of the decision, it may nevertheless quash any of the findings of fact in it.294 CAT decisions are enforceable in the same way as a judgment of the High Court in England.

  Competition Act 1998, ss 46, 49 and Sch 8.   Note that the standard of review for appeals under the Communications Act 2003 has recently been amended by the Digital Economy Act 2017. See further Chapter 3, at Section 3.3.7.4. 290   Competition Appeal Tribunal Rules 2015, SI 2015/​1648, esp. rules 4 and 6. 291  Competition Appeal Tribunal Guide to Proceedings (2015) at . 292   Competition Act 1998, Sch 8, para 3(2).    293  Ibid, para 3(2)(e).    294  Ibid, para 3(4). 288 289

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10.9 CONC LUSIONS Competition law investigation and enforcement powers form an important part of the complex framework of regulation in the telecommunications sector. In particular, the use of competition law tools and techniques can be important for issues which arise on the periphery of the telecommunications industry, where sector regulation may not have the necessary reach to remedy the issue identified. The differing methods of investigating anti-​competitive behaviour in the regulated sectors leaves substantial discretion to the regulators—​primarily Ofcom for telecommunications markets in the UK. The history of telecommunications regulation since the Competition Act came into force in 2000 and gave modern competition powers to the sector regulators for the first time, has shown that using ‘mainstream’ competition law in telecommunications is both vital—​particularly to address ‘convergence’ issues—​a nd difficult, given the continued pace of technology change driving consumer demand for ever more developed and higher quality services. Competition enforcement techniques sometimes have difficulty in keeping pace with this change—​d ifficulties with market definition being a main example. Continued technological change is not the only challenge facing Ofcom. The impetus given to competition enforcement in all sectors by the ERRA—​reinforcing the requirement on Ofcom to consider competition enforcement before using its sector powers—​as well as the withdrawal of regulation from many telecommunications markets as operators in them cease to have SMP, will mean that competition law is set to play a substantial role in the supervision of UK telecommunications market for many years to come.

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11 C APACIT Y AGR EEMENT S FROM MICROWAVES TO MVNOs Graeme Maguire, Joanne Wheeler, and Rhys Williams1

11.1 Introduction  11.2 Types of Capacity Agreement  11.3 Key Contractual Issues  11.4 Regulatory Issues  11.5 Emerging Trends 

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11.1 INTRODUC TION 11.1.1  What are capacity agreements? In a competitive communications environment, capacity agreements enable operators at every level to offer their customers more choices, to develop innovative new product offerings, and to increase revenue and market opportunities. This in turn encourages increased competition and enhanced efficiency in communications facilities. In the broadest sense, capacity relates to the ability of a communications network to carry information. It can be measured in a number of ways, from the number of bits per second that can be transferred over a line, or otherwise transmitted, or the number of calls that can be carried simultaneously to the bandwidth of a coaxial cable. 1   The authors would like to thank Cathal Flynn, associate at Bird & Bird, for his assistance with updating this chapter; Claire Brunel-​Cohen for her assistance with updating the previous edition; and Richard Graham for his assistance with the original version of this chapter.

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Electronic communications operators require capacity in order to sell services to their customers. Accurate capacity planning is essential for operators seeking to establish themselves in the market. If they have too little capacity, calls will fail and transfer times will slow down. Excess capacity, however, will simply lead to wasted costs. Having access to a wide range of capacity agreements enables operators to ensure they have sufficient capacity for all their customers’ needs. It should be noted that in this chapter, the term ‘capacity agreement’ is used to denote the contractual arrangements concluded at the wholesale level between different communications service providers. The term can also be (and often is) used to describe the contractual relationship between a network operator and its customers, especially in relation to business-​to-​customer (B2C) leased lines and International Private Leased Circuits (IPLCs) (discussed briefly further below). However, the primary focus of this chapter is on business-​to-​business (B2B) capacity agreements. Increased competition coupled with the deployment of new technology networks and services has given rise to a myriad of different types of capacity arrangements and service provision models. This chapter looks at the main capacity arrangements that are used to facilitate the provision of some of today’s established and emerging communications services and addresses the principal contractual issues that typically arise in respect of such arrangements.

11.1.2 History Capacity agreements have developed since the liberalization of the communications market and the introduction of competition. Originally, when there was only one incumbent operator in each market, that operator built and operated its own network and determined how much capacity each element of the network required. With the liberalization of the communications sector and the fostering of competition, however, it soon became apparent that operators were not going to build complete competing infrastructures. Some competing networks were established, in particular in the major metropolitan areas, but substantial areas of many countries continued to be served by one or perhaps two networks. In addition, other operators entered the market without owning any infrastructure at all, and these ‘reseller’ operators instead purchased capacity from other operators at wholesale prices, then on-​sold that capacity to other service providers or used it for particular retail services or applications. As new services were developed, so demand for capacity grew, encouraging the network operators to design, build, and deploy new networks with ever greater capacity. Fibre-​optic systems began to replace the traditional copper

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wire systems, not least because of the advantages they offered over the old systems, such as speed and capacity, digital signalling functionality, and reduced signal degradation. Fibre-​optic systems are basically thin filaments of glass through which light beams are transmitted. The light beams carry information in digital form, sent through the fibre strand over a pre-​determined wavelength. Because light can only travel in one direction, fibre-​optic systems are often (but not always) deployed in fibre pairs to enable simultaneous two-​w ay communication. As the communications industry developed into a global industry and capacity requirements increased, so operators became more willing to purchase capacity from their competitors. This was particularly true of capacity on undersea cables, which were originally constructed by consortia of incumbents, who quickly realized the opportunities for profit from the hordes of new entrants into liberalizing markets in the late 1980s and early 1990s.2 By the late 1990s, at the peak of the first telecommunications/​e-​commerce boom, a number of operators began using capacity swaps as a means of boosting their sales figures. The basic idea of a capacity swap, whereby Company A provides capacity to Company B in exchange for similar amounts of capacity in a different geographic location, was sensible and logical for operators having different capacity requirements in different places and building out their own networks at differing times. However, a number of capacity swaps were also recorded internally as sales, apparently boosting revenues and/​or profits for companies whose internal auditing processes were perhaps not as robust as they should have been. The bursting of the dotcom bubble that followed shortly afterwards resulted in a number of these companies entering Chapter 11 bankruptcy proceedings, although not necessarily directly as a result of having swapped capacity with each other. Capacity swaps still take place today but there are fewer of them and the appropriate accounting treatment is now clear. As technology evolved, so communications companies developed new methods of increasing capacity on optical fibres, for example through wavelength division multiplexing (WDM). WDM increases the capacity of an optical fibre by transmitting multiple signals simultaneously over the same optical fibre but at different wavelengths. Lit optical fibres traditionally supported one light stream, using one frequency of light. First introduced in the 1980s, WDM technology was originally limited to two wholly discrete frequencies on the same fibre. Since the

  See further Chapter 16, at Section 16.2.2.

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1990s, however, and the introduction of dense wavelength division multiplexing (DWDM), communications companies have been able to support an increasing number of separate wavelengths through constantly expanding channel counts and faster supported time division multiplex (TDM) rates within the individual wavelengths. The potential bandwidth in optical fibres is vast, with over 160 data channels capable of being run through a single fibre, enabling operators to provide large amounts of capacity with an advanced degree of product differentiation. Each wavelength can carry any communications protocol containing voice, data or video traffic, with bandwidth rates up to 40 Gbps. This constantly increasing capacity has coincided with the exponentially increasing demand for capacity from end-​users due to the growth of the internet and longer connection times for data traffic. Interestingly, after a number of years in which commentators have suggested that there was a substantial surplus of bandwidth, bandwidth-​ hungry applications, particularly those providing access to audio-​v isual content and services, have sparked ever increasing demand for capacity. This has led to the creation of a growing fibre-​to-​t he-​home market in many countries for some time now and to support an expanding range of mobile services. This in turn will drive the continued evolution of the capacity agreement market. In today’s market, capacity agreements represent a substantial element of legal practice in the sector, for the same reasons as before:  they facilitate increased and efficient use of communications networks and allow a larger range of service to be provided. Agreements range from simple deals for voice minutes and gigabits, through to satellite transponder capacity, and complex mobile virtual network operator (MVNO) and machine to machine (M2M) arrangements.

11. 2  T Y PE S OF C A PAC IT Y AG R EEMENT 11.2.1  Leased lines Wholesale leased lines, also known as private lines, dedicated lines, or permanent circuits, are perhaps the simplest form of capacity agreement. A leased line is basically a fixed circuit linking two locations, rented from another communications provider for a specific period of time. The circuit or line is usually provided at a number of different speeds up to and over 10 Gbps. While leased lines are an important business retail service, they are also a key enabler of competition at the wholesale level. This applies in respect of both the market for fixed line services and mobile services. In the case of the latter, leased

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lines are essential to the ‘back-​hauling’ of mobile traffic over long distances (eg where traffic is routed between mobile network cells that are not adjacent to one another). The early EU communications regulatory regime has therefore required ex-​incumbent operators to make available leased lines to those seeking network and service access.3 Traditional leased lines using analogue or digital circuits and SDH (synchronous digital hierarchy) and PDH (plesiosynchronous digital hierarchy) transmission are now being superseded in many instances by alternative methods of transmission, notably the Ethernet protocol. In addition, partial private circuits (PPCs), which provide dedicated transmission capacity between an end-​user’s premises and an operator’s point of handover, with the remainder of the circuit being provided by the operator from whom the PPC is rented, offer purchasers a further alternative solution. The key to the attraction of PPCs, indeed the key to the attraction of all capacity agreements, is ownership of the end-​user. The operator that rents the PPC retains billing control and the relationship with its own customer. PPCs, as a segment of the leased lines market, offer an economic solution to entities not having a fully national network, enabling operators to obtain extensive national coverage with minimal investment costs and the ability to configure the circuits to provide required capacity (and security) requirements. A further sub-​set of leased lines comprises International Private Leased Circuits (IPLCs or International Private Line Circuits in the USA). An IPLC is a point-​to-​ point circuit line offered by operators to end-​users to provide a communications link (eg in the form of a virtual private network or VPN) between two (or more) offices of the same organization based in different parts of the world. The ending of the BT/​Mercury international facilities duopoly by Oftel in 1996, which enabled new entrants to provide International Facilities Based Services, including facilitating the use of IPLCs to do so, played a key part in the development of international communications as other countries followed the UK’s lead. Unlike a traditional leased line, however, an IPLC is not a single dedicated circuit. Rather, it is a service offering termination services between two (or more) pre-​defined points, although the operator may route traffic through a variety of different networks between those points. This has the benefit of a lower cost, but has the potential problems of different traffic engineering processes or unexpected traffic volume surges impacting on transmission speeds.

3   For background on this, see Chapter 4, at Section 4.6. Leased lines are included in Market 4 in the Annex to the European Commission’s Recommendation on Relevant Markets. This market is called the Market for Wholesale high-​quality access provided at a fixed location. In the UK, Ofcom refers to this as the market for ‘business connectivity services’. See also Chapter 8.

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11.2.2 IRUs Historically, indefeasible rights of use (IRUs) developed as a term of art to describe certain long-​term leases of part of the capacity of an international submarine cable. The capacity is specified in numbers of channels of a given bandwidth. Many of the original IRU arrangements were for very long terms (25 years was typical), which led to a number of significant implications (which will be discussed further). As noted earlier in this chapter, the original undersea cables were constructed by consortia of incumbents. These have now largely been replaced by individual companies or joint ventures, although it is not uncommon for new consortia to be formed to construct systems. The membership of the consortia has changed, however. Global liberalization, enabling operators to hold licences or be authorized to operate in multiple jurisdictions, has removed the original need for foreign partners, and many operators have experienced the difficulties of managing by committee, as a consortia requires. The first ‘undersea’ cable was actually laid under the river Thames in 1840, and by 1850 a cable connected England to France. An undersea telegram cable linked Ireland and Newfoundland in 1858. The first transatlantic telephone cable system, TAT-​1, was constructed in 1956 and the first transatlantic fibre-​optic system came into service in 1988. The oceans of the world are now lined with submarine cables. The success of subsea and long-​d istance cables also drove the development of bandwidth technology, in particular the invention of bi-​d irectional analogue technologies in the early 1960s, superseding the requirement for a separate cable for each ‘direction’ of traffic. In order to ensure resilience, IRUs can be purchased in pairs, on two separate cables (operators may have other contingency arrangements in place—​for example a satellite link). The intention is that if one cable is accidentally cut, for example by a ship’s anchor in shallow water, the built-​i n redundancy of the design will permit uninterrupted service because all traffic can be automatically routed via the surviving cable. Usually, this works well: simultaneous cuts on two separate subsea cables are a relatively rare—​i f still alarming—​event. As a general rule, once a subsea cable is laid, the only risks it faces are if it is in an earthquake zone or a heavy fishing activity area. IRUs can be purchased in pre-​existing systems. More commonly, however, they are purchased in systems that are being built or that have just been built. This acknowledges the fact that technology continues to develop at a very fast rate, and even relatively new subsea cables are quickly superseded by faster and cheaper designs. Early purchasers of IRUs in a planned subsea cable system are often granted capacity bonuses on the basis that their committed participation makes initial

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funding by the cable owner far simpler and may also encourage other operators to become involved. Unlike a traditional leased line, whereby the renting operator pays fixed periodic charges (usually either monthly or quarterly), an operator purchasing an IRU historically paid a substantial upfront sum on execution of the agreement, but then is only liable for ongoing maintenance costs. The single upfront payment has advantages for both the purchaser and the seller. The latter is able to book revenue earlier than it would be able to for a normal leased line. The former can take advantage of specific capital allowances for IRUs, enabling them to obtain tax deductions for depreciation. This was not an issue when those providing the IRUs were incumbent or ex-​incumbent operators and credit risk was not even perceived as an issue. However, after the significant expansion of communications operators and the bursting of the ‘bubble’ in early 2001 many of these arrangements looked far from sound with hindsight. Fundamentally, IRUs are usually, from a legal perspective, contractual rights. Having paid significant sums up front for a contractual right is not necessarily an argument that takes you very far in discussions with an insolvency practitioner trying to maximize value from the assets of a failed operator. A lot of time and effort was spent in attempts to characterize IRUs as property rights, but to little or no avail. The term ‘indefeasible’ is something of a misnomer, given that IRUs are not indefeasible and no legal title passes to the purchaser. Rather, an IRU is a long-​term ‘lease’ that cannot be terminated by the cable owner (or other superior rights holder) other than in particular specified and limited circumstances, for example the insolvency of the purchaser, or the purchaser’s failure to contribute to maintenance costs of the cable. It is interesting to note that the term ‘IRU’ now has a much wider usage than the original IRU arrangements on undersea cables discussed above. Many capacity arrangements are characterized as IRUs, including arrangements that might be considered to be leased lines (as noted) or dark fibre arrangements (see Section 11.2.3). It is important to look below the label and understand the reality of the arrangements that are being put in place and the associated risks and how these are most appropriately addressed. 11.2.2.1  Tax treatment of IRUs From the perspective of purchasers of IRUs, it is worth noting briefly the UK tax treatment of the cost of acquiring IRUs after 21 March 2000. Broadly, for UK tax purposes, the acquisition of an IRU (or rights derived from an IRU) from the owner of a cable system is treated for income tax purposes as an allowable revenue deduction for the purchaser and not as capital expenditure. The relevant legislation for income tax purposes was set out in Schedule 23 to the Finance

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Act 2000 but this has now been rewritten into Parts 2 and 5 of the Income Tax (Trading and Other Income) Act 2005 (‘ITTOIA’) with effect from 5 April 2005. In ITTOIA, IRUs are defined as ‘indefeasible rights to use a telecommunications cable system’ (or a right derived from such rights).4 Any IRU relating to a cable or to a system a part of which comprises a cable will therefore be caught by ITTOIA. IRUs in any medium other than a cable (eg a duct) should fall outside the relief. For corporation tax purposes, the rules on the taxation of intangible fixed assets 5 apply to IRUs with effect from April 2002 (subject to transitional rules), so that profits and gains in respect of IRUs acquired by a corporate purchaser are generally chargeable to corporation tax as income in accordance with their accounting treatment. Under Part  8 CTA 2009, a deduction would be afforded to a company in respect of expenditure on the IRU on an amortized basis, ie over the life of the IRU. In either case, any income or proceeds derived from the purchaser’s subsequent exploitation, disposal, or revaluation of the IRU will be taxable income. If the purchaser of an IRU does not have a trading activity, it will be subject to tax on income derived from the IRU but, in calculating the amount of net income which is chargeable, it would still be able to make a deduction for the acquisition costs of the IRU. In the case of a purchaser of an IRU, within the charge to income tax (or corporation tax for pre-​April 2002 assets), deductibility of the revenue expense is subject to the usual conditions for trading deductions, in particular, expenses must be incurred wholly and exclusively for the purposes of the trade. If such purchaser is not a trader, equivalent conditions apply.6 From the perspective of the owner of a cable system (other than a corporate owner within the charge to corporation tax, which will be subject to tax on any profit or loss, generally in accordance with its accounts under Part  8 CTA 2009), the grant of an IRU by the cable-​owner is not affected by the tax treatment of IRUs for purchasers. For UK tax purposes, the grant of an IRU by a cable-​owner might be considered as either giving rise to (i) a trading receipt where the grant is part of the owner’s normal exploitation of the cable system, or (ii) a capital receipt derived from the use or exploitation of its cable system. Where the receipt is a capital sum, the cable-​owner will not be regarded as having disposed of the cable network itself, and neither will it be treated as having disposed of absolute ownership of the rights to use the cables. Instead, the cable-​owner will only be taxed on the capital sum (less any allowable costs) on the basis that it has received consideration for granting a right of use of part of the cable system to the person

  ITTOIA, s 146.   Corporation Tax Act 2009 (CTA 2009), Pt 8 (previously Schedule 29 to the Finance Act 2002). 6   The authors would like to thank Mathew Oliver, Partner Bird & Bird, for his assistance with updating this chapter. 4 5

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acquiring the IRU. Similarly, for UK capital allowances purposes, since the grant of an IRU is not treated as a part ‘disposal’ of the cable system itself, the owner continues to be entitled to capital allowances on its original cost of installing the system.

11.2.3  Dark fibre As a general rule, one of (if not) the largest expenses faced by any communications network provider is installing that operator’s cables in the ground. It is commonly estimated that up to 80 per cent of the entire cost of a fibre optic network can be spent on the civil engineering work necessary to design, construct, and connect it.7 While certain regulatory initiatives had been taken to reduce these costs by, for example, promoting the more efficient use of existing infrastructure and mandating greater cooperation and information sharing between infrastructure owners conducting civil works,8 the costs associated with civil engineering as a proportion of the overall network deployment cost remains significant. The actual infrastructure itself is relatively cheap. As such, it makes obvious commercial sense for operators to install more fibre than is actually currently required at the time of build in its ducts and channels, in order to provide for future network development, resilience, and on-​sale opportunities of leased lines and dark fibre. (This of course is part of the reason for the bandwidth surplus noted above.) The term dark fibre has been defined in a variety of different ways over the years. Some have argued that it is any optical fibre that is not attached to transmission equipment at all. Others have suggested it is fibre that is not attached to transmission at only one end, so is awaiting additional work before it can be utilized. Certainly, there appears to be common consensus that it is optical fibre through which no light and thus no signal is being transmitted. Fibre through which light is being transmitted, and which is carrying a signal, is known as lit fibre. There is also something of a halfway house known as ‘dim fibre’, which is a term used in DWDM. DWDM supports as many as 160 wavelengths, as mentioned, each of which is a different frequency of light. Thus, when some wavelengths are left ‘dark’ and some are ‘lit’, the resulting fibre is ‘dim fibre’.

7   Proposal for a Regulation of the European Parliament and of the Council on measures to reduce the cost of deploying high-​speed electronic communications networks, COM(2013) 147 final—​2013/​0 080 (COD), Explanatory Memorandum, at 2. 8   See eg Directive 2014/​61/​EC of the European Parliament and of the Council of 15 May 2014 on measures to reduce the cost of deploying high-​speed electronic communications networks, OJ L 155/​1, 23 May 2014.

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11.2.4  Satellite capacity agreements Satellite capacity or transponder leasing agreements are increasingly becoming an important option in respect of both communications and broadcast capacity. These are important in circumstances where terrestrial arrangements offer no practical solution, where there are temporary surges in demand requirements, or as a back-​up or ‘gap filler’ method of service provision. In a global communications network, satellites can provide key links to the internet backbone and multiple fibre networks. The commercial value of satellite communications technology extends beyond traditional communications services, and satellites play a fundamental role in a wide range of services, including high-​speed internet and multimedia, direct-​to-​home high definition television, radio, GPS, maritime, defence and security, M2M, and those relating to the Internet of Things and private VSAT network solutions.9 One of the key areas of activity in the satellite communications sector is the practice of transponder leasing. Transponder leasing allows satellite operators to lease and allot segment capacity on their satellites to customers, either on a permanent or an occasional-​use basis. A transponder, basically a microwave relay circuit, on a satellite receives signals from earth stations, amplifies them, changes the frequency (from uplink to downlink frequency) and then relays the signals back to earth. The advance in data compression and multiplexing technology has allowed transponders to carry multiple types of voice, data, audio, and video transmissions on one transponder. By leasing capacity to numerous telecommunications operators, broadcasters, and corporate customers, satellite operators are able to generate significant revenue. Associated contractual arrangements include up-​l inking services and facility arrangements. The key providers of transponder leasing capacity in the satellite industry include Inmarsat, SES, Eutelsat, Intelsat, EchoStar, Telesat, MEASAT, and AsiaSat. As with all capacity providers, satellite operators view the ability to book and manage redundant capacity as an integral part of generating revenue. They are therefore willing to invest in developing systems that allow both themselves and their customers to choose their capacity flexibly to suit their requirements as and when they arise.

11.2.5  MVNO agreements A mobile virtual network operator (MVNO) is a telecommunications service provider that offers mobile telecommunications services to customers, but that

  See Section 16.2.1.

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typically has a limited mobile network or no mobile network itself and has not been assigned spectrum resources.10 Different types of MVNO models exist. These range from a pure ‘reseller model’, where the MVNO owns/​operates limited or no wireless network of its own and simply resells to its end-​users the service provided by the ‘host’ MNO, to ‘full MVNOs’ using their own network infrastructure and capability to handle much of the transmission and back office functionality. This can include, for example, ownership and activation of SIM cards and numbering, billing management, account authentication, ownership and management of the subscriber database, and control of customer service. Each type of MVNO model will, for obvious reasons, demand a specific type of capacity arrangement with the capacity provider or host MNO. The classic MVNO model is a business with a well-​k nown customer brand, such as Virgin or Tesco, leveraging its brand into mobile communications. A number of MVNOs have also positioned themselves to appeal to specific target customer groups, for example cost-​sensitive customers who do not require any value-​added service elements. Some have used the MVNO model as a way of expanding their product portfolio from a pure fixed telephony offering to also include mobile telephony.11 Others have adopted innovative business models by relying on advertising revenues. There are various attractions for commercial entities wishing to set up such ventures. The most obvious attraction is that MVNOs will not be required to invest in infrastructure assets (including spectrum) to enter the mobile service market. This lowers barriers to entry by reducing the capital expenditure required to enter the mobile marketplace and provides a potentially shorter route to profitability. The lowering of barriers to entry in this way promotes greater competition for mobile services, which is why MVNO access has been used in some countries as a regulatory remedy on national markets for mobile access and call origination services where a competitive failure has been identified. The downside of MVNO access, however, is that margins can be significantly more exposed when retail prices fall. Another possible disadvantage is that MVNO access, if competitively priced, could discourage new entrants from investing in mobile network infrastructure which can have a long-​term negative impact on (infrastructure-​based) competition. There are also benefits for the mobile network operator providing the services to the MVNO in terms of gaining additional usage of capacity on its network, thereby generating revenues that it would not otherwise generate. In this way, MVNOs provide the mobile network operator with an opportunity to increase economies of

10   Ofcom, ‘The International Communications Market Report 2016’, Glossary, 205 . 11   See Ofcom, ‘Strategic Review of Digital Communications’ Discussion Document, 16 July 2015, 74.

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scale in respect of its network utilization. They also provide MNOs with an added revenue stream. MVNOs may allow the mobile network operator to acquire traffic from market niches that would not otherwise be as effectively reached under its own branding strategy. However, there will clearly be a potential risk of loss of customers to the MVNO. There has been a lot of debate around the role that regulation needs to play in facilitating MVNOs. While MVNO access was initially applied as a regulatory remedy in some national markets in Europe where collective significant market power (SMP) was identified, a lighter regulatory approach has been followed in recent years as competition has developed in mobile service markets. In the UK, MVNO arrangements are not facilitated by regulation requiring mobile network operators to enter into an MVNO arrangement, but are left as a commercial matter to be negotiated between the mobile network operator and the potential MVNO. Further, an MVNO is not required to comply with any specific MVNO regulations in addition to the requirements set out in the General Conditions. The approach has been replicated in most other European jurisdictions. There are now a number of successful MVNO arrangements in place in the United Kingdom, with Virgin Mobile’s telecommunications supply agreement with BT (which acquired Everything Everywhere in January 2016) being the most notable, with three million UK subscribers.12 The number of MVNOs has increased over the last decade and, based on the most recent reliable information, there are around 1,000 such arrangements in place across the globe.13 With service providers increasingly offering bundled products to their customer base, the addition of mobile products to their portfolio will increase the attractiveness of MVNOs. The backbone of any MVNO arrangement is the ability of the MVNO to resell under its own branded service the airtime it has purchased from the mobile network operator. This ability to purchase wholesale extends beyond the basic purchase of minutes to SMS, MMS, GRPS and 3G/​HSDPA capacity as well. To conclude, for mobile network operators, there are a number of reasons for allowing MVNOs to use their networks. MVNOs offer an ability to lease excess capacity on the operator’s purchased spectrum, thereby facilitating a greater return on sunk network investment costs, with the responsibility for marketing and customer support often being dealt with by the MVNO. In this way, MVNOs provide the mobile network operator with an opportunity to generate increased economies of scale in respect of its network utilization. They also provide MNOs with an added revenue stream. MVNOs may also provide the mobile network operator

12  . 13  .

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with the ability to reach market niches that would not otherwise be reached under its own branding strategy.

11.3  K E Y CONTR AC T UA L ISSUE S 11.3.1 Introduction Although some types of capacity agreement, such as leased lines and IRUs, have in effect become commoditized, thus leaving little scope for negotiation of individual terms, there remain a number of key issues to bear in mind in every capacity agreement. As with any written contract, certain provisions will usually be included in a capacity agreement, in particular payment terms, limitations on and exclusions of liability, termination, confidentiality, and traditional boilerplate provisions. In addition, the following provisions will need particular attention in any bespoke capacity agreement.

11.3.2  Service level agreements As with any commercial contract, service level agreement (SLA) response times often have a bearing on the charges paid for the service. Clearly, one party’s commitment to provide services of a specified standard and within a specified period will cost a purchaser more than a promise to use reasonable endeavours to achieve those standards with a light service credit regime. In addition, many providers will argue that SLAs are non-​negotiable because they have to provide the same level of service to all their clients. This is fine, but the charges still may be negotiable. One particular issue under capacity agreements, however, is repair times. Does the offering provide for network redundancy to ensure resilience? Put another way, can traffic be switched instantly to a diverse path in the event that the primary traffic path fails? What is the guaranteed speed of restoration? This is particularly important for subsea capacity in that it will always take longer to send a ship to repair a cable breakage at sea than it will to repair a cable break on land. Equally, and depending on the fault causing the service outage or disruption, the speed of restoration on subsea cables may be faster if a party owns and staffs facilities such as cable landing stations or other access points itself, and so does not require consent to access such premises. This is also clearly the context behind the later discussion in relation to the options under the pre-​emption regime in relation to transponder capacity on satellites. Negotiations tend to focus around key definitions such as ‘availability’ and how planned and emergency maintenance is to be dealt with. It is also important to

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understand the balance between the margin a supplier may be making on providing the services and the potential impact on the customer if the services are not provided at all or suffer a quality degradation. Clearly resilience and diversity have roles to play here in appropriate circumstances. Many SLAs will be backed up by service credit regimes which will provide some limited redress if the contracted availability is not achieved without the customer having to claim and prove its loss. It is widely acknowledged that leased lines play a vital role in business communications in the UK and other markets, both at retail and wholesale levels. It is therefore important that the markets for these services operate effectively and competitively. As such, it is not surprising that Ofcom and other regulatory authorities have focused regulatory attention on these markets. Where an operator has had an SMP determination made against it,14 it may be subject to minimum service level requirements. This may mean that SLAs offered in a commercial context can be subject to the prior approval of the regulatory authority, typically in the form of an approved reference offer. Adherence to these SLAs is seen by regulators as critical to ensuring a functioning competitive environment, and regulatory authorities can apply various regulatory tools to ensure that access providers do not discriminate between their competitors and, for example, their downstream arm in terms of quality of service levels provided. This can even include the operational separation of the access provider’s network management from its downstream retail arm and, in extreme cases, their outright structural separation. In the UK, BT and Ofcom agreed in March 2017 to the implementation of stronger operational separation measures within the BT Group in the context of Ofcom’s strategic sector review.15 This includes the incorporation of Openreach, BT’s network management division, as a separate legal entity and the implementation of various other safeguards aimed at ensuring equivalency both in terms of network access and ongoing service levels. Dark fibre raises interesting SLA issues in that the apparatus attached to each end of the fibre is the user’s responsibility, but the connection may be the fibre owner’s (or a third party’s) responsibility. It is important that this is clearly addressed in any dark fibre agreement to ensure clarity of obligations. Further, there are a number of different product specifications for dark fibre at an International Telecommunication Union (ITU) level, each with different properties, depending on the type of fibre, its length, and its purpose.16 The capacity of

  See further consideration of SMP obligations in Chapter 4, at Section 4.6 and Chapter 8.   ; ; . 16   eg ITU-​T G.652 (11/​16) remains perhaps the most commonly deployed fibre. 14

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an optical fibre to accept transmission technology (such as WDM) depends upon its specifications. Thus, given the speed with which technology is developing, purchasers should be conscious of the risks of entering into any long-​term contract for dark fibre without being certain that the fibre is ‘future-​proofed’ and comfortable that its transmission properties are sufficiently clarified in the contract.

11.3.3 Term The ideal term of an agreement will vary depending on a number of factors. In relation to capacity agreements, particular factors to bear in mind include: Service Continuity: a longer term contract provides more security than a shorter term, in that ongoing costs are known and the purchaser will have the comfort of knowing that it will not have to find replacement capacity on short notice; Cost: a longer term can usually be purchased more cheaply (relatively speaking) than a short term. If the capacity being purchased is a fundamental part of the purchaser’s service offering, the purchaser may want a longer term contract to ensure continued supply; Scalability: if an operator is expecting to expand quickly, it will want an option to increase capacity quickly and simply. In which case, it may be sensible to seek to tie all related capacity agreements to the same termination/​expiry date for ease of internal administration; Risk Aversion: short term contracts lower the barriers to exit in the event of a market downturn. During the dotcom boom, operators entered into very long-​term contracts, but then struggled to exit those contracts when the bubble burst. This is the counterpoint to the issue of contractual security noted above; Competition: in a very competitive market, prices can be driven down as innovation and technology develops. Short term contracts enable purchasers to take advantage of new service offerings such as enhanced speed or lower latency. Notwithstanding this, purchasers may try to ‘future proof’ a capacity agreement by establishing a periodic price review mechanism. The effectiveness of such a mechanism will ultimately depend on the bargaining/​purchasing power of the purchaser, particularly if this price review mechanism requires the vendor to approve either the instigation of the periodic review exercise itself or the revised price (or both).

11.3.4 Access As in the case of simple leased lines, the majority of dark fibre agreements are now commoditized standard terms. Key issues to bear in mind, however, remain

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the same as when early dark fibre agreements were negotiated. Given that the purchasing operator is responsible for attaching electronic communications equipment and lasers to light the fibre at each end (unless the vendor is providing a managed service), the purchaser will want to ensure that it has appropriate and sufficient access (and, depending on the type of arrangement, location or co-​ location) rights at each end. This will require the detailed description of network demarcation points in the agreement. The seller will usually want as long a term as possible, but with the option of early termination should it decide to alter the physical architecture of its network.

11.3.5  Relocation of apparatus Even with the protection of Code Powers (where applicable), there is always a risk that an operator will have to relocate its apparatus at some point during the term of a capacity agreement. The seller will therefore want to address this possibility in the capacity agreement. Equally, the purchaser will want to ensure that if any relocation is required, its access to the capacity and its costs and quality of service will remain unaffected through a temporary (or permanent) re-​routing of traffic.

11.3.6 Testing Capacity agreements will often include provision for testing prior to handover. In IRU agreements, there may or may not be testing procedures for the entire cable system. An agreement should certainly contain testing and acceptance provisions for the IRU circuits themselves.

11.3.7  Satellite capacity contractual issues Transponder leasing arrangements tend to be on standard terms offered by the satellite operator and scope for any significant negotiation is often limited. The contracts contain the general terms that you would expect to find in B2B commercial arrangements. However, certain key terms require more attention to deal with the nature of satellite capacity. Transmission plan: The transponder leasing agreement will ordinarily contain a detailed transmission plan setting out a detailed description of the usage and technical parameters of the signals to be transmitted to and from the satellite (up and down links). Compliance with  laws: Although an obligation to comply with all applicable laws is common in general commercial arrangements, transponder leasing

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arrangements tend to focus particular attention on the laws that the satellite operator and customer must comply with. The satellite operator will generally be required to ensure that all approvals, consents, and licences are obtained in respect of the leasing of the satellite capacity. On the other hand, the customer will often be burdened with the requirement to ensure that it complies with all applicable laws in force in the country of transmission of the up-​l ink signal and, more onerously, in the countries where the footprint from the satellite is able to be received (usually referred to as ‘landing rights’). The Audiovisual Media Services Directive (previously the Television Without Frontiers Directive) can be highly relevant here to lightening some of the regulatory burdens in relation to TV broadcasts and on-​demand services, but any detailed discussion is beyond the scope of this chapter.17 Force majeure and exclusions of liability: The relationship between force majeure and unavailability is particularly important in transponder leasing agreements. With the risks of adverse atmospheric conditions, such as solar flares and sun outages, and also issues such as micrometeoroid impacts and unavoidable conjunction with space debris, being highly relevant, the satellite operator will be keen to ensure that the definition of force majeure and exclusions of liability provide appropriate protection for the satellite operator. It is important that the customer understands the implication of these and what arrangements are available to mitigate the consequences. Rights of pre-​emption and restorability: As the ultimate aim of any satellite operator is to ensure that all its capacity is used, there will be scenarios where capacity cannot be offered to those requesting it, whether due to excess capacity requirements on the allotted transponder or by the downtime of alternative transponders. The satellite operator therefore has to prioritize allocation of capacity and, where designated capacity is not available, offer alternative capacity. The relevant terms used to describe the prioritization are whether there is a right of pre-​emption over the capacity and whether the capacity is restorable: • where there is a right of pre-​emption over a customer’s satellite capacity, the satellite operator can use the allocated capacity to restore other customers’ services; • where there is no right of pre-​emption then the satellite operator cannot use the allotted capacity for other customers; • where the satellite capacity is deemed to be fully restorable, then should the customer’s allocated transponder fail, the customer will be provided with an

  See further Chapter 14, at Section 14.2.

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alternative transponder on the same satellite, and if the satellite fails, then the customer will be provided with capacity on an alternative satellite to the extent reasonably practicable; and • where the satellite capacity is not restorable, then in the event the transponder or satellite fails, the customer will not be provided with alternative capacity. The customer’s needs and what it is willing to pay, together with the strength of the customer’s negotiating position, will ultimately dictate what priority it has over other customers. The following scenarios illustrate the hierarchy of customer rights: 1. the satellite capacity is non pre-​emptible and fully restorable; 2. the satellite capacity is non pre-​emptible and non-​restorable; and 3. the satellite capacity is pre-​emptible and non-​restorable. It is very important to look carefully at how these terms are used in different transponder leases, including whether pre-​emption rights are in favour of the satellite operator or the customer. Earth stations: It will be usual for satellite operators to require its customers to ensure that the earth stations used for transmitting the signals to the satellites are licensed and meet certain requirements. The customer will generally take the risks arising from non-​compliance with these requirements. Right to re-​sell: The extent to which the customer under a transponder leasing arrangement may resell any allotted capacity, if at all, is clearly a key issue and should be stated. Fixed/​occasional-​use capacity: Historically, satellite capacity tended to be leased on a permanent basis. However, the requirement for the occasional-​use of satellite capacity has become increasingly important in the satellite capacity sector. In respect of broadcasting, the transmission of live broadcasts away from the studio (eg to Anfield or the Millennium Stadium) has contributed to an increase in the number of occasional-​use satellite capacity arrangements. Rights of cancellation: The customer’s right to cancel any allotted capacity will ultimately depend on the negotiated position. It is unusual for a customer to be able to terminate allotted capacity once it has entered into a long-​term supply arrangement without paying early termination charges. In respect of occasional-​use capacity, there are general rights to withdraw capacity on agreed notice provided that a minimum commitment is achieved over the term of the agreement.

11.3.8  MVNO contractual issues The contractual arrangements in place with the MVNO and the mobile network operator will vary significantly depending on the type of MVNO model and the

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nature of the network. The telecommunications regulatory regime in the particular market in which the arrangement is concluded may also require the insertion of certain terms. Certain key provisions contained within the MVNO arrangements include the following: Pricing: The MVNO will be able to work independently of the host mobile network operator and can set its own pricing structures, though clearly it will need to pay the charges it has agreed to pay to the mobile network operator. If the MVNO access is mandated under the national telecommunications regime, then the host operator may be subject to price control obligations, including those that require the recovery of incurred costs only. If this is not the case, the pricing practices of the host MNO may need to be compliant with the principles of ex post competition law, including those relating to discriminatory pricing  for example. Branding rights: This is a key issue given that a customer may be leveraging a well-​ known consumer brand that is a fundamental element of its business plan. Many Tesco Mobile subscribers may not know that the underlying network used is the O2 network. Term/​exclusivity/​minimum commitment: As one would expect, these issues are at the heart of the commercial deal. The MVNO will need to ensure that it has the ability to move to a different mobile operator or at least use this possibility as leverage when terms are renegotiated and extended. Forecasting: MVNO agreements can include traffic forecasting provisions requiring the MVNO to furnish the host MNO with reasonably accurate traffic forecasts. Traffic forecasting allows the MNO to take the measures necessary to ensure the availability of sufficient capacity for network functionality in the future. The MVNO agreement may also require accurate traffic forecasting, and the MVNO may be subject to financial penalty if its forecast is out by more than a certain fixed percentage of the actual traffic handled. Promoted services: Contractual provisions will apply in respect of the services that the MVNO is able to provide and promote. In the field of mobile communications, new services are regularly developed as a way of creating extra revenues. MVNOs will require flexibility to procure and offer these services to their own customers. However, the mobile network operator will be keen to ensure that the MVNO does not profit from these opportunities to the detriment of the mobile network operator’s customer base. Customer services and billing: The MVNO agreement will document who will be responsible for customer services and billing. If the MVNO has such responsibility, the contractual arrangements will need to document how information is passed between the systems and how customer service issues are ticketed and resolved.

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Handset procurement: The arrangements in place dealing with the procurement of handsets will ultimately vary depending on the nature of the relationship with the mobile network operator. The MVNO may have independent arrangements in place with the handset manufacturers or may be able to benefit from the mobile network operator’s bulk purchasing arrangements.

11.4  R E GUL ATORY ISSUE S Today’s electronic communications market is a long way from the market of the 1990s, when specific individual licences were required by operators offering services either in the UK or in undersea capacity internationally. In jurisdictions outside the UK, of course, different regulatory regimes will apply, although there is now significant harmonization throughout the EU Member States as a result of the EU communications regulatory regimes. The focus of this chapter, however, is on the UK capacity market. As discussed further in Chapter 6, under the Communications Act 2003, General Conditions apply to anyone who provides an electronic communications service18 or an electronic communications network19 in the UK. A capacity agreement, depending on the type of capacity being purchased and the other provisions of the contract, may be a contract for provision of an electronic communications service or an electronic communications network (or both). In either case, both the buyer and the seller of the capacity will have to ensure that they comply with the relevant General Conditions that apply to them, and these will vary on a case-​by-​case basis, because differing conditions apply to operators, depending on what services or networks they are providing and whom they are providing to. Many capacity agreements are also access services and, as such, may be regulated under the regime established by the Access and Interconnection Directive.20 Access agreements are addressed further in Chapter 8 but in brief, if an operator has been found by Ofcom, or an equivalent regulatory authority  in another EU Member State, to have significant market power21 in a relevant market, that regulatory authority may impose conditions on those operators, in particular in relation to ensuring that charges are on cost-​orientated terms and are not discriminatory.

  Defined in the Communications Act 2003 (as amended), s 32(1).   Defined in the Communications Act 2003 (as amended), s 32(2). 20   Directive 2002/​19/​EC on access to, and interconnection of, electronic communications networks and associated facilities, OJ L 108/​7, 24 April 2002 as amended in 2009. 21   Addressed in the Communications Act 2003, s 78. 18

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It should be noted that regulated service markets are subject to periodic review. The outcome may lead to either of the following: (i) a revised market definition may mean that certain services formerly subject to inclusion (and regulation) within a specific market are no longer so subject or vice versa; and (ii) the regulatory obligations that are imposed in respect of a regulated market during one review period can be amended or withdrawn for the next review period and/​or new regulatory obligations can be imposed. These periodic changes can have an important impact on commercial arrangements that are concluded in respect of regulated services. If, for example, charge controls are removed as an ex ante market remedy, the access provider will likely have some more commercial flexibility in terms of the prices it offers for its services (although it may be subject to other ex ante regulatory measures, including a margin squeeze test, and the application of ex post competition law). The example of the business connectivity market in the UK provides a good example of how ex ante regulation can evolve over time. In its market review of 2004, Ofcom found that Kingston Communications had SMP in the Hull area and BT had SMP in the rest of the UK for the retail market for low bandwidth ‘traditional interface’ (TI) markets (such as analogue circuits or digital circuits using SDH and PDH transmission), the wholesale markets for low and high bandwidth TI terminating segments, and the ‘alternative interface’ (AI) market (eg Ethernet) for terminating segments at all bandwidths. BT was also found to have SMP in the UK market for trunk segments. As a result of these findings, a number of obligations were imposed on BT and Kingston, including obligations to supply, requirements not to discriminate unduly between customers, requirements to publish prices, terms and conditions, and in some cases, price controls. In a further market review in 2008,22 Ofcom found that progress towards more effective competition had varied considerably by market. It proposed that: • outside the Hull area, a separate market now existed for wholesale AI services at bandwidths over 1Gbps and that this market was effectively competitive, so no SMP regulation was required; • a new geographical market in high bandwidth wholesale terminating segments existed in Central and East London and that again it was competitive and no SMP regulation was required; and • the market for low bandwidth TI retail leased lines in Hull was now competitive and so could be deregulated.

22   Ofcom, ‘Business connectivity market review’, 8 December 2008  .

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In 2013, Ofcom identified a set of markets at retail and wholesale level for continuing ex ante regulation.23 In summary, these markets were the following: (i) the retail market for very low bandwidth leased lines in the UK, excluding the Hull area; (ii) the wholesale market for TI regional trunk segments in the UK; (iii) the retail market for low bandwidth TI leased lines in the Hull area; and (iv) the retail market for low bandwidth alternative interface (AI) leased lines in the Hull area. As a result of these findings, a number of obligations were imposed on BT and Kingston, including obligations to supply (grant access), requirements not to discriminate unduly between customers, requirements to publish prices, terms and conditions, and in some cases, price controls. In 2016, Ofcom once again identified a set of retail and wholesale business connectivity markets for continued ex ante regulation.24 This included both terminating and trunk segments of leased lines. On the basis of the technologies used, Ofcom differentiated between contemporary interfaces (or CI forming part of a single product market for contemporary interface symmetric broadband origination (or CISBO) services) and TI. TI leased lines include services which use legacy analogue and Time Division Multiplexing (TDM)-​based interfaces. CI leased lines, on the other hand, include services which use Ethernet and WDM. Specifically with regard to the CISBO product market, Ofcom defined a number of geographic markets including:  the Central London Area, the London Periphery, the Rest of the UK, and Hull. Ofcom’s 2016 market review found that the competitive landscape had changed since 2013 sufficiently to justify the deregulation of a number of business connectivity markets. Ofcom found BT to have SMP in the CISBO market for the London Periphery and the Rest of the UK, and introduced a new passive ex ante remedy on BT to supply access to dark fibre. According to Ofcom, the objective of this remedy was to allow alternative providers to assemble a wider range of inputs in order to differentiate their leased lines services offer and to compete more effectively with BT. BT appealed Ofcom’s 2016 market review decisions concerning the market definition and the imposition of the dark fibre remedy. The Competition Appeal Tribunal (CAT) ruled that Ofcom made some specific errors in relation to the market definition.25 On 20 November 2017, the CAT ordered Ofcom to revoke its

  Ofcom, ‘Business connectivity market review’, 28 March 2013.   Ofcom, ‘Business connectivity market review’, 28 April 2016 . 25   British Telecommunications v Office of Communications (BCMR), 1260/​3/​3/​16  . 23 24

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SMP findings and regulatory conditions (including the dark fibre remedy) for all CISBO services. On 23 November 2017, Ofcom removed all regulation in the CISBO markets, including the dark fibre remedy.26 It then made temporary market identifications and market power determinations, and imposed temporary SMP conditions and directions on BT.27 Ofcom consulted on whether it would be appropriate to add a restricted form of dark fibre access to this package of temporary measures. On 12 April 2018, Ofcom published a Statement setting out its decision not to introduce this temporary remedy.28 As noted above there has been a lot of debate around the part regulation needs to play in facilitating MVNOs. However, the light regulatory touch currently applied seems to have been the right approach at least so far. In the UK, an MVNO is not required to comply with any specific MVNO regulations in addition to the general requirements set out in the General Conditions. As noted earlier, however, some countries have chosen in the past to impose regulatory requirements on MNOs aimed at facilitating the access MVNOs require. There are significant regulatory issues and considerations in relation to the provision of satellite services, including under the ITU Radio Regulations. 29 These are mainly an issue for the satellite operator but if a customer under a transponder lease and associated arrangements is providing its own uplink service it will need to comply with the relevant requirements set out in the General Conditions and Wireless Telegraphy Act 2006 and regulations issued under it. Consideration will also need to be given to any regulation relevant to the landing of the signal in relevant jurisdictions and associated licensing requirements for earth stations. In addition, of course, operators are also bound by the rules of general competition law, in particular Articles 101 and 102 of the Treaty on the Functioning of the European Union.30

26   Ofcom, ‘Business Connectivity Market Review 2016’, ‘Revocation of certain measures imposed in the business connectivity markets’, 23 November 2017 . 27   Ofcom, Business Connectivity Markets, ‘Temporary SMP conditions in relation to business connectivity services’, 23 November 2017 (BCMR Temporary Conditions Statement) . 28   Ofcom, ‘Statement on adding dark fibre to the temporary remedies for business connectivity markets’, 12 April 2018 . 29   See further Chapter 16, at Section 16.3.2. 30   See further Chapter 10.

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11.5  EMERG ING  TR END S It is possible to identify a number of trends from considering the experience of the UK market in relation to capacity agreements. The development of internet-​ based ‘over-​ t he-​ top’ (OTT) communications services has been a particularly notable trend in recent years. While these started out as voice over internet protocol (VoIP) services only, the provision of unified communications services (including voice, video, and messaging) over the internet is now a fast-​g rowing market. This has led to the emergence of innovative types of capacity agreements, particularly where such OTT service allows for interconnectivity with the public switched telephone network or PSTN. Where such interconnectivity is provided, innovative aggregation and resale arrangements are required at the wholesale level, which take adequate account of the underlying regulatory environment. This task has been made difficult in the past by the ambiguity that exists in respect of the status of OTT services for regulatory purposes. It is expected that the review of the EU Regulatory Framework ongoing at the time of writing will facilitate a greater degree of clarity in this respect. The growth of machine-​to-​machine communications and the trend towards the ‘Internet of Things’ has had, and will continue to have, an impact on the volume and types of traffic across networks. This in turn will impact the attitude of regulators to communications network operators, and the service levels and liabilities that customers are likely to seek as loss of communications has an ever-​g reater impact on the bottom line of many businesses and even on the physical safety of the products and services they offer. For many Internet of Things use cases (autonomous vehicles being a prime example), a data round trip of 50 to 100 milliseconds may preclude the use of centralized communications networks. An instruction received too late could be fatal and, whilst travelling at speed, milliseconds matter. This means small cells and base stations are likely to have computing and processing capabilities co-​located to carry out some actions at the edge of the network. This increase in processing at the edge should reduce congestion elsewhere and therefore speed up data rates overall but will increase the complexity of contractual, leasing, and licensing arrangements affecting any network. Whilst 5G is anticipated to provide better and faster data connectivity for mobile phone users to support increased data usage, 5G is also aimed squarely at supporting the M2M that underpin the Internet of Things. The three principal characteristics being targeted for 5G are: (i) a minimum downlink of 1 Gbps, (ii) latency

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under 1 millisecond, and (iii) improved energy efficiency, although it remains unclear at the time of writing how exactly this technology will be deployed on the ground.31 Operators today widely acknowledge the cost and difficulties inherent in constructing competing infrastructures. This is particularly true in the mobile market, where 3G and 4G networks (as a result of the higher frequency range and the requirement to transmit ever growing amounts of information) require smaller cells, more base stations and additional macrocells, microcells, and picocells than the 2G network. This trend will only continue with the development of 5G technology. Heavier network deployment requirements give rise to a corresponding increase in build-​out and maintenance costs. As a result, mobile network operators have been entering into infrastructure sharing agreements for a number of years. These agreements, which may take a variety of forms, from creating a joint venture vehicle to build, run, and maintain the infrastructure, to the simple sharing of space, masts or buildings, allow network operators to make vital savings in terms of capital and operational expenditure in an increasingly competitive environment. Care has been taken, however, to ensure that such arrangements do not have an anti-​c ompetitive effect, particularly in urban areas where the deployment of network infrastructure is less costly than in rural areas. It is interesting to note that the existence of such arrangements has also been an important factor in the analysis of mobile market consolidation, including in the UK. Lastly, it is clear that one of the major themes emerging in recent years has been the continued drive at EU level for further deregulation across Europe. The number of markets identified as susceptible to ex ante regulation in the European Commission’s Recommendation on Relevant Markets is currently four,32 although Member States can and do regulate more markets where market failure (SMP) is identified. The slow but steady roll-​back of ex ante regulation in this manner means that there are fewer markets where capacity agreements are concluded under regulated terms and conditions, and correspondingly more markets where operators have the commercial freedom (subject to ex post competition law requirements) to negotiate terms and conditions.

31   The authors would like to thank Barry Jennings, Legal Director Bird & Bird, for his assistance with updating this section of the chapter. 32   Commission Recommendation of 9 October 2014 on relevant product and service markets within the electronic communications sector susceptible to ex ante regulation in accordance with Directive 2002/​21/​EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services, (2014/​710/​E U), Annex, OJ L 295/​79, 11 October 2014.

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12 COR P OR ATE AND MULTINATIONAL ENTER PR ISE TELECOMMUNIC ATIONS TR ANS AC TIONS Bostjan Makarovic

1 2.1 The Need for a Special Type of Service  12.2 Licensing and Authorization for Corporate and MNE Communications  12.3 Wholesale Access Regulation  12.4 Numbering Resources  12.5 Contractual Aspects 

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This chapter explores specific legal aspects of telecommunications solutions tailored to multinational enterprises (MNEs) and other large corporations. Although many service features addressed in this chapter could to a greater or lesser extent apply to smaller business customers and even certain residential end-​users, there are two key reasons for special consideration in this book: the MNEs’ scale and sophistication of operational needs and their cross-​border spread. These two features, together or separately, affect the technological and organizational service solutions, and the associated regulatory and commercial law implications. Outsourcing to specialized communications providers, offering cloud-​based solutions, and meeting all voice, video, and data connectivity needs increasingly by means of high-​speed IP connectivity creates specific challenges for service authorization, market regulation, and the drafting of contracts.

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12 .1  THE NEED F OR A SPE C I A L T Y PE OF SERV IC E From the point of view of European electronic communications law, most MNEs and the entities comprising them would legally qualify as end-​users.1 This is so because they are purchasing telecommunications services predominantly for their own use and not for resale. However, several aspects of their service requirements make them different from other end-​users.

12.1.1  Cross-​border  nature For several reasons, most notably historic public monopolies and state sovereignty in relation to frequency management, telecommunications markets are still largely regulated at the national level. Despite harmonization of regulation in various areas, including based on the WTO and the EU rules, communications services are still primarily subject to national legislation and regulatory measures. However, MNEs require services that cut across national borders. Even a basic requirement such as ensuring end-​to-​end connectivity with a guaranteed quality of service (QoS) between their global branches could prove to be a challenge because it is likely to involve licensed operators in at least two different countries plus international links such as via submarine cables. Following liberalization in telecommunications services and later networks, opportunities arose for operators from one country to get licensed in liberalized overseas markets in order to provide corporate services internationally. That typically meant that operators from MNEs’ home countries could follow their corporate customers to their host countries. For example, AT&T, the US incumbent operator, could establish in Europe to serve US multinationals. This would enable MNEs to receive comparable service in different jurisdictions, add guarantees of international end-​to-​end connectivity, and potentially save overall costs and administrative burden. One should keep in mind though that such arrangements mostly do not aim to duplicate network infrastructure in the host country, and that the operator will most likely require access to parts of the host country incumbent infrastructure. However, this would still give an MNE the advantages of one-​stop shopping and access to technical solutions required to provide uniform service levels at a global level. Although these advantages offered by global operators have lately been challenged by IP-​based unified-​and cloud communications described below,

1   According to Article 2(n) of the EU Framework Directive, ‘end-​u ser’ means a user not providing public communications networks or publicly available electronic communications services.

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operators are still likely to be in better position than other MNEs when it comes to leasing capacity and purchasing other services internationally. This may be due to their expertise, economies of scale and scope, or licensing requirements that may in some countries prohibit corporate self-​provision of services.2

12.1.2 Outsourcing The above elements may put international operators in a unique market position towards MNEs. A natural additional step for firms such as BT Global Services wanting to offer MNEs a one-​stop global communications solution would therefore be the bundling of connectivity with the associated terminal equipment and IT together with the necessary support and maintenance services. Such full outsourcing service is expected to offer greater global efficiency. While traditional monopoly bundles of terminal equipment such as computers and telecommunications services that were challenged in historic cases3 might be obsolete, the complexity of the ICT used by the MNEs and the associated need for the interworking of software, hardware, and connectivity would be expected to put providers of full service solutions in a beneficial market position. This may be the case with anything from video-​conferencing solutions to operating international product call centres. However, outsourcing MNEs’ communications solutions to the provider of network connectivity is no longer the only option, and there may be other companies able to provide a more efficient and cheaper yet still global outsourced service. The first reason for that is that universal internet (IP) connectivity makes it increasingly difficult to bundle any additional equipment or service with it. An additional obstacle for that may be emerging ‘net neutrality’ laws, although the latter might be more lenient regarding specialized corporate services such as virtual private networks (VPN).4 The second reason is the diminishing role of specialized on-​premises equipment such as public branch exchanges (PBX), which may be increasingly substituted by software running on standard end-​user computer equipment or in the cloud.5 Modern age telecommunications outsourcers can therefore offer their

2   Whereas some countries such as Germany only subject to licences or authorization ‘public’ telecommunications services ie those services that are offered to the public (eg Germany, Telekommunikationsgesetz (TKG) § 6), others such as the UK regulate the provision of any (tele)communications services (see s 32 of the Communications Act 2003). 3  eg Re Cordless telephones in Germany [1985] 2 CMLR 397 and the Computer Inquiry cases, in Chapter 5, at 5.2.5.1. 4  See Art 3(5) of the Regulation (EU) 2015/​2120 of the European Parliament and of the Council of 25 November 2015 laying down measures concerning open internet access and amending Directive 2002/​22/​ EC on universal service and users’ rights relating to electronic communications networks and services and Regulation (EU) No 531/​2012 on roaming on public mobile communications networks within the Union. 5   See ‘Telecomulonimbus: cloudification will mean upheaval in telecoms’, The Economist, 12 April 2017.

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solutions over-​t he-​top (OTT), utilizing MNEs’ internet connectivity provided by a traditional operator or ISP to enable access to the outsourcers’ cloud platform, a model that we discuss below. Such an approach typically requires little or no presence at the MNEs’ premises and often enables new innovative tech firms to compete with traditional telecommunications companies.

12.1.3  System integration In their pursuit of efficiency, MNEs not only require reliable and diverse communications services but also need these services to be integrated, to the greatest extent possible, with other corporate IT systems and processes. For example, a customer order received via a website or a call centre needs to be communicated both to the CRM system and the system managing warehouse supplies, whereby the actual delivery of the goods or services to the customer is managed by means of sending messages to staff, such as a driver or a cleaner, and the receiving customer. This requires the integration of communications facilities, which might be based on the latest technology, with legacy IT systems or even non-​automated processes. On the other hand, system integration increasingly includes machine-​to-​machine (M2M) communications in an Internet of Things (IoT) ecosystem,6 comprising items from manufacturing robots or transportation devices, to a multitude of sensors at various locations and in various devices. System integration has traditionally been a domain of IT. However, the migration of all communications to IP enables legacy telecoms channels to be integrated with the rest of the company’s IT to an extent never seen before. Companies’ IT systems can be seamlessly merged with their staff core mobile phone features such as making calls or sending SMS, or their PSTN call centre operations. System integration can involve the interworking of various traditional and new means of communications, from telephony to Slack-​style7 app-​based online collaboration tools. Such ‘unified communications’ might be an area where players from the telecommunications world are still likely to possess some competitive advantage.

12.1.4  Unified communications, cloud and CaaS Unified communications8 refer to the integration of communication tools like IP telephony, video-​conferencing, instant messaging, corporate call centre features,

  See eg ‘Report Enabling the Internet of Things’, BoR (16) 39, 12 February 2016.  . 8  See eg . w 6 7

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or email, with a view to more efficient collaborative communications. Such communications may now all be accessible to the end-​users via specialized software running on company computers, a website, or ‘app’ on a mobile or tablet device. They can encompass both internal MNE communication and the company’s communications with the outside world, such as via a call centre. As well as a unified front-​end experience, the real change in the industry for corporate service provision has been taking place in the way the services are provided. Whereas unified communications can be provided via the MNE’s own servers or localized data centres, a further trend has been to move such services to cloud computing architectures. The concept of CaaS (communications as a service) resembles other cloud solutions where previously localized, bricks-​a nd-​mortar IT solutions are provided ‘as a service’ (aaS). From making simple PSTN calls or sending SMS messages, to complex collaborative environments, telecommunications can now all be provided over the internet with a combination of web browsers and software hosted online (software as a service—​SaaS). However, MNEs are likely to require more complex solutions that ensure the required availability, security, and capacity, using service level guarantees like those known in traditional corporate IT and telecoms outsourcing agreements. Accordingly, the solutions for MNEs might go beyond SaaS, combining OTT communications solutions with elements of traditional equipment and support outsourcing. CaaS may be provided via an ‘infrastructure as a service’ (IaaS) model, whereby the service provider hosts hardware, software, servers, storage and other infrastructure components on behalf of the MNE, hosts its applications, and handles tasks such as system maintenance, backup, and resiliency planning.9 Cloud solutions might further involve a full platform (PaaS) for application hosting, development, testing, and deployment, whereby communications are becoming increasingly tailored to the end-​user company.

12.1.5  Mobile services While fixed corporate communications are now able to largely bypass traditional PSTN networks, providing global mobile services for MNEs is still a challenge due to nationally awarded radio frequency licences. The ability to resell mobile services or establish virtual mobile network operators (MVNOs) plus cross-​ border mergers of mobile operators have had moderate effect, and the abolition of roaming charges across the EU as of 15 June 2017 still relies on ‘normal residence’, continuing to confine end-​user mobile access agreements to individual Member

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States.10 Still, mobile voice and messaging apps, better affordability of mobile data and ubiquitous WiFi, lately coupled with the ability of employees of large companies being able to use their own mobile terminal equipment (ie ‘Bring-​Your-​ Own-​Device’), promise to move a great deal of corporate mobile communications to the OTT app or CaaS level, increasingly bypassing mobile operators’ own voice and SMS services.

12 . 2  L IC ENSING A ND AU THOR IZ ATION F OR COR P OR ATE A ND MNE COMMUNIC ATIONS 12.2.1  Cross-​border authorization Whereas an MNE’s internal and external communications services inevitably cross national borders, licensing and authorization for such services will still be a matter for national laws in every country where the MNE operates. This is likely to require the providers of such services to obtain licence or authorization in several countries. Despite WTO rules on trade in telecommunications services, individual countries are still permitted to operate their own domestic licensing schemes for communications services subject to their jurisdiction. However, individual WTO members have committed to general permission and exceptions in relation to the following modes of supply: cross-​border supply, consumption abroad, commercial presence, and presence of natural persons in the host country.11 All of the above modes may be relevant in relation to the services provided to MNEs. An MNE might be using a CaaS solution hosted in its home country or a third country. The same service might need to remain available via a broadband connection, often via a virtual private network (VPN), to its employees travelling overseas. Traditional outsourcing and OTT-​solutions for MNEs alike might require installation and maintenance of hardware from terminal equipment to servers outside the country of the provider’s establishment. In each of these cases, however, the commitments of each individual WTO member will need to be considered in terms of the limits of their direct applicability under each country’s domestic laws.12

10   See Arts 3 and 4 of the Commission Implementing Regulation (EU) 2016/​2286 of 15 December 2016 laying down detailed rules on the application of fair use policy and on the methodology for assessing the sustainability of the abolition of retail roaming surcharges and on the application to be submitted by a roaming provider for the purposes of that assessment. 11   See further Chapter 16, at Section 16.4.1. 12   See eg Case 21/​72, International Fruit Company NV and others v  Produktschap voor Groenten en Fruit [1972] ECR 1219, para 27.

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Within the EU, the system of general authorizations in individual Member States does not provide for a reliable ‘passport’ when the same entity wants to offer electronic communications services outside the Member State where it is subject to general authorization.13 Obtaining such an authorization would in most Member States mean notifying the relevant Member State’s NRA.14 Despite the general EU Treaty principle of free movement of services, in UPC v NMHH15 the ECJ ruled that Member States are not precluded from requiring undertakings which supply electronic communications services in their territory to register those services with the same Member State’s NRA, regardless of their general authorization based on registration in another Member State. The ECJ, however, also ruled that such providers cannot be required to establish in the Member State a branch or a legal entity separate from that located in the Member State from where they provide the service, which means that on-​site work at the relevant MNE premises may always be provided by travelling personnel or subcontractors.16 One should note, however, that such limitations to free movement of service would not apply to those types of telecoms-​related outsourced services that do not qualify as electronic communications ie that do not ‘wholly or mainly’ consist in the ‘conveyance of signals on electronic communications networks’.17 It is therefore important to consider, if and to what extent do modern services for MNEs fall under traditional definitions of regulated communications services.

12.2.2  Voice and video communications Where services provided to MNEs correspond to applicable legal definitions of regulated communications or telephony services in the relevant jurisdiction, they may be subject to licensing or notification with the relevant national telecommunications regulatory authority, plus possibly other requirements such as the provision of emergency calls or lawful interception.18 However, the nature of modern corporate services might not always provide for a straightforward answer as to the service status and applicable obligations of the provider.

  See further Chapters 4 and 6.   Art 3(2) of the amended Authorisation Directive. The UK does not require notification unless a certain services revenue threshold has been reached according to Ofcom’s Tariff Tables: Administrative Charges for the Networks and Services Sector. A one-​stop shop system whereby BEREC forwards the notifications to individual NRAs concerned is currently proposed under Art 12(3) of the Proposal for a Directive of the European Parliament and of the Council establishing the European Electronic Communications Code, COM(2016) 590 final, 14 September 2016. 15   Case C‑475/​12, UPC DTH Sàrl v Nemzeti Média-​és Hírközlési Hatóság Elnökhelyettese, Judgment of the Court (Second Chamber), 30 April 2014. 16 17  Ibid.   See Art 2 of the amended EU Framework Directive. 18   See eg amended Authorisation Directive, Arts 3 and 6, and the Annex. 13 14

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Where voice and/​or video services comprise an OTT communications platform without the provider’s responsibility for the conveyance of signals, such services would not normally be considered electronic communications services.19 For example, a CaaS solution hosted in the cloud and accessible via the web might provide voice and video conferencing plus email by wholly relying on the MNE’s open internet access at one or more of its locations. Under this scenario, the MNE is responsible for contracting for the underlying conveyance service, while the CaaS are provided OTT. However, if the same solution also encompassed the offering of calls to public telephone (E.164) numbers, this might, according to BEREC, constitute its provider’s responsibility for the conveyance of signals,20 an approach similar to the US concept to ‘interconnected’ VoIP services.21 The proposal for the European Electronic Communications Code further strengthens the distinction based on E.164 numbering, using ‘number-​based’ and ‘number-​independent’ as a regulatory distinction criteria for the two types of newly defined interpersonal communications services.22 Regulatory approaches are less often focused on video transmission, which means that the regulation of video calls is likely to follow the regulation of voice as its inevitable component.23 The distinction based on PSTN connectivity might be possible to implement in regulatory practice and might seem like an acceptable compromise between traditionally regulated and unregulated activities, but offers limited guidance in an IP-​dominated environment: E.164 telephone numbers are becoming no more than additional identifiers of end-​users otherwise identifiable via their IP numbers. Moreover, applications, from consumer apps to complex corporate services, might primarily be using their own identifiers, such as user names or email addresses. Overemphasis on E.164 numbers also risks capturing services that lack a significant conveyance component, and are primarily online equivalents of traditional offline environments, such as video-​conference rooms or online multimodal corporate collaborative tools. In these cases, contractual responsibility for conveyance on a public network would provide for a more relevant regulatory boundary.24

20   BEREC Report on OTT Services, January 2016, at 16.  Ibid.   See Chapter 5, at 5.2.5.4. 22   Art 2(6) and (7) of the Proposal for a Directive of the European Parliament and of the Council establishing the European Electronic Communications Code, COM(2016) 590 final, 14 September 2016. 23   Chilean regulator SUBTEL, eg, lists video as one of the possible components of IP telephony. See . 24   According to Swiss regulator BAKOM, ‘a telecommunications service provider is  . . .  a natural or legal person who itself transmits or arranges to transmit information using telecommunications for third parties and assumes responsibility for the provision of the promised service in respect of these third parties within the framework of a contractual relationship under private law.’ Guide to the Registration Form for Providing Telecommunications Services, 1 May 2010. 19 21

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12.2.3  Collaborative environments Voice and video may be only two of the several components that form today’s integrated communications services offered to MNEs. These may bring corporate communications closer to online collaborative environments such as Slack, which would generally be considered information society services that are in the EU regulated by the E-​Commerce Directive.25 This is so because the facility to access information online from various sources, including from co-​workers or company group members, would constitute an on-​demand electronic service provided at a distance for commercial gain.26 Even though such a service triggered conveyance of signals between corporate or other locations, it would not as such constitute the conveyance activity because the links would be provided by a telecommunications operator. Furthermore, such environments may be built for a specific company, hosted in its own private or public cloud, maintained and further developed by an IT outsourcing company, which would not make them ‘public’, a requirement of various telecommunications regulatory systems,27 but rather self-​ provided. Even where such collaborative environments incorporate switched (interconnected) voice telephony (eg via WebRTC), the question is whether they consist ‘wholly or mainly’ in the conveyance of signals on electronic communications networks,28 because voice may be offered alongside features such as file sharing, internet messaging, or database access. However, as OTT platforms increasingly and casually incorporate features previously confined to traditional telecommunications services, regulators and policymakers seek ways to impose a ‘level playing field’,29 abandoning earlier unwritten exceptions associated with OTT services’ inherent commercial and technological features, and looking instead at the broadest possible purpose from the end-​user’s perspective, which is conveying messages. On the one hand, new regulatory approaches may expressly seek to capture ancillary communications features of collaborative and other online environments to pursue certain fundamental goals of telecommunications regulation such as communications privacy. The Proposal 25   Directive 2000/​31/​EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market, OJ L 178, 17 July 2000. 26   According to Directive (EU) 2015/​1535 of the European Parliament and of the Council of 9 September 2015 laying down a procedure for the provision of information in the field of technical regulations and of rules on Information Society services, OJ L 241/​1, 17 September 2015, Art 1 (1)(b), an ‘information society service’ is ‘any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services’. 27   See eg § 6 Telekommunikationsgesetz (TKG), German Federal Telecommunications Law. 28   Art 2(c) of the amended EU Framework Directive. 29   See Explanatory Memorandum to the Proposal for a Directive of the European Parliament and of the Council establishing the European Electronic Communications Code, COM(2016) 590 final, 14 September 2016.

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for the EU ePrivacy Regulation recognizes the problem of integrated online environments, and expressly extends the scope of e-​privacy obligations to ‘services which enable interpersonal and interactive communication merely as a minor ancillary feature that is intrinsically linked to another service.’30 Such services are otherwise excluded from telecommunications market regulation even under the proposed European Electronic Communications Code.31 On the other hand, regulators may altogether adopt a functional approach and look at the transmission purpose of the service instead of the provider’s control over the conveyance element. For example, BNetzA, the German regulator, considered Gmail a public electronic communications service, which was upheld by a German administrative court: the only purpose for using Gmail was to convey messages from sender to recipient, and even though Google itself does not provide the actual signal transmission between the servers that are involved in email delivery, the court held that this transmission via the open internet must still be attributed to Google because the transmission was triggered by Gmail users hitting the ‘send’ button and facilitated by Google’s email servers.32 However, upon appeal, the Higher Administrative Court in Münster in February 2018 ruled that the case be referred to the European Court of Justice in order to clarify ‘whether internet-​based e-​mail services provided via the open internet, which do not themselves provide internet access, need to be covered as transmission of signals over electronic communication networks’.

12 .3  WHOL E S A L E ACC E SS R E GUL ATION A few inputs required for the operators to provide telecommunications services to MNEs may be subject to wholesale regulation. This will particularly be important in case of bottleneck facilities in the host country that the MNE’s home country operator might need to access in order to offer services at the MNE’s overseas locations. Whereas market entry for telecommunications service providers has been

30   Art 4(2) of the Proposal for a Regulation of the European Parliament and of the Council concerning the respect for private life and the protection of personal data in electronic communications and repealing Directive 2002/​58/​EC (Regulation on Privacy and Electronic Communications), COM(2017) 10 final, 10 January 2017. 31   According to Art 2(5) of the Proposal for a Directive of the European Parliament and of the Council establishing the European Electronic Communications Code, COM(2016) 590 final, 14 September 2016, ‘interpersonal communications service’ means ‘a service normally provided for remuneration that enables direct interpersonal and interactive exchange of information via electronic communications networks between a finite number of persons, whereby the persons initiating or participating in the communication determine its recipient(s); it does not include services which enable interpersonal and interactive communication merely as a minor ancillary feature that is intrinsically linked to another service.’ 32   Administrative Court of Cologne, Judgment of 11 November 2015.

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made easier through WTO rules and a general relaxation in licensing regimes worldwide, actual provision of service may require access to network elements of the host country incumbent operator(s). Several inputs may be largely the same as in case of the provision of other end-​ user communications. Whereas the capacity required for the MNEs will be higher than in case of residential or small business markets, there might be little or no difference in the network elements used. New entrants are in both cases expected to require facilities such as unbundled local loops, backbone connectivity, which may include active transmission via IP/​MPLS networks,33 or even direct access to submarine cable landing stations. All these facilities may be subject to wholesale regulation irrespective of whether they are required to provide the service in the residential or in the business market.34 However, corporate markets are often particularly difficult to tackle for new entrants because they require high-​quality services not always available in the incumbent operators’ standard offerings. This is often due to the regulators’ focus on the retail market where the bargaining power of the end-​users is lower. Moreover, one has to keep in mind that the market for MNE services is a lucrative market that the incumbent operators are not comfortable to lose to the new entrants—​who might be larger than them internationally and might enjoy an established relationship with the MNEs in their home countries. Limiting their wholesale offering to low-​speed TDM leased lines that have long been the regulators’ focus35 whilst restricting access to high-​speed Ethernet links and IP/​MPLS backbone may be a possible anti-​competitive strategy. With the specific requirements of the business markets in mind, the European Commission in 2014 redefined the previously regulated market for the terminating segments of leased lines, transforming it into the market for ‘wholesale high-​quality access’ (known as the new ‘Market 4’).36 This separate market definition builds on the idea that the last mile remains the key bottleneck for corporate connectivity in

33   See eg . 34   See further Chapter 8, Section 8.5. 35   It was only in 2007 that European Commission adapted the wholesale leased lines market to the requirements of the IP data-​d riven communications by adding ‘irrespective of techology used’. See Commission Recommendation on Relevant Product and Service Markets within the electronic communications sector susceptible to ex ante regulation in accordance with Directive 2002/​21/​EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services (Second edition). 36   Market 4 of the Commission Recommendation 2014/710/EU of 9.10.2014 on relevant product and service markets within the electronic communications sector susceptible to ex ante regulation in accordance with Directive 2002/​21/​EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services.

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EU Member States, and that regulating the physical building blocks of the network such as the copper local loop or the resale of regular residential broadband products would not enable sufficient level of competition in the business market.37 The exact scope of the regulated wholesale products may vary from Member State to Member State, and may comprise not only broadband transmission but also (fully ‘unbundled’ or ‘dark’) fibre access and (shared) wavelength division multiplexing (WDM) fibre access, which uses different colours of light to differentiate multiple operators’ signals in a single optical link.38 While some of the products such as WDM may be suited to large business offerings by technology alone, others such as asymmetric broadband via copper pairs or hybrid copper-​fibre networks may require additional characteristics:  guaranteed availability and high quality of service in all circumstances, including service level agreements (SLAs), 24/​7 customer support, short repair times and redundancy; high-​quality network management, not only in the access network but also in the backhaul network segment, resulting in upload speeds appropriate for business use and very low contention; the possibility to access the network at points which have been defined according to the geographic density and distribution of business such as business parks; or the possibility to offer separate Ethernet continuity eg through an additional header allowing for several layers of virtual LANs.39 These wholesale regulated features would normally be reflected in end-​user agreements between the operators and MNEs or other large corporate entities.

12 .4  NUMBER ING R E S O URC E S Whereas the regulation of IP numbering space is internationally centralized, the assignment and use of E.164 numbers used for telephony is under individual countries’ jurisdictions.40 While this might pose a challenge for the MNEs who want to

37   ‘Leased lines may be provided using a range of technologies. Legacy options (so-​c alled  “traditional” interface leased lines) include low-​bandwidth analogue leased lines and digital lines at a wide range of bandwidths, for example, via SDH/​PDH or TDM-​based technologies. These are usually point-​to-​point connections. Increasingly, leased lines are offered over Ethernet-​based technologies, allowing more flexibility, normally at a lower cost, and can be both PtP and PtMP. Ethernet-​based leased lines, in particular carrier-​g rade Ethernet with larger frames, have been found substitutable to legacy traditional leased lines in most Member States.’ Explanatory Note to the Commission Recommendation of 9 October 2014 on relevant product and service markets, at 47. 38   See eg UK Case UK/​2016/​1849: Market for wholesale high-​quality access provided at a fixed location in the United Kingdom and Dutch Case NL/​2017/​1960: Wholesale high-​quality access provided at a fixed location (Market 4). 39   Explanatory Note to the Commission Recommendation of 9 October 2014 on relevant product and service markets, at 47. 40  .

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be accessible globally, the practical solution is often provided by means of international resellers who are able to secure numbering space in various jurisdictions, ensuring local presence plus local termination and origination rates. The EU tried to address the same issue at the policy level by means of introducing an EU-​w ide numbering space (ETNS), having fostered the use of a virtual calling country with the number +3883,41 an experiment that was later abolished due to insufficient interest of the business community.42 One should note though that securing numbering resources in the country of establishment or service provision does not always solve all the challenges because specific conditions may be attached to the use of national numbers. Apart from general requirements for the local use of geographic numbers that are regularly found in national numbering plans,43 other specific business-​related conditions may apply to certain numbering ranges. In Germany, for example, it is considered to be misleading advertising if large corporations use local geographic telephone numbers that connect customers to a centralized call centre and not to the firm’s local branch, unless one makes it unmistakably clear that calls would be forwarded to the company’s office elsewhere.44

12 .5  CONTR AC T UA L A SPE C T S Contracts for electronic communications services for large companies and MNEs are characterized by the same elements found in a typical end-​user agreement:  network access, transmission service, and the provision (and possibly installation) of terminal equipment. However, considering multiple locations, the number of users, the need for system integration with any legacy elements, and multiple additional functions required (eg a call centre), one can in comparison to consumer or small business contracts expect a high degree of complexity. In a cloud-​based MNE solution, one or more service providers are likely to have to provide the following components: • network access, which may comprise both the Internet and PSTN access; • transmission services, which may comprise virtual private network (VPN) between locations, calls and text messaging (SMS) at designated rates;

41   CEPT/ECTRA Decision of 2 December 1999 On European Telephony Numbering Space (ETNS) conventions (ECTRA/​DEC(99)04) Revised version by written procedure 12 January 2001. 42   See also Chapter 4, at Section 4.5. 43   Associating numbers with geographic areas is also a premise of Recommendation ITU-​T E.164 (11/​2010). 44  See .

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• on-​site wiring and equipment installation and maintenance; • terminal equipment, which comprises hardware such as desktop phones and may include software such as personal computer or mobile apps; • the hosting and maintenance of the MNE’s own servers hosting the CaaS solution or, alternatively, the hosting of the CaaS solutions for the MNE by the provider in its own data centre or third-​party cloud; • communications software, which may be provided as a services (SaaS), including its adaptation, initial and ongoing development; • hardware and software installation, maintenance, helpdesk, and on-​ site support. Electronic communications networks and services components will to some extent resemble those in the agreements for residential end-​users and small businesses, only with much greater capacity in terms of connectivity and numbering resources used, plus stronger level of service. These aspects are also likely to be regulated by various rules protecting end-​users. For example, according to EU Universal Service Directive, not only a consumer but also a corporate entity regardless of size has the right to request a contract for the provision of electronic communications services that would specify in a clear, comprehensive, and easily accessible form information such as tariffs, the ability to place an emergency call, any compensation in case of breach of quality of service guarantees, or the duration of the contract and the conditions for renewal.45 The provision of equipment, software, including its development and maintenance, or support, on the other hand, would resemble other IT contracts that do not comprise the communications functionality. Increasingly, specialized hardware such as fixed telephones or PBXs are being substituted by software (eg softphones, softswitches), which is increasingly likely to run on standard personal computers or servers rather than on specialized telecommunications boxes.46

12.5.1  Technical clauses In a traditional telecommunications outsourcing agreement, the customer company would often transfer the ownership and maintenance of on-​site equipment such as telephones and PBXs to the outsourcer who could then provide service back to the company using the transferred (or replacement) infrastructure for both internal communications and outside connectivity.47 In a more contemporary, cloud-​based context, some elements of this approach may still be present, notably 46   See Art 20 of the amended Universal Service Directive.   See Telecomulonimbus, n 5.   See Sinclair, M in Walden, I, Telecommunications Law and Regulation (4th edn, Oxford University Press, 2012), at 569 et seq. 45 47

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with a view to the integration of the legacy systems such as company computers and phones with their CaaS counterparts. One should further note that, even in a cloud communications environment, a traditional operator role would still be required to ensure the connectivity between the MNE premises and the hosted solution or the MNE’s own data centre, for example via leased Ethernet links, which may be provided in a contract with the same or a different provider. As for the cloud service itself, a key new dilemma emerges in relation to the solution hosting. Whereas in most retail internet-​based services the physical location of the hosting server may be irrelevant at least from the end-​user perspective, the situation is likely to be different in case of corporate (tele)communications for the reasons of capacity, latency, security, and regulation, the latter potentially comprising rules on personal data exports or data residency. Accordingly, the MNE and the service provider will need to agree on a solution that will satisfy both the MNE’s commercial needs and the regulatory requirements. Where location of the hosted CaaS solution is critical for the company’s security purposes, the company may choose to host the solution on their own servers locally, or in their own local or remote data centre. One should keep in mind though that security in such cases is more likely to be a matter of company policies than actual risks:  major cloud providers have been focusing on minimizing cloud security risks for years, utilizing the ability of cloud solutions to provide redundancy or even distributing files over multiple data centres to avert the risks of data loss and contain the impact of potential data breaches. That said, data residency requirements may apply in different countries for various reasons. EU data protection laws have long restricted export of personal information to countries that do not sufficiently address privacy concerns.48 Such laws may further address government control over information flows or security concerns, such as in Russia and China.49 Apart from the location of the hosted solution, the contract will need to address the type of hosting. In a multi-​tenant public cloud solution, a single instance of software running on a server is used by several end-​users (tenants), whereby this instance would be divided or partitioned in order to ensure data confidentiality.50 Whereas multi-​tenancy is a typical solution for small businesses, MNEs may use single-​tenancy private cloud solutions whereby each company uses its own instance of the software application and supporting infrastructure51

  See Art 25 of the Directive 95/​4 6/​EC and Article 44 of the Regulation (EU) 2016/​679. See further Chapter 13.   See Determann, L, ‘Local Data Residency Requirements for Global Companies’ (Baker & McKenzie, August 2015), . 50   Mundra, M, ‘Multi-​tenant Vs. Single-​tenant Architecture (SaaS)’ (SAP Blog, July 2015), . 51  Ibid. 48 49

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or a hybrid solution, depending on the sensitivity of different classes of data or communications. Adequate Service Level Agreement (SLA) with Key Performance Indicators (KPIs), normally in terms of maximum or average times, will be required for various aspects of the service. These guarantees may relate to the performance of software and hardware, such as CaaS server downtime. They may further relate to human factor such as the performance of the provider’s engineers. An example would be the lapse of time between a fault being reported by the end-​user and the fault being attended to or ultimately repaired. Other KPIs such as the time required for setting up new service features or delivering orders for additional capacity of communications links or cloud service capacity (eg increasing the number of simultaneous communications channels or users) may be based on a mix of technological and human factors. In a distributed environment where various entities might be in charge of connectivity, terminal equipment, software, and hosting, it is crucial for these guarantees to only address the area that a particular provider can control. For example, a CaaS provider might not be able to exercise any control over the link between the premises and the data centre. Service level guarantees offered by such a provider can therefore only relate to the time when the link is not down.

12.5.2  Commercial clauses Telecommunications services agreements are typically based on one or more of the following basic charging mechanisms: per user; per minute of call, which may include an initial call set-​up fee; per message; or per link capacity. Separate fees may be charged for service set-​up or modification, equipment installation, or repairs, all of which may be wholly or partially based on engineer-​hours. All the above charging mechanisms are likely to be relevant in large corporate and MNE context. However, their context and relevance have been shaped by changes in technology and market liberalization that have enabled new business models and place less focus on traditional focus on ‘per minute’ charging. That said, due to current regulatory policies, certain costs such as PSTN call termination will continue to be highly volume-​sensitive.52 ‘Per user’ charging has traditionally been based on the number of voice telephone channels that can simultaneously be used by the corporation to communicate with the outside world using public telephone network. Incumbent operators would for this purpose install on the copper access network one or more Integrated Services Digital Network Primary Rate interfaces (ISDN PRI), also referred to as

52   See eg European Commission Recommendation of 7 May 2009 on the Regulatory Treatment of Fixed and Mobile Termination Rates in the EU, 2009/​396/​EC.

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ISDN30 because they support up to thirty voice telephone channels. These channels are then allocated to individual users by PBX on the corporation’s premises, or by the telephone operator’s own central location switching solution (Centrex). ISDN30 may by the regulators still be perceived as bottleneck and offered at regulated rates.53 In the CaaS context, however, ‘per user’ charging does not refer to the number of user channels enabling communication via the access network but rather to the number of employees that are simultaneously able to use the communications platform, regardless of where they are physically, and independently of the capacity of the access network that a cloud provider would normally have no control of. Capacity-​based charging models have traditionally been used for large corporate communications. Point-​to-​point connections such as leased lines, including Ethernet links, or dark fibre have been charged for based on capacity such as the speed of the link (Mb/​s) or the number of optical fibres leased. Capacity-​based charging can also be used in an IaaS model whereby the customer company is charged per number of individual hardware items and their capacity. With the introduction of flexible, software-​based cloud communications technologies that enable constant access control and usage monitoring, capacity-​based charging is becoming ‘smarter’. Communications capacity actually used and additional features may be charged for in addition to or instead of the basic communications software licence. Such charging practices are converging with innovative usage fees in the context of ‘pay per use’ software licensing otherwise well-​k nown for SaaS products.54

53  See eg Commission Decision concerning Case UK/​2014/​1607:  Fixed narrowband wholesale services in the United Kingdom; fixed narrowband retail services in the Hull Area; and retail ISDN2 exchange line services in the United Kingdom excluding the Hull Area. Comments pursuant to Article 7(3) of Directive 2002/​ 21/​EC. 54  .

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13 COMMUNIC ATIONS PR IVAC Y Ian Walden1

13.1 Introduction  13.2 Defining Terms  13.3 User–​State  13.4 Service Provider–​User  13.5 Subscriber–​User  13.6 User–​User  13.7 Concluding Remarks 

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13.1 INTRODUC TION The right to privacy of communications is one of the most enduring and widely recognized of the constellation of rights known as privacy law. While privacy remains a notoriously elusive concept, our communications activities have been consistently recognized as a fundamental element of our private life, placed side-​by-​side with notions of family and home. While the terminology used in international instruments and national constitutions may have evolved over time to reflect changing technologies, from ‘correspondence’ to ‘communications’,2 the centrality of communications privacy to our private life remains undisputed. Despite its constant presence, the nature of communications privacy has evolved greatly since it made its appearance in the UN Declaration. In 1948, the primary relationship being governed was that between the individual and the state, protecting the former from arbitrary interference by the latter. In modern regimes,

1   With thanks to Christopher Millard for writing and updating the chapter in the first four editions, as well as reviewing this new chapter. 2   See the Universal Declaration of Human Rights (1948), at Art 12, and the Charter of Fundamental Rights of the European Union (‘Charter’) (2000), at Art 7, respectively.

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manifest most clearly within European Union (EU) law,3 other communication privacy relationships have also come to be recognized as requiring express legal protection and regulatory intervention. First, with liberalization and privatization, the state-​owned incumbent became distinct from the state and part of a global industry comprising a multitude of private entities. In the course of entrusting these private entities with the content of our communications, they obtain vast amounts of data about our communications activities, both qualitative and quantitative, embodying substantial potential value in an information economy. Controlling the commercial interests of service providers to use and abuse this data has therefore become an important component of modern communications privacy. Second, a distinction must be made between the privacy interests of the person that contracts with a provider for the provision of services, generally referred to as a subscriber, and a user of that service. Two key examples being an employer and employee or a parent and child. To what extent should the law intervene to protect the privacy interests of the user from the capability of the subscriber to interfere in the user’s private communications? Lastly, there is a privacy relationship between the actual parties to the communication, the calling and the called party or sender and recipient. Each of these four distinct privacy relationships, User–​State, Service provider–​Subscriber, Subscriber–​User, and User–​User, has become ever more important in our communications environment. This chapter examines how each of these four privacy relationships has become the subject of legal intervention, designed to protect and balance the various privacy interests of the parties. In the EU, such legal intervention has appeared in the form of data protection laws, specifically the Data Protection Directive (DPD),4 the PEC Directive and the General Data Protection Regulation (GDPR),5 and proposed reform of the PEC Directive.6 While data protection law is closely related to and overlaps with the right to privacy, it also contains some unique characteristics that distinguish it from traditional notions of privacy law, as most clearly expressed in the Charter’s recognition of them as separate rights.7 First, the data protection right is applicable to all data about a person, whether that data can be said to be of a private or public nature. Second, personal data can

3   ie Directive 02/​58/​EC concerning the processing of personal data and the protection of privacy in the electronic communications sector, OJ L 201/​37, 31 July 2002 (‘the PEC Directive’). 4   Directive 95/​4 6/​EC on the protection of individuals with regard to the processing of personal data and on the free movement of such data, OJ L 281/​31, 23 November 1995. 5   Regulation (EU) 2016/​679 on the protection of natural persons with regard to the processing of personal data and the free movement of such data, OJ L 119/​1, 4 May 2016. 6   Proposal for a Regulation concerning the respect for private life and the protection of personal data in electronic communications, COM(2017) 10 final, 10.1.2017 (‘ePrivacy proposal’). 7   Charter at Art 7, ‘Respect for private and family life’ and Art 8, ‘Protection of personal data’.

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only be processed on some legitimate ground, establishing a general obligation on the person possessing any personal data; whereas traditional privacy law has focused primarily on controlling instances where a person’s private life is interfered with. Third, there is a need for an independent supervisory authority to ‘control’ compliance with these rules. It is the latter two components that establish data protection as both a legal and regulatory regime that goes way beyond traditional notions of a privacy right. In the EU, communications privacy issues reside somewhere between data protection and privacy law, although not always easily or coherently.8 In the most recent reforms, there has been an attempt to establish clear water between the two, with the GDPR solely referring to the Article 8 data protection right, while the ePrivacy proposal’s declared basis is Article 7.9 Whether this distinction has real world implications is more doubtful given that the regulatory regime is common to both. Ultimately, it will be for the Court of Justice of the European Union (CJEU) to articulate how and when they differ, which it has failed to do to date.10 For the purposes of this chapter, the phrase ‘communications privacy’ is used to encompass both data protection and privacy law. The Data Protection Directive and GDPR are generally applicable to all forms of processing of personal data, without specific reference to the telecommunications sector. However, when the Data Protection Directive was first proposed in 1990, the Commission also published a draft Directive addressing data protection issues in the telecommunications sector.11 It reasoned that a general measure would not be sufficient to address concerns about the use of personal data in particular areas. It was therefore envisaged that the Data Protection Directive would be supplemented by a series of sectoral Directives, although these were never forthcoming. The telecommunications sectoral proposal was eventually adopted in 1997,12 and was subsequently replaced by a revised measure in 2002, ie the PEC Directive. The PEC Directive is designed to ‘particularise and complement’ the general regime (Article 1(2)), which it does in respect of the four privacy relationships outlined above. It is important to note, therefore, that where the PEC Directive is silent as to an issue, this does not generally mean that the issue is unregulated, rather that the regulatory position is that which is detailed in the general regime, ie the Data 8   See eg Lynsky, O, The Foundations of EU Data Protection Law (OUP, 2015); and Tzanou, M, ‘Data Protection as a Fundamental Right next to Privacy? “Reconstructing” a not so New Right’, (2013) 3(2) International Data Privacy Law 94. 9   See recital 1. 10   See cases C-​4 65/​0 0, Rechnungshof v Österreichischer Rundfunk [2003] 3 CMLR 10, at para 70; C-​92/​0 9 and C-​93/​0 9, Volker and Markus Schecke GbR and Hartmut Eifert v Land Hessen [2012] All ER (EC) 127, at para 52; and Tele2 Sverige AB v Post-​och Telestyrelsen [2017] 2 CMLR 30. 11   OJ C 277, 5 November 1990. 12   Directive 97/​6 6/​EC concerning the processing of personal data and the protection of privacy in the telecommunications sector, OJ L 24/​1, 30 January 1998.

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Protection Directive or GDPR. Conversely, the GDPR expressly states that it does not impose ‘additional obligations . . . in connection with the provision of publicly available electronic communication services  . . .  in relation to matters for which they are subject to specific obligations with the same objectives . . .’.13 Directive 97/​66/​EC and the PEC Directive were transposed into UK law through a combination of primary legislation and secondary regulation. Article 5(1) and (2) were implemented through Part I of Regulation of Investigatory Powers Act 2000,14 as replaced by the Investigatory Powers Act 2016, while the remainder is contained in the Privacy and Electronic Communications (EC Directive) Regulations 2003.15 The PECR has been amended on a number of occasions, but the primary reform occurred in 2011, transposing the amendments made to the PEC Directive by the ‘Citizens’ Rights’ Directive in 2009.16 This chapter examines the complex nature of each of the four privacy relationships, focusing on two particular aspects. First, the obligations placed upon telecommunications providers to regulate their conduct in order to either prevent abusive practices by them or third parties, or facilitate the exercise of privacy rights by their subscribers and users. Second, the evolving legal treatment of key types of personal data generated through the use of telecommunications services: communications content, traffic and location data, and subscriber data. Before examining the different privacy relationships, it is necessary to examine the terms and terminology used in EU law to set the regulatory boundaries of the communications privacy regime.

13. 2   DEFINING TER MS In terms of the protected interests in communications privacy, while both privacy and data protection rights are primarily viewed as individual rights, they have also been recognized as extending to legal persons in certain circumstances. Indeed, since its founding the International Telecommunication Union’s Constitution has required signatory states to protect the ‘secrecy of correspondence’,17 rather than privacy, which reflects a concern to protect state interests in international communications as much as the rights of citizens. Privacy jurisprudence has been most comprehensively examined by the European Court of Human Rights (ECtHR),

14   GDPR, at Art 95.   Explanatory Notes to the Regulation of Investigatory Powers Act, at para 9.   SI 2003/​2 426 (PECR), which replaced the Telecommunications (Data Protection and Privacy) Regulations 1999, SI 1999/​2093. 16   Privacy and Electronic Communications (EC Directive) (Amendment) Regulations 2011, SI 2011/​1208. 17   This has been consistent throughout its history, from the International Telegraph Convention (1865), at Art 5, to the current ITU Constitution (2014), at Art 37(1). See further Chapter 16. 13 15

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which has held that Article 8 protects communications between individuals in the course of their professional life, as well as their private life, especially where it involves interference by the state in the form of intercepting communications in the course of a law enforcement investigation.18 European data protection law originates within the Council of Europe rather than the EU, with the adoption of a Convention in 1981.19 The Convention expressly recognizes that parties may wish to extend the scope of the instrument to include ‘information relating to groups of persons, associations, foundations, companies, corporations and any other bodies consisting directly or indirectly of individuals’, which was taken up by a number of states.20 While the Data Protection Directive and the GDPR adopt a more restrictive scope, limited to natural living persons, the PEC Directive recognizes the ‘legitimate interests of legal persons’ as subscribers to communication services and grants them a subset of rights under the regime (Article 1(2)). In addition, the regime is applicable to all forms of communication, whether between persons, a person and a machine (eg a website) and even so-​called ‘M2M’ communications, where there is no direct human involvement at all.21 In doing so, data protection law can be viewed as granting positive horizontal rights to legal persons that have not yet been recognized by the ECtHR under Article 8 jurisprudence.22 A second regulatory boundary concerns what constitutes the regulated conduct that renders service providers subject to certain regulatory obligations. While privacy law has always taken a broad interpretation of what constitutes ‘correspondence’,23 data protection law focuses solely on the ‘provision of publicly available electronic communication services in public communications networks’.24

18  eg Huvig v France (1990) 12 EHRR 528, paras 8 and 25. In Bărbulescu v Romania (5 September 2017), the Grand Chamber of the ECtHR notes that the notion of ‘correspondence’ is ‘not qualified by any adjective, unlike the term “life”. And indeed, the Court has already held that, in the context of correspondence by means of telephone calls, no such qualification is to be made’ (para 72). 19   Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data, Strasbourg, 28 January 1981 (European Treaty Series No. 108) (Cmnd 8341) (London: HMSO, 1981). See also Recommendation R 95(4) ‘on the protection of personal data in the area of telecommunication services, with particular reference to telephone services’. 20   Ibid, at Art 3(2)(b). See generally Walden, I  and Savage, N, ‘Data Protection and Privacy Laws:  Should Organisations be Protected?’, (April 1988) 37 The International and Comparative Law Quarterly 337. 21   The 2016 Proposal would make this explicit, although it would seem implicit under the current regime. The Internet of Things is the context for the current concern, where personal devices around the home communicate with each other, but it would be equally applicable to industrial EDI systems, such as deployed in the automotive and transportation industries. 22   See van der Sloot, B, ‘Do Privacy and Data Protection Rules Apply to Legal Persons and Should They? A Proposal for a Two-​t iered System’, (2015) 31 Computer Law and Security Review 26, at 32. 23  eg Klass v Germany (1978) 2 EHRR 214, re: telephone conversations and Copland v UK (2007) 45 EHRR 37, re: email and internet usage. 24   PEC Directive, at Art 3.

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This in turn begs the question as to what constitutes an ‘electronic communication service’? As discussed in Chapter 4, the current EU definition is based on a technical interpretation of a service that ‘consists wholly or mainly in the conveyance of signals’, which has generally limited its application to traditional fixed and mobile operators. In January 2017, the Commission published its proposal to reform the PEC Directive, to align it with the GDPR. Under the ePrivacy proposal, the phrase would adopt a ‘functionally equivalent’ approach, under a new concept of ‘interpersonal communication services’,25 which will embrace a range of OTT communications services that have previously fallen outside the regulated sphere, from Skype to WhatsApp. In contrast to the 2016 Proposal, however, the definition used in the ePrivacy proposal would exclude the last part of the sentence and would ‘include services which enable interpersonal and interactive communication merely as a minor ancillary feature that is linked to another service’.26 This represents a very substantial extension of scope from the current position and has generated considerable controversy.27 In particular, it would effectively alter the characterization of certain legal persons from a subscriber to a service provider. A hotel, for example, offers accommodation as a service, but will offer its clients connectivity as an ancillary service. While under the PEC Directive, the hotel is a subscriber to communication services and hotel guests are users; under the ePrivacy proposal, the hotel becomes a service provider, while the guests are users or subscribers, depending on the nature of the relationship with the hotel. A second part of the definition is the need for the service to be ‘publicly available’. What constitutes ‘public availability’ may vary between Member States, but in the UK has been interpreted as a service ‘that is available to anyone who is both willing to pay for it and to abide by the applicable terms and conditions’.28 On this issue, data protection law could appear to depart somewhat from privacy law, to the extent that the ECtHR has held that an infringement of Article 8 can occur where an interception is of a ‘private’ telecommunications system,29 although

25   Proposal for a Directive establishing the European Electronic Communications Code, COM(2016) 590 final, 14 September 2016 (2016 Proposal), at Art 2(5): ‘a service normally provided for remuneration that enables direct interpersonal and interactive exchange of information via electronic communications networks between a finite number of persons, whereby the persons initiating or participating in the communication determine its recipient(s); it does not include services which enable interpersonal and interactive communication merely as a minor ancillary feature that is intrinsically linked to another service.’ 26   ePrivacy proposal, at Art 4(2). 27  eg The Guardian, ‘Publishers call for rethink of proposed changes to online privacy laws’, 29 May 2017, and Business Insider UK, ‘European regulators are about to kill the digital media industry’, 14 August 2017, . 28   Oftel, ‘Guidelines for the interconnection of public electronic communications networks’, at 6.1. 29   Halford v United Kingdom (1997) 24 EHRR 523, at para 56.

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any limitation in the PEC Directive must be viewed in the context of the continuing applicability of the DPD and GDPR. As well as being limited to publicly available services, the PEC Directive is also limited to communications between a ‘finite number of parties’, excluding information that is broadcast to the public (Article 2(d)). The rationale being that the broadcaster, as sender of the communication, is using a medium that is not inherently confidential, although personal data obtained about any recipient of the broadcasting service would be covered (recital 16).30 While this chapter generally refers to service providers as the regulated entities, the PEC Directive regime can extend both to the operators of networks as well as suppliers of ‘terminal equipment’, from mobile handsets to desktop computers.31 Member States may require that networks and equipment have ‘specific technical features’ to implement the provisions of the PEC Directive, but only as long as they do not interfere with the functioning of the EU Single Market (Article 14). In respect of the latter, EU law expressly states that ‘radio equipment’ sold in the EU should comply with the ‘essential requirements’, one of which ‘incorporates safeguards to ensure that the personal data and privacy of the user and of the subscriber are protected’.32 Terminal equipment is also increasingly viewed as an element of a person’s private life,33 more akin to his home or indeed even more private, as noted by the US Supreme Court in Riley v California: a cell phone search would typically expose to the government far more than the most exhaustive search of a house: A phone not only contains in digital form many sensitive records previously found in the home; it also contains a broad array of private information never found in a home in any form –​unless the phone is.34

Reference has already been made to the qualitative and quantitative explosion in data being generated and processed by service providers in our modern communications environment as we spend more of our lives online. In terms of communications privacy, however, not all data is equal and it needs to be further distinguished into three broad categories: communications content, traffic data, and subscriber data. There is widespread consensus, reflected in both privacy and

  See generally Walden, I and Woods, L, ‘Broadcasting Privacy’, (2011) 3(1) Journal of Media Law 117.  Commission Directive 2008/​6 3/​EC on competition in the markets for telecommunications terminal equipment, OJ L 162/​20, 21 June 2008. 32   Directive 2014/​53/​E U of 16 April 2014 on the harmonisation of the laws of the Member States relating to the making available on the market of radio equipment, OJ L 153/​62, 22 May 2014, at Art 3(3)(e). Under Art 44, the Commission has powers to adopt delegated acts on such matters, but no such measures have been drafted to date. 33 34   ePrivacy proposal, at recital 20.   134 S Ct 2473 (2014), at 20–​21. 30 31

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data protection laws, that the processing of each category engages our private life to differing degrees, although to what extent is increasingly debated. Communications content is defined by the PEC Directive as ‘any information exchanged or conveyed between a finite number of parties’ (Article 2(d)), which, as already noted, excludes broadcast content. Key to understanding this definition is that it is not the private or confidential nature of the content itself that triggers the regime, since it could involve both publicly available and non-​personal information, but the act of communication between specific parties that is being protected as private. While communications content is broadly defined, two modes of communicating content are further distinguished: ‘calls’ and ‘electronic mail’. A definition for a ‘call’ was provided in the original PEC Directive, but was subsequently deleted in 2009, despite its continued usage, including in the ePrivacy proposal. It is generally used in the context of voice telephony services, rather than data services. ‘Electronic mail’ encompasses any type of message content, including voice, but it must be capable of being stored, either in the network or the recipient’s terminal equipment (Article 2(h)). A live ‘call’, therefore, would fall outside the definition, unless it was being recorded. While ‘calls’ are referred to throughout the PEC Directive, the distinction between calls and electronic mail only becomes relevant in the context of unsolicited communications. Traffic data is defined in the PEC Directive as: any data processed for the purpose of the conveyance of a communication on an electronic communications network or for the billing thereof (Article 2(b))

This data represents the attributes of communications activities. The when, where, and how of our communication’s conduct. While data concerning a person’s location (the where) will clearly fall within the definition of traffic data, the PEC Directive also governs the processing of location data generated in relation to the use of communication services, through GPS, cell site triangulation, or WiFi hotspots, but distinct from the communication process itself. For fixed line communication services, location data is revealed by a billing address (as subscriber data) and, in broad terms, by the use of a geographic number (as traffic data), but it is the capabilities of digital mobile networks and devices that have given rise to privacy concerns and regulatory intervention (recital 35). Historically, traffic data has not been considered to engage our privacy interests at the same level as access to the content of our communications. While this view is increasingly contested, the CJEU seems to continue to differentiate between access to the content of communications, which can ‘affect adversely the essence’ of our rights to privacy and data protection,35 from traffic data, despite commenting 35   Tele2 Sverige AB v Post-​och Telestyrelsen [2017] 2 CMLR 30, at para 101. A similar sentiment can be found in ECtHR jurisprudence, see Malone v United Kingdom (1985) 7 EHRR 14.

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that it comprises ‘information no less sensitive . . . than the actual content of communications’.36 On the other hand, the PEC Directive treats them as equals when requiring Member States to ensure their confidential treatment (Article 5(1)).37 Subscriber data comprises the data we impart to the service provider when signing up to the service, such as name and address and payment details. The privacy interests involved here are inevitably of a comparable nature to those concerning any relationship with a provider of an online or offline service. While these categories can help us to examine the different dimensions of communications privacy, they can inevitably bleed into each other in ways that can undermine the operation of any protective regime. Subscriber data, for example, may include a person’s account password, which is disclosed to the service provider and may be retained to assist the user if they forget it, but usage of which could enable access to the content of the user’s communications.38 It should also be noted that the categories do not necessarily map to statutory terminology, which may utilize phrases and adopt different meaning depending on the context.

13.3  USER –​S TATE Protecting communications from inappropriate state interference concerns not only rights of privacy, but other individual rights and freedoms, including freedom of expression, association and assembly, and fair trial. The ECtHR has regularly been asked to consider issues of state surveillance in the context of an individual’s right to privacy under Article 8 of the Convention, including most recently in Zakharov v Russia,39 which has been seen as setting the ‘European standard on mass surveillance’.40 While on many issues Zakharov simply reasserts where the Court’s jurisprudence stands, on some matters, the jurisprudence has become more pronounced. The User–​State privacy relationship is relevant to a book on telecommunications law because law enforcement investigations increasingly involve obtaining data from telecommunication service providers about their subscribers and users, whether public law enforcement agencies (LEAs) in respect of traditional physical crimes or online criminality, or rights holders and litigants requesting access to data for civil litigation or other enforcement actions.41 In the former, the state takes

  Tele2, n 35, at para 99.   This equality represents a shift from Directive 97/​6 6/​EC, which only addressed the confidentiality of communications content (Art 5(1)). 38   See Home Office, ‘Acquisition and Disclosure of Communications Data’, at para 2.31. 39   (2016) 63 EHRR 17. 40   Concurring opinion of Judge Pinto de Albuquerque, in Sazbó and Vissy v Hungary, 12 January 2016, at 1. 41   eg case C-​275/​0 6, Promusicae v Telefonica de Espana SAU [2008] 2 CMLR 17. 36 37

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the form of the LEA exercising investigative powers, in the latter, it is the courts that represent the state, authorizing the privacy intrusion, to ‘protect the rights and freedom of others’ (ECHR, Article 8(2)). As with other topics covered in this book, this law enforcement need has resulted in the imposition of both ex ante and ex post regulatory obligations on service providers. In terms of ex ante obligations, this requires service providers to conduct themselves in certain ways in order to be in a position to assist law enforcement at some point in the future. The two key examples of this are obligations to build an ‘intercept capability’ into a network or service,42 and requirements to retain data concerning usage of the network or service for designated periods of time. Ex post obligations arise when an LEA contacts the service provider to request the obtaining and disclosure of data in respect of a specific investigation. Such requests may be in respect of targeted suspects or be bulk requests in respect of particular categories of communication. Again, as with other topic areas, there are two jurisdictional dimensions to law enforcement obligations:  whether the applicable service falls within the regulated sphere and whether the obligations are applicable to service providers located outside the state but providing services into the state. This section examines the rules imposed on service providers to assist LEAs, primarily under EU and UK law.

13.3.1  EU law One of the first occasions that issues of state interference with an individual’s communications was formally addressed by the EU was a 1995 resolution of the Council of the European Union, as an aspect of police cooperation in the fight against terrorism and serious crime.43 It was triggered by concerns that the ongoing liberalization of the telecommunications sector and rapid technological developments were generating problems for Member States in terms of interception capabilities. The main part of the Resolution comprises an Annex detailing a set of requirements that law enforcement agencies had with regard to the intercept capabilities provided by service providers, including access to ‘call associated data’.44

42   eg in the US, the Communications Assistance for Law Enforcement Act Pub. L. No. 103–​414, 108 Stat. 4279 (1994). 43   Council Resolution of 17 January 1995 on the lawful interception of telecommunications, OJ C 329/​1, 4 November 1996. 44   Defined as ‘Signalling information passing between a target service and the network or another user. Includes signalling information used to establish the call and to control its progress (e.g. call hold, call handover). Call associated data also includes information about the call that is available to the network operator/​ service provider (e.g. duration of connection).’

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In response, the Article 29 Working Party (A29WP), established under the Data Protection Directive, reminded Member States of the need to respect privacy and detailed its own list of minimum requirements for national law to protect fundamental rights.45 Later that same year, the A29WP got in first and, in response to proposals for data retention from the G8 high-​tech crime subgroup, issued a recommendation stating that ‘traffic data should in principle not be kept only for law enforcement purposes’.46 The PEC Directive, and its predecessor Directive 97/​66/​EC, address state interference in two provisions. First, Member States are required to ensure the confidentiality of communications and related traffic data, by prohibiting ‘listening, tapping, storage or other kinds of interception or surveillance of communications’ (Article 5(1)). This default position may then be made subject to national law exceptions where based on a ‘necessary, appropriate and proportionate measure’ in order to: . . . safeguard national security (i.e. State security), defence, public security, and the prevention, investigation, detection and prosecution of criminal offences or of unauthorised use of the electronic communication system (Article 15(1)).

This effectively replicates the privacy exceptions detailed in Article 8(2) of the ECHR. However, the provision then goes on to state that it is permissible for Member States to adopt measures ‘providing for the retention of data for a limited period’ (Article 15(1)) which ran counter to the opinion of the A29WP. Following the terrorist attacks in Madrid in 2004 and London in 2005, the political mood was in favour of mass retention of traffic data, which resulted in the adoption of the Data Retention Directive in 2006.47 As a consequence of the extended competence of EU law following the Lisbon Treaty, including the incorporation of the Charter of Fundamental Rights, the CJEU has entered into the fray on User-​State relationships concerning communications privacy. Article 15(1) has since been subject to considerable scrutiny by the CJEU, first in relation to the validity of the legislative measure on data retention and second in relation to the applicable scope. In 2014, the CJEU struck down the Data Retention Directive as invalid for being incompatible with Articles 7 and 8 of the Charter.48 In 2016, the CJEU held that Article 15(1) 45  Recommendation 2/​99  ‘on respect of privacy in the context of interception of telecommunications’ (WP18), 3 May 1999. 46   Recommendation 3/​99 ‘on the preservation of traffic data by Internet service providers for law enforcement purposes’ (WP25), 7 September 1999. 47   Directive 2006/​2 4/​EC on the retention of data generated in connection with the provision of publicly available electronic communications services or of the public communications networks and amending Directive 2002/​58/​EC, OJ L 105/​5 4, 13 April 2006 (‘Data Retention Directive’). 48   See case C-​293/​12, Digital Rights Ireland Ltd v Minister for Communications, Marine and Natural Resources [2014] 3 CMLR 44 (DRI).

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precludes legislation that provides for the ‘general and indiscriminate retention of all traffic and location data’.49 In addition, it held that retained data should not be accessible by LEAs without prior review by ‘a court or an independent administrative authority’ for the purpose of tackling ‘serious crime’ and the data should be retained in the EU.50 These judgments and their implications for data retention, communications privacy, and, by association, service providers are not yet fully worked through. However, any future initiative at EU level will need to be a preventative measure, targeted in some manner and restricted to ‘serious crime’.51 For the UK, the government has conceded in the ongoing domestic litigation52 that the threshold must be raised to ‘serious crime’53 and that there is a need for some form of independent prior authorization before accessing retained data.54 The UK’s intended departure from the EU could eventually lessen these constraints, although not if they were considered an important consideration in any ‘adequacy’ determination under the GDPR.55 Under the PEC Directive, service providers are required to establish internal procedures for responding to data requests by LEAs,56 although no distinction is made between ex ante and ex post obligations. In addition, data about the number of requests made by LEAs, the legal basis for the request, and the service provider’s response should be reported to a competent authority, to enable oversight of the exercise of these LEA powers. This provision implies that any data obtained from service providers must be mediated through the service provider, rather than permitting LEAs direct access to a service provider’s network. This echoes the sentiment of the ECtHR in Zakharov, when it notes that disclosing an authorization to a service provider before obtaining access to a user’s data ‘is one of the most important safeguards against abuse’ (para 269).

  Tele2, n 35, at 112.  Two further references have been made to the CJEU on issues arising from these cases:  C-​207/​16, Ministerio Fiscal, OJ C 251/​7, 11 July 2016; and C-​475/​16, K, OJ C 428/​8, 21 November 2016. 51   Tele2, n 35, at 108. It is somewhat ironic that the Data Retention Directive does not refer to prevention as an aim (Art 1(1)), the word having been removed at the request of the Parliament. 52   Secretary of State for the Home Department v Tom Watson MP & ors [2015] EWCA Civ 1185. 53   Home Office, Investigatory Powers Act 2016: Consultation on the Government’s proposed response to the ruling of the Court of Justice of the European Union on 21 December 2016 regarding the retention of communications data, November 2017 (‘Consultation 2017’). The Government intends to insert a bespoke definition, distinct from the general definition at IPA, s 263(1), lowering the sentencing threshold from three years to six months, as well as the likelihood from ‘reasonably expected’ to ‘capable of’ being so sentenced. 54   Consultation 2017, the government intends to make LEA access to communications data subject to approval by the Investigatory Powers Commissioner, except for national security purposes. The IPC will delegate the function to a new Office for Communications Data Authorisations. 55   Art 45. 56   PEC Directive, at Art 5(1b), inserted by Directive 2009/​136/​EC (Citizens’ Rights’), Art 2(9), OJ L 337/​11, 18 December 2009. 49

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Information released by the former NSA contractor Edward Snowden from June 2013 onwards57 revealed the extent to which service providers cooperate with law enforcement in terms of disclosing data. This resulted in considerable public consternation and distrust towards service providers. In response, service providers have tried to become more transparent about such practices, publishing ‘transparency’ reports, in addition to any reporting obligations they have to oversight authorities.58

13.3.2  UK law In all jurisdictions, LEAs are granted a range of powers to assist in the prevention, investigation, detection, and prosecution of criminal conduct. Such powers include the right to engage in covert and coercive techniques, including interfering with a person’s communication privacy, such as the interception of communications. 59 Given the inevitable privacy intrusion involved, the exercise of such powers will generally require some form of prior authorization, under executive, judicial, or administrative procedures. In addition, not all LEAs are equal, with intelligence agencies having distinct responsibilities to protect national security and related enhanced powers. It is beyond the scope of this section to examine the multitude of laws in the UK governing the conduct of national security, criminal, or regulatory law enforcement agencies, but it will be assumed that a requesting LEA is acting lawfully when making a request.60 Instead, the focus is on those laws that impose obligations on operators or service providers to assist LEAs in the course of an investigation. UK law has recently undergone reform, with parts of the current regime under the Regulation of Investigatory Powers Act 2000 (RIPA) being replaced by the Investigatory Powers Act 2016 (IPA), which also folds other existing powers into it.61 As such, the following analysis takes into account both, due to their similarities, but concentrates on the latter. In compliance with Article 5(1) of the PEC Directive, the IPA establishes a general criminal prohibition on intentionally intercepting a communication

  See .  Google was the first, see . See also Vodafone’s ‘Law Enforcement Disclosure Report’, . 59   See generally Sieber, U and von zur Mühlen, N (eds), Access to Telecommunications Data in Criminal Justice (Duncker & Humblot, 2017). 60   Such requests may impose mandatory (eg IPA) or permit voluntary (eg Counter Terrorism Act 2008, s 19(1)) data disclosure by a service provider. 61   ie RIPA, Part II and III remain in force. 57

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‘in the course of its transmission’ (s 3(1)).62 The IPA then details the various circumstances in which interception conduct has lawful authority, including under other statutory powers or court orders (s 6). While the IPA is the primary statutory provision on interception, other legislation could also be applicable to equivalent conduct, including the Wireless Telegraphy Act 2006, Computer Misuse Act 1990, and the Data Protection Act 1998.63 As discussed in Section 13.2 and earlier in this section, an initial issue to determine is with whom any obligations lie? Under the IPA, the regulated entity is a ‘telecommunications operator’, defined as a person that: (a) offers or provides a telecommunications service to persons in the United Kingdom, or (b) controls or provides a telecommunication system which is (wholly or partly)—​ (i) in the United Kingdom, or (ii) controlled from the United Kingdom. (s 261(10))

A ‘telecommunication service’ is defined in two stages: any service that consists in the provision of access to, and of facilities for making use of, any telecommunication system (whether or not one provided by the person providing the service). . . . the cases in which a service is to be taken to consist in the provision of access i99i to, and of facilities for making use of, a telecommunication system include any case where a service consists in or includes facilitating the creation, management or storage of communications transmitted, or that may be transmitted, by means of such a system (s 261(11) and (12)).

The first element is a replication of the RIPA definition, while the Data Retention and Investigatory Powers Act 2014 (DRIPA) inserted the second element into RIPA,64 before being replicated in the IPA. The amendment was designed to address perceived legal uncertainties about the scope of the first phrase.65 It makes clear that the definition should be not understood as being the same as that of an ‘electronic communication service’ under current EU telecommunications law,66 but rather encompasses a much broader range of service providers, including ‘web-​based

62  This period includes any storage of a communication in a telecommunication system (s 4(4)). See Edmondson and others v R [2013] EWCA Crim 1026. An offence of interception under UK law can be traced back to the Telegraph Act 1868, s 20. 63   Sections 48, 1, and 55 respectively. Under the IPA, Ofcom is authorized to intercept for the purpose of the enforcement of the Wireless Telegraphy Act 2006 (Art 48). 64   DRIPA, s 5. 65   See Walden, I, Computer Crimes and Digital Investigations (2nd edn, OUP, 2016), at 4.125 et seq. 66   See further Chapter 4, at Section 4.2.

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email, messaging applications and cloud-​based services’.67 The government has also stated that a person is offering a telecommunication service where connectivity is provided incidental to the operation of an application or website or is otherwise ancillary to the provision of another service (eg Wifi in an airport lounge).68 In terms of jurisdiction, while the physical telecommunication system has to be located at least in part in the UK, the jurisdictional trigger for services is merely the offering or provision of services. This had led to uncertainties in respect to its application to non-​UK-​based service providers, which was clarified, first through an amendment under DRIPA and now under the IPA, making explicit that foreign service providers are subject to the majority of obligations.69 Such extraterritorial reach can give rise to obvious conflict of law concerns where there is a tension between an obligation under the IPA and the law of the state in which the operator is established. The IPA attempts to address such concerns by providing that a conflict of law can be raised as a defence to a claim for breach of statutory duty to comply with a warrant or notice.70 13.3.2.1  Ex ante obligations: technical capability and data retention When an LEA approaches a service provider to request the disclosure of data (ie content, traffic, or subscriber), the extent to which a service provider can respond to a request (ie irrelevant of its willingness to comply), will depend firstly on whether its systems are configured to generate and capture such data, and secondly on whether the data remains available to be disclosed at the time of the request. To address this issue UK law, in common with many jurisdictions, may impose obligations upon a service provider in respect of system and/​or data availability. In terms of system availability, service providers design and operate their networks and services in a distinct manner to meet their specific needs. Standardization reduces such variety somewhat, particularly where interoperability is concerned, but a range of considerations, including cost, will determine what data is generated by the operation of a telecommunication network or service. For example, requirements for data to bill, whether for wholesale interconnection or retail users, will determine what traffic data the network needs to generate. With the adoption of an expansive definition of what constitutes a ‘telecommunication service’ to cover OTT communication services, such variety is substantially expanded, including services that have been specifically designed

  See Home Office, ‘Interception of Communications Code of Practice’, January 2016, at 3.8.   See Home Office, ‘Draft code of practice on Interception of Communications’, February 2017. 69   eg IPA, s 43(3) (in relation to targeted interception), s 85 (in relation to the acquisition of communications data), and s 97 (in relation to data retention); although not all obligations that have extraterritorial application are enforceable through civil proceedings, eg s 97(2). 70   eg IPA, ss 43(5) and 85(4). 67

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to minimize the amount of data generated and retained (eg Snapchat). In such an environment, what is the scope of the duty on an operator to respond to a request? Under the IPA, an operator is required to do that which is ‘reasonably practicable’,71 which although not further defined would imply that the LEA has to take an operator as they find them, ie if the applicable system does not generate the data, then the duty has been discharged. From a state perspective, to reduce such uncertainty, the IPA provides that the Secretary of State may issue a notice to an operator requiring them to implement a specific ‘technical capability’ (s 253).72 While the exact requirements would be tailored to the operator, secondary legislation details the types of capability that the operator may be required to implement, including the timescales for disclosure, capacity (ie number of requests that can be handled simultaneously) and the ability to ‘remove electronic protection applied by or on behalf of the telecommunications operator to the communications or data’.73 This last requirement has generated concern that operators could be required to build back doors into the encryption systems they deploy, which may create a vulnerability that could be exploited for malicious purposes. The requirement repeats an identical requirement under RIPA,74 but has significantly extended application given the broader definition of a ‘telecommunication service’. However, the requirement should not impact encryption systems applied, or controlled, by subscribers and users.75 In meeting the requirements of a ‘Technical Capability’ notice, operators may be required to comply with industry standards, such as those developed by the European Telecommunications Standards Institute.76 The operator will also have an ongoing obligation to consider the requirements when developing new systems and services. Once a notice has been implemented, then the threshold for what is ‘reasonable practicable’ for an operator becomes compliance with that capability.77 Building such a capability can obviously represent a significant compliance cost for an operator and therefore the IPA makes provision for the possibility of payments being made by the government (s 249).78 From a market perspective, such payments can be seen as preventing such capabilities from becoming a barrier

  eg ibid, at ss 43(4), 66(3), and 128(5).   An operator can refer a notice back to the Secretary of State for review (s 257). When reviewing a notice, the Technical Advisory Board and a Judicial Commissioner must be consulted. 73   The Investigatory Powers (Technical Capability) Regulations 2018, SI 2018/​353. 74   RIPA, s 12 and the Regulation of Investigatory Powers (Maintenance of Interception Capability) Order 2002, SI 2002/​1931. 75  eg end-​to-​end encryption, where the key is generated by and maintained on the user’s device (eg WhatsApp). RIPA, Part III, contains powers to access protected data from a user. 76   See . 77   eg IPA, at s 43(6), 66(4), and 128(6). 78   Such financial assistance may be in the form of a grant, loan etc. (s 250(3)). 71

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to market entry. In terms of communications privacy, however, significant payments towards the capital and operational costs of service providers could be seen as enrolling them onto the side of LEAs; thereby eroding the gatekeeper function between User and State ascribed to them by the ECtHR in Zakharov. In terms of data availability, an operator obviously retains data in its normal course of business, but what constitutes ‘normal course’ will be determined as much by regulation as the commercial imperatives of the service provider. Under telecommunications law, for example, data may be kept for billing purposes. In the UK, the General Conditions of Entitlement (GCE) permit ‘records’ to be kept for up to fifteen months.79 Conversely, the PEC Directive adopts a default position that traffic data should be erased or rendered anonymous when no longer needed for transmission.80 It is this latter requirement, which minimizes the availability of traffic data for reasons of communications privacy, that is one of the factors that have led to calls for the imposition of data retention requirements on service providers specifically for law enforcement purposes. Of the three categories of data mentioned above, most retention regimes are applicable only to traffic data, ie the attributes of our communications activity. Retention of content is rarely considered, primarily because it is considered to interfere with the essence of our private life, but also for more practical reasons around the volumes of data involved.81 Mass data retention by service providers has long been a subject of fraught debate in the UK, EU, and in many other countries.82 The IPA’s data retention regime (Part  4) has been imported from DRIPA, which itself replaced the rules transposing the Data Retention Directive into national law,83 whose legal status had become unclear following the CJEU’s 2014 decision. Under Part  4, the Secretary of State can issue a retention notice to an operator requiring it to retain ‘relevant communications data’, ie traffic data, for up to twelve months from the date of the communication (s 87(3)).84 The notice must specify any requirements for the

79   GCE, at 11.2. ‘Records’ mean ‘data or information showing the extent of any network or service actually provided to an End-​User and any data or information used in the creation of a Bill for an End-​User’ (11.6(f)). In the US, ‘telephone toll records’ must be retained for 18 months (47 CFR § 42.6). When considering the retention period, the FCC received a request from the US Department of Justice requesting that the period be extended from six months to eighteen months specifically because such records are ‘often essential to the successful investigation and prosecution of today’s sophisticated criminal conspiracies’ (See Federal Register, vol. 50, no. 149, 2 August 1985, at 31397. 80   PEC Directive, at Art 6(1). See further Section 13.4. 81   In Russia, Federal Law No. 374-​FZ will require the retention of content for a period of six months. It is currently scheduled to come into force on 1 July 2018, although there have been calls for it to be delayed to 2023 due to the need to build sufficient data storage facilities. 82   Walden, n 65, at 4.224 et seq. 83   ie The Data Retention (EC Directive) Regulations 2009, SI 2009/​859 (‘2009 Regulations’). 84   As of November 2017, the government has issued retention notices to fewer than twenty-​five operators. See Consultation 2017, at 14.

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obtaining, generation, or processing of the retained data (s 87(9)), which represents an important expansion of scope from the 2009 Regulations, which only applied to communications data ‘generated or processed . . . in the process of supplying the communication services concerned’ (reg 3). The IPA potentially enables the government to require an operator to redesign its systems to obtain communications data that would not come into existence simply through the normal operation of the service, but can be specifically requested to aid potential future investigations. An operator subject to a retention notice has obligations to take appropriate measures to secure the retained data against accidental or unauthorized access or disclosure and destroy it once the retention period expires, unless otherwise authorized by law (s 92). While such security obligations would seem a normal element of the regime, echoing general and sectoral obligations under data protection law, the CJEU raised concerns about this when invalidating the Data Retention Directive. The Court noted that the measure ‘permits those providers . . . to have regard to economic considerations when determining the level of security which they apply, as regards the costs of implementing security measures.’85 It would seem possible to interpret this concern in three different ways: either that mass data retention can never be maintained sufficiently securely and therefore should not be embarked upon; that private sector entities are not capable of being trusted to maintain data securely, due to economic considerations; or that rules should be adopted that require service providers to secure data without reference to economic considerations. Each seems highly problematic. First, because we permit (and expect) operators to retain more sensitive data on our behalf (eg communications content); second, because it implies that were the public sector to be responsible for retention it would not have mind to cost considerations, which seems unrealistic; and third because economic considerations cannot simply be disentangled from being a relevant factor in security engineering. 13.3.2.2  Ex post obligations: interception, acquisition and equipment interference Where a service provider has been made subject to an ex ante obligation, the IPA grants rights to certain LEAs to request data from, or require certain conduct of, operators. Requests for data can be distinguished into ‘interception of communications’, ie content, and the acquisition of communications data, ie traffic data. Conduct-​related requests are in respect of ‘equipment inference’ and ‘national security notices’. A distinction is also made between ‘targeted’ and ‘bulk’ requests, the latter being directed at a much larger selection of communications, most of which concern persons not under investigation. Given the vast potential

  DRI, at para 67.

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for collateral privacy intrusion, the regimes governing ‘bulk’ data collection and equipment interference are much more narrowly prescribed.86 While interception and acquisition involves the direct obtaining of data from an operator’s systems, equipment interference is primarily directed at obtaining data from equipment being used by a suspect, such as a mobile device or network. As such, the role of the operator in equipment interference is more facilitative, assisting the LEA to carry out the equipment interference in order to enable the LEA to obtain communications, equipment data, or any other information.87 Indeed, the applicable code of practice notes that in certain situations the LEA may have to choose whether to acquire data with the assistance of an operator or independently, a decision that should include considerations of proportionality.88 The Code details such proportionality criteria including the need to cause ‘least possible interference to . . . others’, which could be read as steering LEAs away from obtaining assistance; as well as whether the conduct has any implications ‘for the privacy and security of other users of equipment and systems’ (4.18), on which an operator would seem well placed to advise. Yet again, service providers can have a mediating role in governing the User–​State relationship. The conditions for the issuance and implementation of warrants and notices under the IPA are beyond the scope of this chapter, but it is worth noting that the recipient service provider will not be in a position to challenge the validity of the grant of the warrant or notice, eg with regard to purpose or proportionality, but only in relation to procedural irregularities on the face of the documentation or its service.89 Indeed, the IPA imposes an obligation on an operator to report ‘any relevant error’90 to the Investigatory Powers Commissioner (s 235(6)). Finally, service providers are under a duty not to disclose the existence or content of any notice or warrant they have received, although the consequences differ between the ex ante obligations, which are enforceable through civil proceedings,91 and the ex post obligations, for which disclosure is a criminal offence.92 This reflects the fact that an unauthorized disclosure in the latter case could interfere with a live investigation.

  IPA, Pt 6.   Ibid, at s 99(2). A ‘communication’ is defined at s 135, while ‘equipment data’ is defined at s 100. 88   Home Office, ‘Draft Equipment Interference Code of Practice’, February 2017, at 7.11. 89   eg under the Home Office code of practice under RIPA, Acquisition and Disclosure of Communications Data (March 2015), details of what a notice should include are specified (at 3.47). 90   IPA, s 231(9), which is defined as non-​compliance by a public authority with a requirement, which is subject to review by a Judicial Commissioner, and is identified in a code of practice. 91   Ibid, at s 95(5), regarding data retention, and s 255(8) regarding a technical capability notice. 92   Ibid, eg at s 59 (interception), s 82 (acquisition of communications data). 86 87

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13.4  SERV IC E PROV IDER – ​U SER While it is beyond the scope of this chapter to offer a detailed examination of the general data protection regime and its potential applicability to the different parties discussed in this chapter,93 it is important to understand the status of a service provider under data protection law, since the general applicability of the regime differs depending on the nature of the role they play. EU data protection law distinguishes between a ‘controller’ and a ‘processor’ of personal data. The former is the person that ‘determines the purposes and means’ of the processing, while the latter processes the data on the controller’s behalf.94 Under the DPD regime, the regulatory obligations reside solely with the controller, while the processor is only subject to contractual obligations (Article 17(3)). Under the GDPR, this changes somewhat, with the processor being made subject to certain direct regulatory obligations (Article 28), although the general model remains the same. However, in the PEC Directive and the ePrivacy proposal, the controller/​processor distinction is not expressly used in the substantive provisions to distinguish the respective roles of the service provider, subscriber, or user.95 This potentially extends liability for non-​compliance to persons acting in the role of a processor. Under PECR, for example, it states that ‘a person shall neither transmit, nor instigate the transmission of’ unsolicited communications (reg 20), which could include an intermediary service provider who supplies a facility to enable the calls to be made.96 In a traditional telecommunications context, a service provider would likely be characterized as a processor in respect of the communications content they transmit on behalf of their users, but a controller in respect of subscriber data and traffic data.97 However, as a processor, a service provider could only act on the instructions of the controller, unless permitted by law,98 which would permit a service provider to disclose communications content under a law enforcement order, such as an interception warrant, or where an express compliance exemption is provided for.99 Given these constraints, service providers may want to be

93   See eg Rosemary Jay’s Data Protection Law & Practice (4th edn, Sweet & Maxwell, 2014), and Guide to the General Data Protection Regulation (Sweet & Maxwell, 2017). 94   GDPR, at Art 4(7) and (8) respectively. 95   Recitals 10 and 32 of the PEC Directive reference the roles of controller and processor. 96   Such an outcome would require evidence of the required fault on behalf of the intermediary, which is more likely to be that of intention rather than knowledge. 97 98   DPD, at recital 47.   DPD, at Art 16 and GDPR, at Art 28(3)(a). 99   Under the Data Protection Act 1998 (DPA), s 1(4), a person on whom an obligation to process data is imposed by law, becomes the data controller in respect of that data and processing purpose; while under s 29(3), a data controller is exempt from its non-​d isclosure obligations where it is for the purpose of the prevention or detection of crime.

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a controller in respect of customer content, to enable them to have the freedom to determine certain processing purposes, while accepting contractual restrictions over the extent of such processing. As the scope of the regulated activity (ie the provision of electronic communication services) is extended to cover a much wider range of service providers, especially those for whom the communication service is simply a ‘minor ancillary feature’, then these roles will inevitably become more fluid and complex to determine and apply in respect of particular processing purposes and circumstance.100

13.4.1  Processing restrictions As a controller, the processing of subscriber data by a service provider is subject to the general data protection regime. For traffic and location data, however, processing is subject to additional controls over further processing under the PEC Directive. These controls effectively treat traffic and location data in a similar fashion to other ‘special categories of data’ under EU law, such as health and racial and ethnic origin data.101 For traffic data, the default position is that it should be erased or rendered anonymous ‘when it is no longer needed for the purpose of the transmission’ (Article 6(1)), which echoes the general prohibition on processing ‘special categories’ of data. A  service provider may depart from this default position on certain limited grounds of necessity or consent. In terms of necessity, subscriber billing and interconnection payments is the only permitted purpose, with the time period extending only for so long as the payment can be pursued or challenged (Article 6(2)).102 The A29WP has stated that this should be interpreted as permitting routine storage for a maximum six months, with only disputed cases being processed for longer.103 Processing of traffic data is permitted for the purpose of the marketing of electronic communication services or the provision of ‘value-​added services’, but only with the consent of the relevant subscriber or user, and only for so long as is necessary for such purposes (Article 6(3)). The restriction on the type of services that can be marketed is designed to prevent service providers exploiting their position to become a de facto channel through which other products and services are marketed, whether on behalf of themselves or third parties. Given that any consent must

100  See Kuan Hon, W, Millard, C, and Walden, I, ‘Who is Responsible for “Personal Data” in Cloud Computing?—​The Cloud of Unknowing, Part 2’, (2012) 2(1) International Data Privacy Law, Vol. 3. 101   DPD, at Art 8(1) and GDPR, at Art 9(1). Referred to as ‘sensitive personal data’ under the DPA, s 2. 102   Note that this period may differ from any regulatory obligation to maintain billing records, see n 79 above. 103   Opinion 1/​2003 ‘on the storage of traffic data for billing purposes’ (WP69), 29 January 2003.

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be ‘freely given, specific and informed’,104 users or subscribers must be able to withdraw their consent at any time and be given appropriate information (Article 6(4)). The processing of traffic data for the permitted purposes under Article 6 is restricted to the service provider or any person ‘acting under the authority’ of the provider (Article 6(5)), which has been interpreted as meaning as a ‘processor’ under the DPD.105 As such, traffic data cannot be disclosed to another controller for further processing for its own purposes. This significantly erodes the potential commercial value of such data, which is one reason why the expanded scope of the ePrivacy proposal has generated such opposition from certain sectors.106 Finally, traffic data may also be disclosed to a national regulator for telecommunications in order that it may discharge its duties to settle disputes (Article 6(6)).107 For location data, ie non-​t raffic data, service providers are only able to process it where it is either rendered anonymous or with the consent of the user or subscriber for the purposes of providing a value added service (Article 9(1)). Since the PEC Directive is only applicable to the provision of public electronic communication services, the restrictions on processing location data are not applicable to other types of service providers, such as an ‘information society service’, where the telecoms operator is acting as a ‘mere conduit’ in respect of the processed location data.108 However, while traffic data can only be processed under the authority of the ECS provider,109 location data can be processed under the authority of the third party providing the value added service.110 This distinction could potentially mean that the ‘third party’ can be a controller of the data, acting jointly or independently of the ECS provider or, alternatively, the provision could be read to mean that the ‘third party’ is a processor on behalf of the ECS provider, but can appoint a sub-​processor to carry out processing. As well as having the right to withdraw such consent at any time, a user should have the capability ‘using a simple means and free of charge’ of refusing the processing of their location data each time they connect to the network or transmit a communication (Article 9(2)). This level of granular consent illustrates the extent to which location data is viewed as ‘very sensitive’ data going to the heart of our private life.111   DPD, at Art 2(h), GDPR, at Art 4(11).   See Case C-​199/​12, Josef Probst v mr.nexmet GmbH, 22 November 2012 [2013] CEC 913. 106   eg . 107   ie Framework Directive, at Arts 20 and 21. 108   See A29 Working Party Opinion 13/​2011  ‘on Geolocation services on smart mobile devices’ (WP 185), at 4.2.1. 109   PEC Directive, Art 6(5) and PECR, reg 8(2). 110   PEC Directive, Art 9(3) and PECR, reg 14(5)(a)(ii). 111   A29WP, Opinion ‘on the use of location data with a view to providing value-​added services’ (WP 115), 25 November 2005. 104 105

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13.4.2  Data security Data security is an integral element of all data protection regimes. Under EU law, a controller is obliged to implement ‘appropriate technical and organisational measures’ to protect personal data against accidental, unlawful or unauthorized loss, alteration, or disclosure.112 Data security is also recognized as being integral to the position of telecommunication networks and services as critical national infrastructure, on which users and interconnected networks are highly dependent.113 While this section focuses on the former, ie security as privacy, the latter, ie security as integrity, also results in the imposition of obligations and liabilities on service providers, some of which substantially overlap with requirements designed to protect communications privacy.114 Under the PEC Directive, the general obligation to maintain security measures is repeated and elaborated upon in respect of providers of ‘publicly available electronic communication services’ (Article 4(1)).115 In the original measure, the additional obligation simply comprised a requirement to inform subscribers of any additional security risks they faced when communicating (Article 4(2)). The 2009 reforms substantially expanded the security obligations on service providers, primarily through a security breach notification requirement. However, in its ePrivacy proposal, the Commission has proposed their removal to avoid duplication with the GDPR.116 The concept of security breach notification obligations originates from California in 2002.117 For the service provider, a requirement to notify is seen as incentivizing good data security practices, as well as countering a natural tendency to keep such matters secret. From the data subject’s perspective, notification enables the potential ‘victim’ to take steps to mitigate any harm. The PEC Directive adopts a two-​stage approach to notification (Article 4(3)), which has been further

  DPD, at Art 17, GDPR, at s 2.   See Directive 2002/​21/​EC on a common regulatory framework for electronic communications networks and services (as amended in 2009) (Framework Directive), at Chapter IIIa ‘Security and Integrity of Networks and Services’, Arts 13a and 13b. See Communications Act 2003, ss 105A–​105D, also Ofcom guidance (8 August 2014) and update (18 December 2017). 114   See Directive 2016/​1148/​E U concerning measures for a high common level of security of network and information systems across the Union, OJ L 194/​1, 19 July 2016 (NIS Directive). The NIS Directive is applicable to ‘operators of essential services’ and ‘digital service providers’ that are not public communications networks or publicly available electronic communication services (Art 1(3)), although these terms include an internet exchange point’, which interconnect IP networks, and a ‘cloud computing service’ (Annex II and III), which are clearly integral to modern communication systems and services. 115   Regarding compliance, see ENISA report, ‘Analysis of security measures deployed by e-​communication providers’, December 2016. 116 117   ePrivacy proposal, at 1.2 and 3.5.   California Civil Code § 1798.29 and 1798.80 et seq. 112 113

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elaborated through a Commission Regulation.118 First, the provider must notify the competent national authority ‘without undue delay’, which has been further defined as ‘no later than 24 hours after the detection of the personal data breach, where feasible’.119 This was examined in TalkTalk Telecom Group plc v Information Commissioner, where the Tribunal held that a customer’s letter notifying the operator of a breach was sufficient awareness to trigger the notification obligation, rather than allowing the operator to wait until it had carried out its own investigation.120 Second, if the breach is ‘likely to adversely affect’ the subscriber or user, which includes legal persons as well as individuals, then the provider is required to notify those affected persons.121 Were it to decide that notification was not necessary, its decision can be overruled by the authority, which can then order notification. This second stage is not required if the service provider can satisfy the authority that any data disclosed or obtained as a result of the breach would not be intelligible to any third party, because the data has been protected through measures such as encryption. Notification to the authority must include details of the consequences of the breach and the measures taken, or proposed, to address the breach; while affected persons must be told at least the nature of the breach, recommended measures to mitigate any potential adverse consequences, and contact points to obtain further information.122 This breach notification obligation is applicable to a service provider regardless of whether it is acting as a controller or processor with respect to the relevant data, which differs from the position under the GDPR, where the controller has the obligation to notify the authority and data subjects (Articles 33 and 34), whereas the processor is only required to notify its controller (Article 33(2)). This creates an anomaly between the two instruments, which the Commission proposes to address by removal of the sectoral breach notification requirement. In addition to security breach notification, the PEC Directive grants a right of audit to national supervisory authorities (Article 1a). Under UK law, the results of such audits can be made public.123 This sectoral power will no longer be necessary when the GDPR comes into force, since it grants a generalized power of audit to supervisory authorities (Article 58(1)(b)).

118   Commission Regulation (EU) No. 611/​2013, OJ L 173/​2 , 26 June 2013 (‘Notification Regulation’), adopted under Art 4(5) of the PEC Directive. 119   Ibid, at Art 2(2), which also states that detection is deemed when the provider has ‘sufficient awareness’. 120   EA/​2016/​0110, 30 August 2016. 121   Commission Regulation (EU) No. 611/​2013, n 118, at Art 3(2), indicating the circumstances that should be taken into account when assessing such likelihood. 122   Ibid, at Annex I and II. 123  eg SSE Energy Supply Limited (Retail Telecoms), .

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13.4.3 Transparency Security breach notification is just one element of a broader raft of transparency obligations that a controller has towards a data subject, to enable the latter to exercise control over their personal data. Under the DPD, transparency was primarily subsumed within the concept of ‘fair’ processing, but has become a distinct principle under the GDPR.124 As noted in the previous section, service providers are required to inform subscribers of any residual risks to their personal data that would not be addressed by security measures taken by the service provider (Article 4(2)). The examples given are accessing ‘an open network such as the Internet or analogue mobile telephony’ (recital 20); the latter reflects the state of technological development at the time of the original measure. This transparency obligation is the only security-​related provision retained in the ePrivacy proposal.125 Under EU ‘Net Neutrality’ rules,126 providers of ‘internet access services’ have an obligation to be transparent in any contract about how any traffic management measures could impact the privacy of end-​users and the protection of their personal data (Article 4(1)(a)). The Body of European Regulators, BEREC, has stated that such information should include the types of personal data involved and the measures taken to protect such data.127 These obligations are supplementary to the general information requirements for controllers under the GDPR.128

13.4.4  Monitoring users While Section 13.3 examined the User–​State relationship in respect of the interception of communications, a service provider may also engage in conduct for certain purposes that could amount to interception. In an age of behavioural online advertising, message content may be reviewed in order to target adverts; for cybersecurity reasons, to prevent spam or malware; or to enhance a system’s algorithmic modelling of customer conduct. Of these purposes, the PEC Directive only expressly recognizes the prevention of crime and the ‘unauthorised use of the electronic communication system’ as legitimate reasons for interfering with the confidentiality of a communication (Article 15(1)). Alternatively, the consent of the communicating parties would legitimize any interception activities. However, consent-​based interception is problematic for a number of reasons: the standard

125   Arts 5(1)(a) and 12.   Art 17.  Regulation (EU) 2015/​2120 laying down measures concerning open internet access, OJ L 310/​1, 26 November 2015. See further Chapter 15. 127   BEREC Guidelines on the Implementation by National Regulators of European Net Neutrality Rules, August 2016, at paras 135–​136. 128   Arts 13 and 14. 124 126

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for obtaining a valid consent under data protection law is high, and raised under the GDPR; obtaining consent from non-​subscribing users is very difficult, and consent can always be withdrawn. European and UK law permit consent-​based interception where both parties have consented.129 The European Commission challenged UK law for being non-​ compliant with EU law, because the original provision in RIPA enabled interception on the basis of ‘reasonable grounds for believing’ that consent had been given.130 This was amended in 2011 and the concept of consent is now that under data protection law. UK law has also long recognized that interception may occur either incidental to, or in the course of, the provision of services.131 Under the IPA, an operator is permitted to intercept a user’s communications for one or more of the following purposes: • Relating to the provision or operation of the service; • Relating to the enforcement of any enactment relating to the use of the service or the content transmitted by the service; or • Aimed at preventing or restricting the viewing or publication of content transmitted by the service (s 45). The scope of the first purpose seems particularly unclear since, subject to compliance with general data protection laws, an operator may have strong commercial incentives to tie the provision of a service to an act of interception, such as monitoring communications for advertising purposes. Such uncertainty becomes greater as the definition of what constitutes a ‘telecommunication service’ has been extended to encompass certain OTT communications services, such as Gmail, whose revenue model for the service is based on advertising (eg ‘cost per click’) rather than end-​user subscriptions. In terms of preventing the viewing or publication of content, this clearly engages an individual’s right to freedom of expression as much as their communications privacy.132 While the IPA renders such conduct by operators lawful, questions remain whether it would be lawful under data protection law without either the consent of the users of the service or some other legal authorization.133 An example of

129  See A v France (1994) 17 EHRR 462 and the IPA, s 44. By contrast, under US law interception is lawful if only one party has given prior consent (18 USC § 2511(2)(c)). 130   Commission Press Release (IP/​10/​1215), ‘Commission refers UK to Court over privacy and data protection’ (30 September 2010). 131   eg Telecommunications Act 1984, s 45(1): ‘A person engaged in the running of a public telecommunication system who otherwise than in the course of his duty . . .’ 132   In terms of ECHR, Art 8, see Golder v United Kingdom (1979) 1 EHRR 524: ‘Impeding someone from even initiating correspondence constitutes the most far-​reaching form of “interference” ’ (para 43). 133   See A29WP Opinion 2/​2006 ‘on privacy issues related to the provision of email screening services’ (WP 118), 21 February 2006, at III(c).

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the latter would be an injunction obtained by rights holders under the Copyright Designs and Patent Act 1988, s 97A, to block or impede access by subscribers and users to infringing content being streamed over the internet.134 However, the CJEU has held that an internet filtering system would be unlawful were it to be applicable to all communications; applied indiscriminately to all customers; used as a preventative measure and for an unlimited period.135 Under the ePrivacy proposal, access to communications content is presumed to generate ‘high-​r isks to the rights and freedoms of natural persons’ and therefore any such processing would require user consent and it must not be possible to provide the service without such processing; or with the prior consultation with the data protection supervisory authority, under a procedure detailed in the GDPR (Article 36(2) and (3)).136 The former combines consent and necessity, which raises the legitimacy threshold beyond that required for any other type of personal data, including the ‘special categories’ under the GDPR. The latter is a quasi form of prior authorization, which to date has only been required where state agencies are involved. Were the current ePrivacy provisions on communications content to be adopted, UK service providers will be constrained to a much greater degree than under existing law, which is likely to reduce their ability to generate value from their customers.

13.4.5 Directories Under the New Regulatory Framework, the provision of directories of subscribers is a part of universal service provision, as is a right for subscribers to be included in such directories.137 From a data protection perspective, however, such directories represent a public source of personal data about the subscriber, containing their telephone number and home address, made available in either printed or electronic form or via a directory enquiry service. To reconcile these potentially divergent interests, the PEC Directive requires that subscribers be fully informed before being included in a directory, including any functionality that the directory may have, such as search functions, or transmission to a third party, such as a competing provider of a directory enquiry service (recital 39 and Article 12(1)). Subscribers should then be free to choose whether to be included in the directory or not, which data relating to them is included, and to correct or withdraw such

 eg FAPL v British Telecommunications & ors [2017] EWHC 480 (Ch).   Case C-​70/​10, Scarlet Extended SA v Societe Belge des Auteurs, Compositeurs et Editeurs SCRL (SABAM) [2011] ECR I-​11959. 136   ePrivacy proposal, at recital 19 and Art 6(3). 137   Directive 2002/​22/​EC on universal service and users’ rights relating to electronic communications networks and services (as amended in 2009) (‘Universal Services Directive’), at Arts 5 and 25. 134 135

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data, all at no charge (Article 12(2)). As with traffic and location data, this provision treats subscriber data akin to sensitive data, legitimizing the processing solely on the basis of consent.138

13.5  SUBS C R IBER – ​U SER Of the four privacy relationships examined in this chapter, the most complex is that between a subscriber to a communication service and a user of that service. A subscriber is the party that has a contract with the service provider and, as already mentioned, may be a natural or a legal person.139 Payment may be made under the contract, whether on a prepaid or post-​paid basis, or there may be no payment where the counter-​performance by the user is being exposed to advertising. While a user could also be a legal or natural person,140 for the purposes of the PEC Directive, a user only means natural persons. The two most obvious examples of the Subscriber–​User relationship are that between an employer and employee and between a parent and child. An employee may call friends from their desktop during work hours to chat about the weekend or access the internet to search for a holiday; while parents may provide their child with a mobile device designed to track them when out and about.141 In what circumstances, however, should a user be able to preserve the privacy of their communications activities when using a service for which the subscriber has contracted and may be required to pay for? Relying on the consent of a user to any monitoring can be even more problematic than in other areas of communications privacy. In an employment context, can consent ever be said to be ‘freely given’; while in a family context, when does a child have the capacity to grant consent?142 The PEC Directive addresses two specific scenarios, one primarily applicable to employer–​employee relations; the other more relevant to that of parent–​child.

13.5.1  Lawful business practices The first scenario concerns the recording of communications and related traffic data, a form of interception. Such recording clearly interferes with the privacy

138  The scope of such consent is examined in Case C-​5 43/​0 9, Deutsche Telekom AG v Bundesrepublik Deutschland, 5 May 2011, at paras 54–​67. 139 140   Framework Directive, at Art 2(k).   Ibid, at Art 2(h). 141   eg Family Locator: 142   Under the GDPR, consent is not freely given where there is a ‘clear imbalance’ between the data subject and controller (recital 42); while children’s consent is subject to a special rule (Art 8).

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relationship between the communicating parties (examined further below). However, in this particular circumstance, the purpose of the recording must be ‘to provide evidence of a commercial transaction or of any other business communication’ (Article 5(2)), which is generically referred to as a ‘lawful business practice’. As noted earlier, while business communications are recognized as potentially comprising part of a person’s private life, the degree to which they should be protected is considered to be of a lower order, in part because such communications generally involve one of the communicating parties, an employee, utilizing the communication services of their employer. The privacy interests of the communicating parties may therefore be justifiably interfered with to protect the ‘business practice’ interests of the subscriber, ie the person that both enables and provides the principal reason for the communication taking place. Under UK law, this provision was transposed into national law through secondary regulations made under RIPA, and subsequently the IPA, generally referred to as the ‘lawful business practice’ regulations.143 These regulations permit a ‘system controller’ to record or monitor ‘relevant activities’ solely for one or more specified purposes, including to ‘ascertain compliance with regulatory or self-​ regulatory practices or procedures’, for the ‘prevention and detection of crime’, or ‘for the purpose of investigating or detecting the unauthorised use of that or any other telecommunication system’ (reg 3(1)). Such monitoring does not require the consent of the parties, which is an alternative basis for lawful interception,144 but it does require ‘all reasonable efforts’ to be made to notify users of the telecommunication system (reg 3(2)(c)). Another legitimate purpose for monitoring is to ‘ascertain or demonstrate the standards which are achieved or ought to be achieved by persons using the system in the course of their duties’ (reg 3(1)(a)(cc)), ie employee monitoring. As such, issues of communications privacy become entwined with issues of employment law. Both the Article 29 Working Party and the Office of the Information Commissioner (ICO) have issued guidance that examines communications privacy within the wider context of employee monitoring.145 More recently, the issue has been examined by the ECtHR in Bărbulescu v Romania,146 where an employee was dismissed for sending personal messages using a corporate Yahoo! Messenger account. The

143  RIPA, s 4(2), IPA, s 46. The Telecommunications (Lawful Business Practice) (Interception of Communications) Regulations 2000, SI 2000/​2699, and The Investigatory Powers (Interception by Businesses etc. for Monitoring and Record-​keeping Purposes) Regulations 2018, SI 2018/​356. 144   RIPA, s 3(1), IPA, s 44. 145   See Working Document ‘on the surveillance of electronic communications in the workplace’ (WP 55, 29 May 2002) and Opinion 2/​2017 ‘on data processing at work’ (WP 249, 8 June 2017). Also the ICO’s Employment Practices Code, Part 3 ‘Monitoring at work’. 146   Judgment of the Grand Chamber, 5 September 2017 (Application no. 61496/​0 8).

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ECtHR held that the state had failed to adequately protect the individual’s Article 8 rights. Despite the fact that the employer had told the employee that he should not use work computers for personal use, he had not been give prior notification that enforcement of this restriction could result in the monitoring of his communications, especially the content of his messages. However, the Court went further and noted that even if such notification had been part of the original restriction, ‘an employer’s instructions cannot reduce private social life in the workplace to zero’ (para 80). This suggests that employers must provide employees with some di minimis means of communicating for personal reasons during work hours.

13.5.2  Itemized bills The second scenario concerns itemized billing. Where a subscriber receives an itemized bill, it will generally detail the different categories of call made and their associated cost. Indeed, such detail may be provided to evidence compliance with a regulatory requirement to ensure that subscribers ‘can monitor and control expenditure’, as is their right.147 As a consequence, subscribers may be given a record of calls made and received by users of the service. To try and protect users from such disclosure, the PEC Directive offers two potential solutions. First, the subscriber shall have the right not to receive an itemized bill (Article 7(1)), which places the onus on the subscriber to choose to refrain from receiving such data. Second, Member States are made subject to a general obligation to implement measures to ‘reconcile the rights of subscribers . . . with the right to privacy of calling users and called subscribers’ (Article 7(2)). While it is left to the Member States to determine what measures to take, the provision calls for sufficient availability of ‘alternative privacy enhancing methods of communications or payment’, specifically referencing the deletion of certain digits from a billed number and calling cards (recital 33). Under UK law, this obligation to take measures has been placed on Ofcom.148 Under the General Conditions of Entitlement, a service provider must therefore not include in an itemized bill calls made that are free of charge to the subscriber, such as a helpline number; while the obligation to provide an itemized bill does not apply where the subscriber is accessing the service on a pre-​paid-​basis.149

147   Universal Services Directive, at Art 10(2) and Annex, Part A(a). See also the CJEU decision C-​411/​02, Austria v Commission (2004) ECR I-​8155, in which Austria was held to have failed in its obligation to ensure itemized bills ‘sufficiently detailed to ensure effective verification and control by the consumer’. 148 149   PECR, at reg 9(2).   GCE, at Conditions 12.4 and 12.5 respectively.

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13.5.3  Call-​blocking The provisions on lawful business practices and itemized bills are designed to protect the user’s privacy from the subscriber. The PEC Directive also contains a provision offering protection in reverse. Service providers are required to offer subscribers, by a simple means and free of charge, the ability to prevent users automatically forwarding calls to the subscriber’s terminal.150 Preventing such ‘nuisance’ calls (recital 37) can be viewed as a classic expression of privacy as the ‘right to be let alone’,151 which is elaborated further in the PEC Directive with respect to unsolicited communications in the User–​User relationship (at Section 13.6.3 below). The ePrivacy proposal removes any reference to the need to reconcile the interests of the subscriber and user, which implies that the Subscriber–​User relationship is considered to require no further regulatory intervention.

13.6  USER – ​U SER The final privacy relationship, between the communicating parties, has a more limited direct impact on service providers, but has generated some of the most high profile communication privacy issues in recent years, particularly in relation to ‘cookies’ and ‘spam’. The ‘cookie’ rule has resulted in large numbers of websites presenting banners and other mechanisms to site visitors about how the site deploys cookies and requesting consent, while controlling unwanted, unsolicited calls and emails remains a major concern for the general public. The latter issue engages service providers because of the potential for network congestion.

13.6.1 Cookies At the time the PEC Directive was being considered, at the beginning of the century, the issue of ‘cookies’ had come to public attention as usage of the World Wide Web was exploding. A cookie is a simple text file which a website can deposit, or ‘set’, on a site visitor’s web browser in order to improve the user experience, by enabling the site to identify returning users through an exchange of data held on the visitor’s device. There is a wide range of different cookies being used now, as well as many other techniques that operate in different ways but have similar objectives, ie to identify, measure, and track the conduct of visitors interacting with an online resource.152 The policy and regulatory concern with such techniques

  Art 11 and PECR, reg 17.   Warren, S and Brandeis, L, ‘The Right to Privacy’, (1890) 4 Harvard Law Review 193. 152   Broadly, cookies are distinguished into session and persistent, first and third party. 150 151

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were two-​fold:  their deployment was not transparent to users; and the placing and accessing of data on the user’s device, which is itself part of a person’s private sphere. Indeed, the original standard that defined such techniques was specifically designed to be hidden from the user for reasons of efficiency. Such lack of transparency was seen as fundamentally unacceptable from a privacy and data protection perspective,153 so the PEC Directive included a provision to address this concern. The original provision required that those that use electronic communication networks ‘to store information or to gain access to information stored in the terminal equipment of a subscriber or user’ must provide clear and comprehensible information about the purposes for such processing and a right to refuse such processing (Article 5(3)). The right to refuse was qualified to the extent that any such processing was necessary to enable or facilitate the transmission of a communication or to provide an ‘information society service’ that had been explicitly requested. However, as with all transparency obligations, websites could comply by simply adding the required information to the details already included in privacy policies, which are rarely read. Notification was therefore increasingly viewed as insufficient to address the privacy concerns and, in 2009, the provision was strengthened to require that consent be obtained. This then led to the appearance of banners, pop-​ups, and other creative solutions to give users an opportunity to consent, whether by opting in or opting out.154 Ironically, the ICO initially chose to adopt an explicit consent approach to cookies, but promptly experienced a huge loss of analytics about how its own website was being used by the public, as most visitors chose not to opt in! In 2013, the ICO eventually changed its stance and adopted an opt-​out, implied consent approach.155 The ePrivacy proposal now devotes a whole article to the issue. It adopts a default position that collecting data from a user’s terminal equipment, even where the device itself emits the data, or using its processing capabilities is prohibited unless an exception is applicable. Following the general scheme of the Data Protection Directive and the GDPR, the justifications for processing can be broadly divided into consent and certain specified necessities. In terms of consent, the ePrivacy proposal makes the concession that its expression may be obtained ‘by using the appropriate technical settings of a software application enabling access to the internet’ (Article 9(2)), which would replace the need for some of the cookie

153   eg A29WP Recommendation 1/​99 ‘on invisible and automatic processing of personal data on the internet performed by software and hardware’ (WP17), 23 February 1999. 154   See and . 155  See .

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banners and other mechanisms that are currently used. However, users will need to be notified at six-​monthly intervals of their right to withdraw their consent (Article 9(3)). The necessity-​based justifications include those already present, as well as web audience measuring carried out by the provider of the requested information society service (Article 8(1)(d)). With regard to device emissions, the classic example of the potential for abuse involved Google’s Street View service, when it was discovered that between 2008 and 2010 the mapping cars were also collecting payload data, such as passwords and credit card details, sent over open WiFi networks.156 The ePrivacy proposal refers to the emergence of new services that track a person’s movement based on device scanning (recital 25). As a consequence, it states that the only justification for collection is in order to establish a connection or where ‘a clear and prominent notice is displayed’ (Article 8(2)). The latter requirement is similar to the approach taken to the collection of images by CCTV cameras.157 In both cases, the unique feature is that an individual is outside his home in a public space, where expectations of privacy are accordingly reduced.158

13.6.2  Calling line identification Calling line identification (CLI) involves the presentation of the number of the calling party on the device of the called party, primarily when using voice services, and is a form of traffic data. While privacy law classically protects this relationship between the communicating parties, data protection law is more concerned with empowering individuals to control the disclosure of their data and therefore provides for privacy options for each party to the communication exercisable against the other. Under the PEC Directive (and unchanged in the ePrivacy proposal), the calling party is able to withhold the disclosure of their device CLI, to prevent the called party obtaining information about from where the call originates (Article 8(1)). Conversely, the called party must be able to prevent presentation of CLI for incoming calls, prevent disclosure of the identity of the connected line (ie the terminating device) and reject calls being connected to his device that do not disclose the CLI.159 While the latter two options are designed to protect the privacy of the called subscriber, the option to prevent disclosure of the incoming CLI is

  See .   ICO, ‘In the picture: A data protection code of practice for surveillance cameras and personal information’, June 2017. 158  See Von Hannover v Germany (2005) 40 EHRR 1 and Von Hannover v Germany (2012) 55 EHRR 15. 159   PEC Directive, at Art 8(2), (3), and (4) respectively. 156 157

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designed to enable called subscribers who ‘have an interest in guaranteeing the anonymity of their callers’, such as helplines (recital 34). This privacy option can therefore be seen as another example of regulatory intervention in the Subscriber–​ User relationship (discussed above at Section 13.5), but in this case the subscriber grants calling users privacy from the subscriber’s own users, ie the call recipient. In each of the privacy options, the capability should be made available on both a per line basis for subscribers and per call basis for users to allow maximum flexibility. To facilitate the exercise of these rights, the service provider is required to offer users a ‘simple means and free of charge’. With CLI, the privacy interests of each party are therefore protected and balanced at an extremely granular level. In the UK, the provision of a CLI facility is governed under the General Conditions of Entitlement and is only applicable to providers of ‘public communications networks’ and only where technically and economic viable (Condition 16).160 However, the data protection requirements under PECR are applicable to any provider of a ‘public electronic communication service’ (regs 10 and 11). While service providers have a legal obligation to offer and publicise such facilities,161 most device manufacturers now offer the option to block disclosure of called ID. In certain situations, the CLI information may have a public interest value beyond that of the privacy interests of the communicating parties. Service providers must therefore ensure that the privacy options can be overridden in certain circumstances, such as the tracing of malicious or nuisance calls or emergency calls.162 To assist the emergency services, a service provider should also be able to override any subscriber or user decision preventing the processing of location data. A  third situation recognized under UK law is in the case of a national ‘emergency’,163 where communication services can be used as a means of sending out emergency alerts to the public. In this case, restrictions on the processing of traffic and location data can be disregarded for a brief period of time.164 In each situation, while the traffic and location data is being generated in the normal course of providing a communication service, data protection rules give subscribers and users qualified rights to control the subsequent use of such data.

160   See Ofcom Guidelines for the provision of Calling Line Identification Facilities and other related services over Electronic Communications Networks (v2), 26 April 2007. 161  PECR, reg 12; eg . 162   PEC Directive, Art 10 and PECR, regs 15 and 16. See also Commission Recommendation (2003/​558/​EC) on the processing of caller location information in electronic communication networks for the purpose of location-​enhanced emergency call services, OJ L 189/​49, 29 July 2003. 163 164   Civil Contingencies Act 2004, s 1.   PECR, reg 16A.

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13.6.3  Unsolicited communications In our ‘always on’ connected society, simply being contacted has become a significant communications privacy issue:  the ‘right to be let  alone’. Wherever we are, at home, work, or otherwise, we can be in constant receipt of unsolicited communications over both voice and data services. In an online environment, ‘spam’ is widely used to denote the vast quantities of emails and other messages received by users. For voice services, cold-​calling as a sales technique has become endemic. Controlling such unsolicited communications is a key national and international policy and regulatory concern, although some measures have engendered opposing concerns about potential inappropriate restrictions on the right to freedom of expression.165 Under the PEC Directive (and retained in the ePrivacy proposal), the use of automated calling systems, fax, or email for ‘direct marketing’ purposes is only permitted with the prior consent of the subscriber or user (Article 13(1)).166 An exception is provided where a person has obtained the contact details ‘in the context of the sale of a product or a service’ and the direct marketing is in relation to the person’s own ‘similar products or services’.167 In this situation, the recipient data subject must be given an opportunity to object ‘free of charge and in an easy manner’ at the time of collection and with each subsequent message (Article 13(2)). In all cases, it is prohibited for a message sender to ‘disguise or conceal’ their identity (Article 13(4)), which has been extended in the UK to include preventing the presentation of CLI on the called line, a right in any other circumstance.168 Service providers are obviously intermediaries in unsolicited communications, as well as being victims and perpetrators in certain cases, so the PEC Directive requires Member States to enable service providers to bring legal proceedings against infringers, as well as subjecting them to penalties where their negligence contributes to an infringement (Article 13(6)).169 Under UK law, a distinction is made between the perpetrator of an unsolicited communication, as user of a ‘line’,170 from the

165   eg the debates surrounding the WCIT, specifically in relation to Art 7 on ‘Unsolicited bulk electronic communications’. See further Chapter 16, at Section 16.3.4.1. 166   On consent, see A29WP Working Document 2/​2013 providing guidance on obtaining consent for cookies (WP 208), 2 October 2013. 167   The A29WP suggests that ‘similar’ be judged from ‘the objective perspective (reasonable expectations) of the recipient’. See Opinion 5/​2004  ‘on unsolicited communications for marketing purposes’ (WP90), 27 February 2004, at 9. Under US law, the equivalent term is ‘established business relationship’ (47 USC § 277(a) (2), defined at CFR §64.1200(f)(5)). 168   PECR, regs 19 and 21, as amended by SI 2016/​524. 169   eg in May 2017, the ICO fined Keurboom Communications Ltd £400,000 for a serious breach of PECR, reg 19. See . 170   PECR, reg 2(4), which includes ‘anything that performs the function of a line’.

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subscriber to that ‘line’ over which the communication is made. Both may be held liable, the subscriber for permitting his line to used,171 although the subscriber’s liability is a form of accessory or secondary liability, where the fault element will differ from that of the principal, generally requiring intent in respect of the aiding and abetting and knowledge in respect of the ‘essential matters which constitute the offence’.172 Similar rules in the US have given rise to a question concerning who is the ‘sender’ of an unsolicited communication. Yahoo! is subject to a class action for sending unsolicited messages in breach of the Telephone Consumer Protection Act.173 In this case, when a user sent a message to another person, the recipient also received a ‘welcome’ message from Yahoo! advertising their services. In this scenario, should the incorporated ‘welcome’ message be viewed as a distinct unsolicited commercial communication, or is the service provider simply taking advantage of an unsolicited communication initiated by the user? In the UK, the ICO has noted a distinction between the sender of a message and the ‘instigator’ of a message, where companies ask message recipients to forward marketing messages to friends and family, so-​called ‘viral marketing’.174 The instigator remains subject to the PECR rules because they have ‘encouraged’ the sending of the message. Applying this to the Yahoo! scenario, by offering users the facility to send messages to persons not using the service, Yahoo! could be considered as having instigated the message. Under UK law, the PECR lays down distinct rules for each type of unsolicited communication:  automated calling systems, facsimile systems, voice call and ‘electronic mail’.175 One mechanism designed to support the regime is the establishment of national ‘registers’ to enable subscribers to opt out of receiving unsolicited communications on a general basis. The ‘Telephone Preference Service’ and related services are operated by the Direct Marketing Association, under contract to the ICO which has the statutory obligation to establish and maintain registers.176 The ePrivacy proposal retains the provisions on unsolicited communications (Article 16), as well as requiring providers of ‘publicly available number-​based interpersonal communication services’ to deploy state-​of-​the-​a rt measures to

172   PECR, regs 19(3), 20(3), 21(2), and 22(4).   Johnson v Youden [1950] 1 KB 544, at 546.   47 USC § 227. See , also . 174   ICO, ‘Guide to the Privacy and Electronic Communications Regulations’, 20 May 2016, at 22. 175   PECR, regs 18–​26. 176   PECR, regs 25–​26. Responsibility for registers was transferred from Ofcom, by SI 2016/​1177. See and . 171

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limit unwanted calls for users and to provide users with the facility to block calls from specific numbers or anonymous sources (similar to the CLI provisions) and prevent automatic call-​forwarding (Article 14).

13.7  CONC LUDING R EM A R K S As this chapter has (hopefully) shown, communications privacy should not be seen as simply a minor branch of privacy and data protection law. Each privacy relationship illustrates different facets of both regimes in uniquely interesting ways. From a privacy perspective, the User–​State relationship and, to a lesser degree, the Service Provider–​Subscriber relationship concerns the conditions under which exceptions to the individual right may operate. Any interference must be in accordance with law, for a legitimate purpose and necessary and proportionate. By contrast, the Subscriber–​ User and User–​User relationships often involve a balancing exercise between the individual rights of both parties, extending beyond privacy to include freedom of expression and other rights. The latter therefore tends to require a more complex and nuanced legal response than the former. Under data protection law, the perspective differs. For the controller, the constraints are similar to privacy with processing always needing to be legitimized through necessity or with a data subject’s consent. For data subjects, the regime enables the exercise of control over their personal data through consent, often implemented through action, using ‘a simple means and free of charge’. Under the general regime, the service provider as controller has to justify the legitimacy of the processing activity. Under the sectoral regime, however, it can be argued that the restricted focus on consent-​based processing, combined with the data subject being a controller in respect of communication content, shifts greater responsibility on to the data subject. Both privacy and data protection law treat different types of data differently (content, traffic, location, and subscriber data), each according to the degree to which such data is perceived to represent our private life; although data protection law has narrowed such differences. While subscriber data seems clearly distinguishable, the case for greater parity of treatment between content and traffic data has become stronger as the latter becomes ever more revealing. Compliance with data protection laws is becoming an ever more important issue for controllers and processors, especially with the substantially strengthened sanctions regime under the GDPR. For communication service providers, the additional constraints under the PEC Directive have long been a source of grievance, when compared with others in the Internet supply chain. If the ePrivacy proposal proceeds in its current form, this additional burden will become applicable

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to a much greater number of controllers. As with consumer protection,177 an argument can be made that the telecommunications sector does not require special data protection rules. The case for this position seems stronger under the GDPR given its detailed and comprehensive nature. While the GDPR supports a sectoral approach, through codes of conduct (Article 40), hard-​w iring tailored rules into a legislative instrument can result in inflexible and out-​dated provisions and overly politicizes the reform process. That said, however, clear legislative provision is a necessity in respect of the User–​State relationship, both to safeguard the rights of individuals, as well as provide legal certainty for service providers. Expecting service providers to respond to appropriately authorised LEA data requests seems relatively uncontroversial. However, two aspects that are far from being settled concern the extent to which non-​domestic service providers can, or should, be obliged to respond to cross-​border data requests, and the extent to which service providers should be subject to ex ante crime prevention obligations impacting system design and data availability.

  See Chapter 9.

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14 CONVERGENCE THE IMPACT OF BROADCAST REGULATION ON TELECOMMUNICATIONS Daithí Mac Síthigh

14.1 Introduction  683 14.2 EU Law—​t he Audiovisual Media Services Directive (AVMSD)  684 14.3 UK Law and Licensing  693 14.4 Content Regulation for Radio and Television  708 14.5 On-​Demand Programme Services  714 14.6 Advertising  720 14.7 Premium Rate Services  728 14.8 Convergence  730

14.1 INTRODUC TION The purpose of this chapter is to explain, in the context of telecommunications law and regulation, the regulation by EU and UK law of audiovisual and radio media services. Overarching principles are found in the Audiovisual Media Services Directive,1 which takes an approach described as technologically neutral, but established two top-​level categories of regulation, for television (or linear) services and on-​demand (or non-​l inear) services. In the case of television services, a wide range of standalone works and comprehensive Sections or chapters on the regulation of broadcasting are available.2 As such, the focus here (with a view to the

1   Directive 2010/​13/​E U on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services, [2010] OJ L 95/​1. The 2010 restatement was a consolidation of the original 1989 Directive with its amendments in 1997 and 2007 (each cited in Section 14.2, below). 2   See for instance Barendt, E, Hitchens, L, Craufurd-​Smith, R, and Bosland, J, Media Law: Text, Cases, and Materials (Harlow:  Pearson, 2014); the chapters by Ballard, T (‘Broadcasting’) and Woods, L (‘Regulation

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interests of readers) is on licensing of content and multiplex services by Ofcom and the handling of complaints about those services, with a bias towards the standard licences for services on cable, satellite, internet, and digital terrestrial platforms, and the regulation of DTT multiplexes and of on-​demand services, as opposed to detailed description of the BBC and the commercial public service broadcasters. Indeed, the European Court of Human Rights has regularly found that the regulation of communications infrastructure can have a real impact on the receiving and imparting of information.3 Section 14.2 reviews the AVMSD, including the determination of jurisdiction, and presents its provisions in summary form, noting further changes now proposed by the European Commission and the potential impact of Brexit. Section 14.3 deals with television services, including selected requirements of the Directive, consideration of each type of licence issued by Ofcom, the regulation of key infrastructure (electronic programme guides and conditional access), and (in brief) public service broadcasting. It also notes the regulation of radio, which is not subject to the Directive. Section 14.4 considers content regulation, while on-​ demand services are discussed in Section 14.5. Advertising (across broadcast, on-​demand and non-​broadcast systems) is the subject of Section 14.6, and this Section also takes up the regulation of sponsorship, product placement, teleshopping and ‘participation TV’. Section 14.7 is somewhat different in that it is about the regulation of premium rate services (PRS). Although a form of content regulation, this is more directly associated with telecommunications law (originally a condition of a telecommunications licence, now a standalone scheme). Finally, Section 14.8 considers current and future developments in the area of regulation and technological convergence.

14. 2  EU L AW —​T HE AUDIOV ISUA L MEDI A SERV IC E S DIR E C TIV E ( AV MSD) 14.2.1  Overview of the Directive The original source for the authority of the EU in this area is the regulation of broadcasting services, or in general terms the freedoms of establishment and to provide services as defined in TFEU Articles 56 and 49. Following consideration of

and extra-​legal regulation of the media sector’ in Goldberg, D, Sutter, G, and Walden, I (eds), Media law and practice (Oxford: OUP, 2009); Keller, P, European and International Media Law (Oxford: OUP, 2011); Oster, J, European and International Media Law (Cambridge: CUP, 2017). 3   Autronic AG v Switzerland (1990) 12 EHRR 485; Mustafa v Sweden (2008) 52 EHRR 803; Yildirim v Turkey [2012] ECHR 2074.

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the principle of broadcasting as a Treaty service,4 and a lengthy debate on the appropriate form of regulation,5 the Television Without Frontiers (TVWF) Directive6 of 1989 represented the first legislative intervention. The AVMSD was adopted in 2007 with a transposition date of 19 December 2009.7 Prior to its adoption, fundamental issues of content regulation (including in relation to material available on the internet) were discussed at length, and the Court of Justice also made a key intervention through its decision in Mediakabel,8 on the status of an emerging platform (near-​v ideo-​on-​demand) and the relationship between Television Without Frontiers and the Electronic Commerce Directive.9 The AVMSD made significant revisions to the original Directive, including the introduction of two tiers of regulation, as discussed in this section. In 2010 the three Directives were consolidated (without further amendment) as Directive 2010/​13/​ EU, and it is that consolidated version which is referred to in this chapter. In 2016, the European Commission proposed further amendments to the Directive; as of the publication of this edition, these proposals are still being considered by the Union’s legislative bodies. The many (and sometimes contradictory10) objectives of the EU’s intervention are best explained in Recital 11, noting the need to ‘avoid distortions of competition, improve legal certainty, help complete the internal market and facilitate the emergence of a single information area’. The Directive applies to ‘audiovisual media services’, further defined as: (a) being under the editorial responsibility of a media service provider, (b) having the principal purpose of providing programmes in order to ‘inform, entertain or educate’ to the general public, and (c) being conveyed by electronic communications networks (adopting the definition from the Framework Directive Article 2(a)).11

  Italy v Sacchi [1974] 2 CMLR 177.   Ward, D, The European Union, Democratic Deficit, and the Public Sphere (Oxford: IOS Press, 2002), 55–​57. 6   Council Directive 89/​552/​EC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities [1989] OJ L 298/​2 3; amended by Directive 97/​36/​EC of the European Parliament and of the Council of 30 June 30 1997 [1997] OJ L 202/​6 0. 7   Directive 2007/​65/​EC amending Council Directive 89/​552/​E EC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities, OJ L 332/​27, 18 December 2007. 8   Mediakabel BV v Commissariaat voor de Media [2005] ECR I-​4 891. 9   Directive 2000/​31/​EC on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market [2000] OJ L 178/​1; see further Chapter 15. 10   On the tension between the ‘free flow’ and ‘cultural policy’ aspects of the Directive, see Oster, n 2, 145. 11   See Chapter 4. 4 5

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This approach does have some substantive consequences for content regulation, meaning that for example, many non-​economic activities are outside the scope of the AVMSD, as are services not making use of networks (eg DVD). Therefore, even though a wide range of audiovisual services across platforms might meet some of the criteria set out in the Directive, many are immediately excluded due to failure to meet other tests; this was the subject of much discussion during the negotiation of the Directive, with the Commission pointing out that it was not proposing to regulate the internet.12 Television Without Frontiers dealt with ‘television broadcasting’ and did not apply to what were termed ‘communication services’ (Article 1(a)). In the 1997 amendments, this definition was retained, although it was noted (at Recital 8) that it was essential that ‘Member States should take action with regard to services comparable to television broadcasting in order to prevent any breach of the fundamental principles which must govern information and the emergence of wide disparities as regards free movement and competition’. But in the AVMSD, which regulates ‘audiovisual media services’ divided into two mutually exclusive sub-​ categories, services are no longer defined in purely technical terms of reception and broadcasting. Instead, a television service (the first category) is defined as an ‘audiovisual media service provided by a media service provider for simultaneous viewing of programmes on the basis of a programme schedule’ (Article 1(1) (e)). Although the language of ‘linear’ is not found, the concept of simultaneous viewing on the basis of a schedule captures its essential aspects. In turn, an on-​ demand (non-​linear) service (the second category) is an ‘audiovisual media service provided by a media service provider for the viewing of programmes at the moment chosen by the user and at his individual request on the basis of a catalogue of programmes selected by the media service provider’. The media service provider is the person who has ‘editorial responsibility for the choice of the audiovisual content of the audiovisual media service and determines the manner in which it is organised’. A programme is defined as moving images (with or without sound) which constitute ‘an individual item within a schedule or a catalogue established by a media service provider and the form and content of which are comparable to the form and content of television broadcasting’. The Directive also sets out what it describes as examples of programmes: ‘feature-​length films, sports

12   Ballard, M, ‘EU regulation attacked as censorship’ The Register 19 May 2006. ; Valcke, P and Stevens, D, ‘Graduated regulation of “regulatable” content and the European Audiovisual Media Services Directive: one small step for the industry and one giant leap for the regulator?’ (2007) 24 Telematics & Informatics 285, 295.

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events, situation comedies, documentaries, children’s programmes and original drama’. Most services in the television category will have been regulated under TVWF. Indeed, the type of near-​v ideo-​on-​demand service at issue in Mediakabel, defined then as a television service, would still be considered a type of television or linear service. However, the definition is less technologically specific than before. On-​demand services will generally have fallen outside of TVWF, but may have been considered information society services under the Electronic Commerce Directive. The key subject of debate during the consideration of the Directive at European level and indeed in implementation and regulation in the UK is that of ‘scope’.13 For example, the common position of the Council of Ministers accepted the general proposal as set out by the Commission, but raised points including that of scope, so as to restrict the application of the new definitions, particularly in the case of user-​generated content.14 The Directive refers to services intended for the public with the potential to have a clear impact on a significant proportion of the public, and—​most significantly—​ that the service be ‘television-​like’. This is included in Recital 17 which is a substantial narrowing of the scope of the Directive: It is characteristic of on-​ demand audiovisual media services that they are ‘television-​l ike’, i.e. that they compete for the same audience as television broadcasts, and the nature and the means of access to the service would lead the user reasonably to expect regulatory protection within the scope of this Directive. In the light of this and in order to prevent disparities as regards free movement and competition, the notion of ‘programme’ should be interpreted in a dynamic way taking into account developments in television broadcasting.

Further recitals encourage a cautious definition of audiovisual media services. Although framed in general terms, they are most likely to be relevant regarding on-​ demand services. Specifically excluded are private correspondence such as email (sent to a limited number of recipients, which seems to suggest that email is not excluded entirely), games of chance, online games, and search engines (Recital 22), standalone text based services (Recital 23), electronic versions of newspapers

13   In particular, see the report prepared for Ofcom: Marsden, C, et al, ‘Assessing Indirect Impacts of the EC Proposals for Video Regulation’ (31 August 2006)  . 14  Council of the European Union, ‘General approach on a proposal for a Directive of the European Parliament and of the Council amending Council Directive 89/​552/​E EC’ (13 November 2006, document 15277/​0 6) .

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and magazines (Recital 28), and services ‘where any audiovisual content is merely incidental to the service and not its principal purpose’ (Recital 22).

14.2.2  Beyond the EU The Directives are applicable within the European Economic Area (EEA), and so bring Norway, Iceland, and Liechtenstein within the AVMS system. (Indeed, as with EU states, a large number of broadcasters addressing audiences in Norway are established in the UK, including the major Norwegian commercial channels, and Norwegian-​language services of global broadcasting companies). The original TVWF Directive was adopted alongside a similar but not identical Council of Europe instrument:  the European Convention on Transfrontier Television. (A ‘disconnection clause’ in the ECTT ensured that EU states would apply the Directive between them, but the ECTT where a non-​EU state was concerned.) Many (but not all) EU states have also ratified the Convention. The ECTT was updated in parallel with the 1997 reforms to TVWF, but an attempt to make further changes in response to the AVMSD foundered on the EU’s objections to Member States ratifying international agreements in areas of the EU’s exclusive external competences.15 Nonetheless, the ECTT (effectively the pre-​AVMS EU law on television services) continues to apply, with particular reference to relations with the non-​EU states that have ratified it (notably Turkey and Ukraine), and perhaps in due course the United Kingdom when it leaves the European Union. (The impact of Brexit on broadcasting regulation is discussed in Section 14.2.5.)

14.2.3  Country of origin and freedom of reception All services regulated under AVMSD are subject to the ‘country of origin’ rule in Article 2.1, ie that services are regulated in their country of origin. Indeed, non-​ AVMSD services under the Electronic Commerce Directive can avail of a similar rule,16 although the regulatory framework for electronic communication services is not based on country of origin.17 The complementary principle of freedom of reception (Article 3)  prevents Member States from applying further regulation to audiovisual media service. While states are required to transpose the Directive, meaning that there will be some similarities between national regulatory systems for audiovisual media services, there may still be situations where a state chooses to go beyond the

15   Mac Síthigh, D, ‘Death of a Convention: Competition between the Council of Europe and European Union in the Regulation of Broadcasting’, (2013) 5 Journal of Media Law 133. 16 17   See further Chapter 15.   See further Chapter 4.

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parameters of the Directive. For example, Swedish law provides for further restrictions on advertising directed at children, and French law requires further use of European content than that required by the Directive.18 This is generally acceptable, but such rules can only apply to those services subject to the jurisdiction of that state (as set out in Article 4), and the state must also be aware that if an audiovisual media service provider is dissatisfied with a non-​AVMSD provision, it can relocate to another Member State while still continuing to be received by audiences within the original Member State. In limited circumstances, states can place restrictions on services regulated in other Member States. The procedures differ as between television and on-​demand services. In the case of television, Article 3(2) allows derogation from the freedom of reception principle where the provisions on minors or incitement to hatred are ‘manifestly, seriously and gravely infringed’ on at least three occasions in a year and subject to a consultation process. The procedure for proscription in the UK involves a notification by Ofcom and a decision by the Secretary of State, and is set out in the Broadcasting Act 1990, ss 177–​178 (for satellite)19 and the Communications Act 2003, ss 329–​332 (for cable, DTT and internet services);20 the power has been exercised on six occasions21 and also considered and confirmed by the domestic courts.22 The scope for derogation is wider in respect of on-​demand services, permitted by Article 3(4) where a necessary and proportionate response to the prejudice to (or ‘serious and grave risk’ thereof) public policy, public health, public security or the protection of consumers. A notification procedure applies, although it can be partially bypassed in urgent cases. For television only, Article 4 sets out two possible courses of action where a broadcaster under the jurisdiction of one state is ‘wholly or mostly directed’ at the territory of another, where the latter (recipient) state has adopted ‘rules of general public interest’ beyond the Directive. The first

18   Garzaniti, L and O’Regan, M, Telecommunications, broadcasting and the Internet:  EU competition law and regulation (3rd edn, London: Thomson Reuters, 2010) 283. 19   Where the quality of the service is unacceptable (further defined as where the service repeatedly contains ‘matter which offends against good taste or decency or is likely to encourage or incite to crime or to lead to disorder or to be offensive to public feeling’) and such an order is compatible with the UK’s international obligations and in the public interest. Enforcement includes a range of criminal offences (supplying decoder equipment, advertising on the service, etc). 20   In broadly similar terms to the provision regarding satellite, but also including the prohibition of the inclusion of the proscribed service in a cable service or multiplex. 21   The statutory instruments are 1993/​1024 (Red Hot Television), 1995/​2917 (XXX TV Erotica), 1996/​2557 (Rendez-​Vouz), 1997/​1150 (Satisfaction Club Television), 1998/​1865 (Eurotica), 1998/​3083 (Eros TV), and 2005/​ 220 (Extasi TV). 22   R v Secretary of State for National Heritage ex parte Continental Television [1993] 2 CMLR 333 (refusal to prevent SI by injunction, referral to ECJ); R v Secretary of State for Culture, Media & Sport ex parte Danish Satellite Television & Rendez-​Vouz Television International [1999] 3 CMLR 919.

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option is for the recipient state to contact the originating state, with the originating state having the obligation to request that the broadcaster comply with the rules of the originating state. The advice of the Contact Committee set up by the Directive can be sought. Should the results not be satisfactory (to the recipient state), and the broadcaster is established in the other state ‘in order to circumvent the stricter rules’, the recipient state can take action against the broadcaster, subject to limitations23 and the subsequent ratification of the action by the Commission. This provision builds on Court of Justice decisions regarding conflicts of this nature.24 Moreover, services originating in other states can also be the subject of regulation through the general law of a state. However, this must not, as the CJEU has said, amount to ‘secondary control of television broadcasts’ already regulated in the country of origin or the preventing of retransmission of such services per se.25

14.2.4  Rules on jurisdiction The criteria on jurisdiction contained in the AVMSD reflect both the original provisions of TVWF on jurisdiction and consideration of those provisions by the Court of Justice.26 The AVMSD now provides for a number of tests, which are applied in a set order. Should jurisdiction be established under a given test, the remaining tests are inapplicable. The first tests relate to establishment and are found in Article 2(3). The simplest test is the first one, that where the head office is in a state and editorial decisions are taken in that state, it is that state which has jurisdiction. Should these two elements be divided, then the location of a significant part of the workforce is considered. If this is inconclusive on the grounds that a significant part of the workforce is found in both states, then the location of the head office is determinative; if on the other hand a significant part of the workforce is found in neither state, then jurisdiction falls to the state ‘where it first began its activity in accordance with the law of that Member State, provided that it maintains a stable and effective link with the economy of that Member State’. Finally, if one of the two elements is outside of the EU (eg head office in an EU state with editorial decisions made the US),

23   Article 4(3): ‘Such measures shall be objectively necessary, applied in a non-​d iscriminatory manner and proportionate to the objectives which they pursue’. 24   See, for example, TV10 SA v Commissariaat Voor de Media [1995] 3 CMLR 284. 25   Case C-​2 44/​10, METV and Roj TV v Germany [2012] 1 CMLR 32, on national law on the regulation of associations and the principles of international understanding, confirming an earlier decision in the context of consumer protection Konsumentombudsmannen v De Agostini C-​3 4/​95 [1998] 1 CMLR 32. 26   See for example Commission v UK C-​222/​94 (use of different criteria for jurisdiction); VT4 C-​56/​9 6 (broadcasters established in more than one state); see further Wagner, M, ‘Revisiting the Country-​of-​Origin Principle in the AVMS Directive’, (2014) 6 Journal of Media Law 286.

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the service is subject to the jurisdiction of the EU state concerned, if a significant part of the workforce is found in the EU state. The remaining tests (Article 2(4)) are technological in nature and only apply if jurisdiction has not been established under the establishment criteria of Article 2(3). These tests are the use of a satellite up-​l ink in a state, or alternatively the use of satellite capacity ‘appertaining to that Member State’. Prior to the AVMSD, capacity was applied first with uplink as the alternative; the change is significant for the UK, which has in effect no relevant capacity but a number of uplinked services which do not fall under the jurisdiction of another Member State.27 There is no extension of these tests to non-​satellite forms of distribution. Finally, a fallback provision in Article 2(5) refers to the general provisions of the TFEU on establishment, found in Articles 49–​55, and Article 2(6) confirms that services which are (a) intended for reception outside of the EU and (b) not received ‘with standard consumer equipment’ by the public in an EU state are not subject to the Directive.

14.2.5  The impact of the AVMSD and its future Table 14.1 summarizes the matters currently covered in the Directive, specifying whether the provision is one of general application or specific to television or on-​ demand services. The current proposals to amend the Directive include a number of significant issues, which can be grouped. One is the proposed creation of a new category for ‘video-​sharing platform services’, with obligations in respect of incitement to hatred and the protection of minors. Another set of changes would liberalize aspects of the current law, including broader scope for product placement and an uncapping of advertising time between 10pm and 7am. Some aspects are intended to put new obligations in place, such as a proposed 20 per cent quota for European works in on-​demand catalogues. A final set makes various changes in wording to definitions. Issues in the negotiations at Council and Parliament level so far have included the need for or right level at which to set the on-​demand quota, the inclusion of social media, and the obligations proposed for video sharing platforms. The position of the UK at this time of change is of particular note. The UK is clearly the preferred place of establishment for international broadcasters operating in

27   Garzaniti and O’Regan, n 18, 280, Walden, I, ‘Illegal content’ in Goldberg, D, Sutter, G and Walden, I (eds), Media law and practice (Oxford: OUP, 2009) 452; DCMS, ‘Audiovisual Media Services Directive: consultation on proposals for implementation in the UK’ (on file with author) 65. See subsequently the Wireless Telegraphy Act 2006, s 9A and Ofcom, ‘Notice of Proposed Changes to Satellite Services licences resulting from the AVMS Directive’ 25 January, 2010. on changes to the licensing regime for satellite earth stations.

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Table 14.1  AVSMD requirements applicable to television and on-demand services

Prohibition on incitement to hatred Protection of minors

Television

On-​demand

Article 6

Article 6

Article 27

Article 12 (more limited than Article 27). Advertising Articles 9–​11 (discrimination, Articles 9–​11 surreptitious advertising, (discrimination, prohibited advertisements, surreptitious advertising, product placement, sponsorship) prohibited advertisements, and Articles 19–​26 (time, product placement, placement, further product sponsorship). restrictions). Quotas Article 16 (‘majority of Article 13 (‘where transmission time’) for European practicable’) for European works, Article 17 (10 per cent) works for independent European productions. Major events and short extracts Articles 14–​15 N/​A Right of reply Article 28 N/​A Other provisions Identification of service providers (Article 5), gradual disability accessibility (Article 7), protection of windows for cinema films (Article 8)

multiple EU/​EEA states, and even for a significant proportion of services addressed to a single state or language-​based audience. As of 2016, the 1222 television services licensed by Ofcom28 can be classified as 337 targeting the UK (including forty-​two for the UK and Ireland29), 138 operating on a pan-​European basis including the UK, 110 targeting non-​EU/​EEA states, and, over half of the total, 637 targeting other EU/​ EEA states (483 at single states and 154 at two or more, normally on a linguistic basis (eg France and French-​speaking Belgium; Greece and Cyprus)). Conversely, only a handful of the services available in the UK are established elsewhere in the EU (around twenty-​five), and many of those are pan-​European services (eg Euronews) or public services (eg RTÉ in Ireland, France24 in France). If appropriate provision is not 28   Figures (dated October 2016)  derived from the MAVISE database held by the European Audiovisual Observatory and further classified by the author. 29   In practice a greater share than 42 of the 337 are addressed to the UK and Ireland, given the similar Sky platform marketed in both states; the low number may be a feature of how the data is reported. Note that some services are also identified as addressed to Ireland (ie part of the 438 listed here as ‘single state’) although are very similar to UK-​addressed services—​most likely in order to carry separate advertising.

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made within the Brexit settlement, UK-​established services will no longer fall within the country of origin rules and so can be subject to re-​regulation by each and every EU state; this may have a particular impact on pan-​European services (whether from US or European companies), and on collections of services targeting single states all established in the same London facilities, because being established within the EU has long been an important facilitator of access to the European audiovisual market. In some states, commercial broadcasters operating in the language of that state are predominantly UK-​established; few other areas of the single market have seen such a concentration of establishment in a single Member State. The UK government has declared its attention to promote free trade, specifying its desire to ‘(support) the continued growth of the UK’s broadcasting sector’.30 Given the paucity of provisions on broadcasting in international trade agreements (let alone the stronger country of origin provisions in the Directive), this will present a particular challenge.

14.3  UK L AW A ND L IC ENSING 14.3.1  Television licensing Ofcom regulates (through licensing) the provision of seven types of independent (ie non-​BBC or Welsh Authority/​S4C) television programme services and additional television services (ie text/​data services broadcast over the air). Four are licensed on the basis that they are provided from places in the UK: (i) television broadcasting services provided with a view to broadcast other than by satellite, (ii) restricted television services, (iii) additional television services, and (iv) television multiplex services (including where provided by the Welsh Authority). The final three use the AVMSD’s definition of jurisdiction: (i) digital television programme services (DTPS), (ii) digital additional television services (DATS), and (iii) television licensable content services (TLCS). A  service licensed in another Member State does not require (and indeed cannot acquire) a UK licence for that service.31 The basis for licensing includes the Broadcasting Act 1990 and (for DTPS/​ DATS) Broadcasting Act 1996. The provision of any of these services (other than a multiplex) without a licence is a criminal offence (Broadcasting Act 1990, s 13),

  ‘The United Kingdom’s exiting from and new partnership with the European Union’ (Cm 9417, 2017) 35.   Commission v Belgium C-​11/​95 [34]: ‘it is solely for the Member State from which television broadcasts emanate to monitor the application of the law of the originating Member State applying to such broadcasts and to ensure compliance with Directive 89/​552, and [ . . . ] the receiving Member State is not authorized to exercise its own control in that regard’. The overwhelming majority of channels available in the UK are licensed by Ofcom. 30 31

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punishable by a fine but proceedings must have the consent of the Director of Public Prosecutions. Occasional challenges to licence refusals are heard in the courts.32 A digital terrestrial television (DTT) service will be licensed as a DTPS or a television broadcasting service, and be carried on a licensed multiplex. A DATS is in practice a data service delivered via DTT. In practice, these are the services collectively branded and presented to consumers as ‘Freeview’. Cable, satellite, and internet services are typically licensed as TLCS. It is however the provider of each service (ie channel) who is accountable to Ofcom, rather than the cable or satellite provider (eg Virgin Media or Sky) to which end users subscribe. Local delivery services (delivering radio/​T V services by cable) were formerly the subject of licensing (under the Broadcasting Act 1990, Part 2) but this is no longer the case (abolished by the Communications Act 2003, s 213). A television broadcasting service entails the provision of programmes with a view to being broadcast (ie by wireless telegraphy), so as to be available for reception by the public. Multiplexes, TLCS, DTPS, and restricted services are excluded from this definition. In essence, these services are the established non-​BBC public service channels: the ITV licences, Channel 4, Channel 5, and S4C Digital (qualifying services in the Broadcasting Act 1996, s 2, excluded from definition of DTPS in the Broadcasting Act 1996, s 1).33 Certain services will also be the subject of Wireless Telegraphy Act licences. For example, a multiplex will require a spectrum licence under Section 8 of the Act, and Ofcom has a duty to secure (so far as practicable) sufficient capacity for the ‘qualifying services’ (the television broadcasting services referred to above) under Section 7. The provider of any of these services is the person with ‘general control’ over the programmes, services, and facilities contained in the service, even though others may have control the making of a particular programme or over the distribution of the service over an ‘electronic communications network’ (Communications Act, s 362). Ofcom revoked the licence of Press TV in January 2012 on the grounds that the body holding the licence did not have general control over the service.34

32   See for instance Re Blast 106 [2015] NICA 16 (refusal to extend a community radio licence quashed (and an extension ordered) as a fair hearing was not granted). 33   The former analogue services also fell within the definition of television broadcasting services, until digital switchover was completed in 2012. 34  . Ofcom had already made a number of adverse findings against Press TV on other grounds; see Johnson, H, ‘Regulation of “Foreign Broadcasters”—​Standards of Fairness and Impartiality Unobtainable Objectives in Reality?’, (2012) 17 Communications Law 25. The service is still available through various means (including satellite and Internet), although no longer holds a licence from any EU Member State.

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14.3.1.1  The licence holder The Broadcasting Acts forbid Ofcom from issuing a licence to a person who is not a ‘fit and proper person to hold’ the licence, and furthermore requires Ofcom to do all it can to ensure that, when it is no longer satisfied that a licence holder is such a person, that person does not continue to hold the licence. This is incorporated into licences (eg condition 29 of DTPS and TLCS licences), providing for revocation when Ofcom ceases to be satisfied that the test is met. Public and parliamentary interest in the application of the ‘fit and proper person’ test to Sky (in connection with its then-​39.1 per cent shareholder News International) arose in connection with the disclosure of information about phone hacking in summer 2011 and the proposed merger between the two. In 2012, Ofcom found that although the conduct of James Murdoch (CEO and Chairman of News International at certain times) ‘fell short of the standard to be expected’, this did not mean that Sky itself should not hold broadcast licences.35 When a differently configured merger was subsequently proposed in 2017 (between Sky and Fox), Ofcom carried out a further assessment of both Sky and Fox and determined that Sky would continue to meet the test, should the change of control go ahead.36 Importantly, Ofcom reaffirmed that the test, while only applying to licence holders rather than individuals more generally, encompassed compliance with broadcasting regulation and other conduct outwith broadcasting, by the corporate entity or by key individuals; failures on the part of Fox regarding sexual harassment were the subject of some discussion. The fit and proper test has led to the revoking of licences. In 2010, four licences under common control (three TLCS held by Bang Channels Ltd and one DTPS held by Bang Media (London) Ltd), used for services branded as Tease Me TV or similar names, were revoked on the grounds that repeated and serious Code and licence breaches (which demonstrated ‘a disregard for the licensing regime’) meant that the licence holders were not fit and proper persons.37 48 breaches of the Code had been recorded, alongside five breaches of condition 11 of the licence (provision of recordings) and unpaid financial sanctions of £157,250. Most recently, in Ofcom’s revocation of a community radio licence (Iman FM) on crime and disorder grounds, it found that the same facts also supported a finding that the licensee was no longer fit and proper.38

 .  . 37  . 38   See discussion in Section 14.4.2, below. 35 36

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A local authority, political body, or advertising agency (including companies in which the agency holds more than a 5 per cent interest) cannot hold a licence or control a licensed company (including through its officers and associates) (Broadcasting Act 1990, Sch 2). There is an exception for services provided by a local authority for providing information relating to its activities. Religious bodies are generally excluded (also by Sch 2) but Ofcom can determine that, subject to various tests, a religious body can hold most forms of licences but not channel 3, channel 5 or national analogue radio licences, or multiplexes.39 14.3.1.2  TLCS The Communications Act 2003 defines a TLCS as a service that is to be made available for reception by members of the public, consisting of television programmes or an electronic programme guide (EPG), with a view to public reception by way of satellite broadcasting, through a radio multiplex service, or distribution through an electronic communications network (s 232). The other types of licensed service are excluded from the definition. However, this is by far the biggest category of television licence in the UK, with close to one thousand licences currently issued;40 Ofcom describes it in simple terms on its website as a licence ‘for linear television channels provided on cable, satellite and the internet.’ The Broadcasting Act 1990 system of dividing satellite services into two regulatory categories (domestic and non-​domestic) was abolished in 1997,41 following a decision of the Court of Justice.42 A licence is issued with little formality, requires the payment of an application fee (£2500) and follows a detailed template. The standard licence consists of 29 conditions, based closely on the Broadcasting Acts and Communications Act, and dealing with issues such as standards, the payment of fees, revocation, and surrender. Licences can only be refused on specified grounds:  two are carried forward from the Broadcasting Act 1990 (fit and proper person, restrictions on licence holder) (s 3) and one is found in the Communications Act 2003 (that the service would be likely to contravene the Broadcasting Code regarding standards or fairness) (s 235). There is no requirement to provide evidence of carriage (as compared with DTPS where an agreement between the service provider and a multiplex is a prerequisite) and the licence does not require renewal, as long as an annual fee is paid.43 A service available in identical form on more than one platform (eg on cable and satellite) requires only one licence.  .   List available at (frequently updated). 41 42   Satellite Television Service Regulations 1997, SI 1997/​1682.   Commission v UK C-​222/​94. 43   A percentage of turnover based on bands (eg 0.0125% of the first £10m), with a minimum fee of £1000. 39

40

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Following the implementation of the AVMSD in the UK a TLCS may now be required (if not already held for the service) for qualifying services transmitted via a live stream on the internet. The provision of the Communications Act 2003 which excluded services delivered via the internet has been repealed, and therefore a service accessed via the internet is potentially licensable. However, two-​way services remain outside of the definition. A two-​way service is provided through an ECN and entails the transmission of images and/​or sound by the provider to users and by the users to the provider or other users (s 232(5)). There are a series of services still excluded from the definition of TLCS. The first group is essentially services that are regulated under another part of the broadcasting legislation, eg if it is provided with a view to being broadcast as part of a multiplex, or is a service already licensed as a television broadcasting service (ss 233(1) and 233(2)). The second group excluded entirely a number of different types of service: two-​way services (ss 232(5) and 233(4), ‘closed circuit’ services (on a set of premises under a single occupier, not connected to an external network) (ss 233(5) and 233(6)), and services for users with a ‘business interest’ in the programmes (s 233(7)–​(10)). Section 234 provides for the modification of ss 233–​4 by order (approved by resolution of both houses of Parliament), subject to at least one of five criteria being satisfied. These criteria include technological developments and the practicability of applying different levels of regulation. The Secretary of State can also by similar order exclude certain types of service from the definition of TLCS. The ease with which multiple ‘feeds’ can be offered by a single broadcaster has prompted specific guidance to be issued by Ofcom.44 It now states that in general terms, multiple feeds will require multiple licences unless the programmes (including advertisements) can be seen on all feeds at the same time, or the services are ‘almost identical’ with ‘very occasional’ variations, or it is purely a ‘+ 1 service’ (ie exactly the same feed but broadcast with a one-​hour delay) or a dubbed/​subtitled version. This would mean, for example, that a service available on two different satellite services would only require one licence, but a service which had different advertisements for different audiences (eg the use of two frequencies) would require multiple licences. TLCS licences are available in respect of three types of service: editorial, teleshopping, or self-​promotional. Editorial services are subject to the general provisions regarding commercial communications. Teleshopping (the supply of direct offers to the public with a view to the supply of goods and services in return for payment, including transactional gambling, adult chat or adult sex chat, and psychic

44   Ofcom, ‘Guidance regarding the licensing position of television licensable content services broadcast into multiple territories’, 19 October 2010  .

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programming and self-​promotional services (promotion of the products, services or channels of the broadcaster) cannot contain editorial material (eg normal programmes) but can carry advertising. Teleshopping services are also subject to a different type of fee than editorial or self-​promotional services (currently a flat fee of £2000 per service). The regulation of teleshopping and participation TV is discussed further in Section 14.6. Licences can be transferred to another person with the written consent of Ofcom and the payment of a fee (currently £1000). 14.3.1.3  DTPS and DTAS A DTPS or DTAS is a service broadcast for public reception on a DTT multiplex (excluding the qualifying services—​ie the non-​BBC channels with public service obligations—​t hat are classed as television broadcasting services). The difference between DTPS and DTAS is that a DTPS is television programmes wholly or mainly made up of moving images (including ancillary text/​data such as subtitles), whereas a DTAS is another service broadcast via a multiplex and not otherwise excluded. An example of a DTAS is a self-​standing data service. Certain provisions (eg production quotas) do not apply to DTAS. In general terms, the requirements for DTPS/​DTAS are similar to that for TLCS, with two significant differences. First, these licences are only issued when the service provider has reached an agreement with a multiplex provider for carriage; a letter confirming this agreement must be submitted with the licence application. Secondly, DTPS/​DTAS licences can cover more than one channel; that is to say, rather than the service-​based approach for a TLCS, the licence is for the provider, with multiple services set out in an Annex. 14.3.1.4  Multiplexes and digital television Ofcom describes a multiplex as a ‘collection of television programme, radio and data services that are broadcast together in a digital signal that occupies no more spectrum than just one analogue television service’. Multiplex 1 was allocated to the BBC by Government, while five multiplexes were licensed by Ofcom. Multiplex 2 had its capacity reserved for ITV, Channel 4, and Teletext, and licensed to a company controlled by the first two, and another part-​reserved (for Channel 5 and S4C) and licensed to SDN (S4C Digital Networks), now owned by ITV plc. The remaining three licences (B, C, and D) were awarded to British Digital Broadcasting and launched as OnDigital (subsequently ITV Digital). After the failure of ITV Digital,45 these three licences were readvertised and awarded to BBC Free To View

45   See generally Starks, M, Switching to digital television: UK public policy and the market (Bristol: Intellect, 2007) 39–​45.

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Ltd (B) and Crown Castle (now Arqiva) (C/​D). Following switchover and consolidation, Channel 5 and S4C are carried on Multiplex 2, while Multiplex B remains controlled by the BBC and contains HD channels only;46 further multiplexes for HD services have been licensed to Arqiva, and to the local TV multiplex operator (discussed below). An additional multiplex licensed in Northern Ireland carries channels from the Republic of Ireland. There are various obligations regarding the services included in a multiplex and also certain reservations of capacity. Licences include a requirement to provide the service, and conditions such as a prohibition on conveying any channel not licensed either as DTPS/​DTAS or by another EEA state. A licence including provision of the ‘core proposals’ of the licensee which were set out during the application process and are varied from time to time. Redacted versions of the licences (and the many amendments to them) are available.47 Digital UK is owned by all the multiplex licensees and manages the DTT platform as a whole. It has a number of roles, in particular the allocation of logical channel numbers (LCNs) to appropriately licensed/​authorized DTT services, in accordance with a published policy. Features of the policy include genre grouping and appropriate prominence for public service channels (influenced by Ofcom’s EPG code; see Section 14.3.3, below). Analogue TV broadcasting was ‘switched off’ in the UK in 2012. The process of switchover was first announced in 1994, legislated for in the Broadcasting Act 1996, and launched in 1998. As analogue transmissions ceased, additional DTT transmissions were added and audiences were encouraged to move to a digital platform (whether DTT or other), in a process managed by Digital UK. 14.3.1.5  Public service television For a definition of public service television in the UK, we can consider the ‘relevant television services’ provided by ‘public service broadcasters’ for the purpose of Ofcom’s review of public service broadcasting.48 These services are: • BBC television broadcasting services; • S4C (‘the television programme services that are public services of the Welsh Authority within the meaning of Section 207’—​previously the bilingual S4C

  Television Multiplex Services (Reservation of Digital Capacity) Order 2008.  . 48   Communications Act 2003, s 264. This review is itself an important part of broadcasting policy in the UK. Crucially it requires Ofcom to consider all the relevant services together (in assessing the provision of public service broadcasting) rather than as standalone services. See further Petley, J, ‘The re-​regulation of broadcasting, or the mill owners’ triumph’ (2002) 3 Journal of Media Law and Practice 131, 134–​5. 46 47

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(with some programmes first broadcast on Channel 4) and Welsh-​medium S4C Digital, but after switchover this is a single Welsh-​medium digital service with no link to Channel 4); The channel 3 services, ie ITV1;49 Channel 4; Channel 5; The former public teletext service.50

Ofcom and others sometimes refer to the general regulation of television programme services as tier 1 and to the PSB-​specific provisions as tier 2 (‘quotas’ ie requirements for programmes meeting various criteria to be broadcast) and tier 3 (other).51 The Communications Act 2003 also refers in various Sections to the ‘licensed public service channels’, which are ITV1 (as defined above), Channel 4 and Channel 5, but not the BBC services or S4C. The regulation of these channels is through licensing, initially through the Broadcasting Acts and further provided for in the Communications Act 2003, s 215 (Channel 3, Channel 5) and s 231 (Channel 4). The tier 2 quotas apply to the licensed public service channels. These channels are subject to requirements regarding news, independent productions, regional programming, programming made outside the M25, original productions, services for disabled audiences (beyond the general provisions applicable to all services), and the relationship between the broadcaster and independent producers. The tier 3 requirements are more general in nature, with a public service remit set out in the Communications Act 2003, s 265 in respect of the licensed public service channels (‘the provision of a range of high quality and diverse programming’ for ITV1 and Channel 5 and a more detailed statement52 for Channel 4). These channels are required to prepare an annual statement of programme policy, having regard to Ofcom guidance and reports; significant changes must be approved by Ofcom. Ofcom has a very limited power to direct a provider to amend

49   Commonly referred to as ITV1, but still a group of regional franchises, all of which except STV (two franchises, Scottish and Grampian) are controlled by ITV plc. Included here too is ITV Breakfast, the separate franchise for mornings (formerly GMTV) bought in full by ITV plc in 2009. 50   The licence was revoked in 2010 after the service provider stopped providing it and it appears very unlikely that a new licence will be issued. See Ofcom, ‘Report to the Secretary of State on the public teletext service’ 1 December 2010 . 51   See for example Katsirea, I, Public broadcasting and European law (The Hague: Kluwer, 2008) 129. 52   (a) demonstrates innovation, experiment and creativity in the form and content of programmes; (b) appeals to the tastes and interests of a culturally diverse society; (c) makes a significant contribution to meeting the need for the licensed public service channels to include programmes of an educational nature and other programmes of educative value; and (d) exhibits a distinctive character.

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its remit or to step in and regulate through specific conditions, in the case of a serious failure (not excused by economic or market conditions) to fulfil the channel’s remit or to make an adequate contribution towards the purposes of PSB. The Digital Economy Act 2010 inserted a new Section 198A in the Communi­ cations Act 2003, of particular interest from a convergence point of view. It provides for Channel 4 Corporation functions in respect of the making of high quality media content (including on-​demand and internet services) and ‘films intended to be shown to the general public at the cinema in the UK’. More broadly, Ofcom’s duty to report on public service broadcasting has been supplemented53 by a further duty to report on the contribution of material included in ‘media services’ to the fulfilment of the Act’s public service objectives, with media services defined in the broadest of terms as meaning publicly available services (where there is editorial control) provided via the internet, as well as television, on-​demand, and radio services. The BBC is the subject of a Charter and Framework Agreement.54 Since April 2017, Ofcom is responsible for the regulation of the BBC in accordance with these instruments; prior to this date, Ofcom’s role was limited to certain aspects of content regulation, with the remaining functions being vested in the (now-​d issolved) BBC Trust. 14.3.1.6  ITV The regulation of Channel 3 licences (ie ITV) was once a major part of UK broadcasting law.55 However, the last franchise auction took place in 1991, in the wake of the Broadcasting Act 1990. That process was primarily financial but with the ability to award the licence to a lower bid for quality reasons in exceptional circumstances. These original licences were renewed after their first ten-​year period in 2001, and were then succeeded by ‘digital replacement licences’ without a new franchise round in 2004, and current licences were renewed (with a change to the boundaries of licence areas in Wales and western/​south-​western England) for a further ten years, on revised financial terms, from 1 January 2015.56 The business

  New Communications Act 2003, s 264A as inserted by the Digital Economy Act 2010, s 2.  . 55  For background, see Munro, C, Television, Censorship and the Law (Farnborough:  Saxon House, 1979), ch 3. 56   The ‘initial expiry date’ was set at 31 December 2014 by the Communications Act 2003, s 224. Ofcom was required to report on whether the services would be sustainable and could meet public service obligations (s 229), so that the Secretary of State could choose from a number of courses of action. The Secretary of State’s decision was to allow renewal to proceed; all licencees applied for renewal and the decisions to renew were announced by Ofcom on 20 February 2014. See and . 53

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structure of ITV has also undergone significant change since 1991, with all licences except those in Scotland now controlled by ITV plc after a series of mergers and operating, in practice, as a single enterprise; a series of reductions in regional programming has been approved. Ofcom has a further role in reviewing and approving the ITV networking arrangements under the Communications Act 2003, ss 290–​294. In practice, these arrangements are now handled by ITV plc under agreed ‘network affiliate arrangements’ which have been accepted by Ofcom.57 14.3.1.7  Local TV After years of review and discussion, a new system for licensing local television services came into force in 2012.58 Two new forms of licence: Local Digital Television Programme Service (L-​DTPS) and Local Multiplex Service Licence were created.59 L-​DTPS are the subject of ‘beauty contest’ licensing in selected geographical areas (which have been identified by DCMS and Ofcom). Some content restrictions are in place (eg no adult material or PRS chat services, with new definitions of both), and local commitments form part of the licensing process, but licences do not contain quotas (eg for the proportion of local programmes broadcast). L-​DTPS and simulcasts of such are included as public service channels for the purpose of EPG prominence.60 Thirty-​one services are currently licensed (although a majority fall within one of two quasi-​networks—​‘Made in  . . .’ and ‘That’s  . . .’ followed by the area name). In the first years of the new services, applications to vary licence commitments (inevitably to reduce such commitments) have been frequent.61 A single new DTT multiplex is licensed by Ofcom (the first and current holder is Comux), with a requirement to carry the L-​DTPS but with space for other services using ‘interleaved’ spectrum62 (the subject of a further WTA licence using newly reserved spectrum).63 Many of these services are also available by way of VOD and IPTV.

57   This system has been in place since 2012; the most recent review took place in December 2016. See . 58   See generally Moore, M, ‘Plurality and local media’ in Barnett, S and Townend, J (eds), Media Power and Plurality: From Hyperlocal to High-​level Policy (Palgrave Macmillan, 2015). 59   Communications Act 2003, s 244 contains general powers. See The Local Digital Television Programme Services Order 2012, SI 2012/​292. 60   SI 2011/​3003. 61   For instance, the London licence holder (London Live/ESTV) has made six requests for amendment since its January 2014 award—​i ncluding one which was made before broadcasts began, and two (one refused) which required a more extensive consultation process by Ofcom on the grounds that it would be a departure from the character of the service. 62   That is, various parts of the broadcast spectrum which are not currently used; the exact frequencies will vary quote widely from transmitter to transmitter. The services currently carried through this system are True Crime, Tiny Pop, and True Movies/Kix. 63   Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2012, SI 2012/​293.

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14.3.1.8  Programme services There are two broad definitions of ‘programme services’ with important differences between them. The narrower definition is those services regulated and licensed by Ofcom under the Communications Act 2003, ss 362(1) and 405(1): ie television programme services (TLCS, DTPS, television broadcasting, and restricted services), radio programme services, BBC sound services, and various additional/​data services. However, the broader definition (found in the Broadcasting Act 1990, s 201 (as amended by the Communications Act 2003, s 360) includes all of these services as well as other services, such as sounds or images sent through a communications system and intended ‘for reception at a place in the United Kingdom for the purpose of being presented there to members of the public or to any group of persons’. This definition is used for the purposes of controlling incitement to hatred (Public Order Act 1986, s 22) and, prompting a need for special classification arrangements, in the Licensing Act 2003 with regard to the licensing of cinemas.64

14.3.2  Radio licensing The modern form of radio licensing can be traced to the Sound Broadcasting Act 1972, which followed the ‘pirate’ radio controversies of the 1960s. The Radio Authority (which took over from the Independent Broadcasting Authority in 1990) was subsumed into Ofcom in 2003.65 The Broadcasting Code is generally applicable to radio and television alike, with a number of exceptions where different provisions apply. In addition, as the Audiovisual Media Services Directive does not apply to radio, the licensing and regulation of radio services is essentially that of UK law alone (subject to international agreements on frequencies). Radio licensing has expanded over the years, particularly as more spectrum has become available for broadcasting. The original independent local radio (ILR) services had exclusivity (apart from the BBC) in their licensed areas and were also the subject of various detailed programming obligations. After 1990, the Radio Authority was charged with licensing as many services as frequencies permitted, subject to four statutory criteria which now form the core of radio licensing.66 (As compared with most television licences, the award of radio licences remains the 64   See discussion in Mac Síthigh, D, ‘Principles for a Second Century of Film Legislation’, (2014) 34 Legal Studies 609, 614. 65   For detailed discussion of independent radio in the UK, see Stoller, T, Sounds of your Life:  The History of Independent Radio in the UK (New Barnet:  John Libbey, 2010); Starkey, G, Local Radio, Going Global (London: Palgrave Macmillan, 2011). 66   Broadcasting Act 1990, s 105: ability of the application to provide the proposed service, extent to which it caters for the tastes and interests of residents in the area, broadening the range of programmes available/​ catering for different tastes and interests, and evidence of demand or support for the service. See also Starkey n 65, 114–119.

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subject of a qualitative ‘beauty contest’ system of evaluation.) The original form of a local analogue licence continues, while other forms of licence emerged, such as restricted service licences (RSLs) used for events, festivals, educational institutions, and community radio.67 Three national analogue services were licensed: Classic FM, Virgin Radio (now Absolute Radio) and Talk Radio (now TalkSport). Some stations are recognized as ‘quasi-​national’ by providing a digital service and having local programming obligations removed.68 Analogue licences are subject to renewal and re-​advertisement. The main area of regulatory activity, though, is in changes to the format of the station, subject to tests set out in the Broadcasting Act 1990, s 106. There has been a significant degree of consolidation in radio broadcasting, with national ‘brands’ (eg Capital FM, Heart) being used for what are a collection of local or regional licences.69 This was facilitated in part by the Digital Economy Act 2010, s 34, which allows for local content to be produced within a larger ‘approved area’ (a region defined by Ofcom) rather than the licensed area. Ofcom has also ‘simplified’ the regulation of Formats on a number of occasions (within its statutory powers), and a 2017 consultation paper from government proposed further changes, including the removal of music-​related Format requirements for local stations.70 Digital Audio Broadcasting (DAB) is in some ways similar to DTT in terms of the ability to support a greater range of services, although ‘switch-​off’ of analogue radio is a question of policy and is not due to happen until certain tests have been met.71 There are two national independent radio multiplexes, (Digital One (since 1999) and Sound Digital (2016)), as well as a BBC multiplex and a number of local multiplexes. The services carried by a multiplex must hold Digital Sound Programme (DSP) Licences, which come in a standard form. (DSP licences are also used for broadcast of radio services via DTT/​Freeview; services carried on cable and satellite are licensed instead as Radio Licensable Content Services.)

67   Significant changes to the regulation of community radio were brought about through the Community Radio (Amendment) Order 2015, SI 2015/​1000, increasing the class of stations permitted to carry advertising, providing for additional renewals of licences, and supporting cross-​ownership with local TV services. 68  Ofcom, ‘Radio in digital Britain’, 2009,  [7.4]. 69   Starkey n 65, 145–​158; Guy Starkey, ‘Cultural Policy in the Coalition Years: Laissez-​faire Regulation, the Public Spending Squeeze and the Drive to Digital’, (2015) 24 Cultural Trends 80, 81. 70  . 71   For instance, one test is that the national digital share of all listening (including DAB and other digital platforms eg through DTT) exceeds 50 per cent. As of 2016, the figure is 45.5 per cent. See further Ofcom, ‘The communications market: digital radio report’ (2016) .

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A multiplex licence includes an initial list of the services carried, which can be varied; Ofcom can only refuse if ‘the capacity of the digital sound programme services broadcast under the licence to appeal to a variety of tastes and interests would be unacceptably diminished’.72 Since 2010, analogue licences due to expire have been renewed, under new powers given to Ofcom on two occasions, so as to provide for ‘stability’ in the long transition to digital radio.73 Local DAB multiplexes can be renewed up to 2030 subject to requirements on maintaining coverage (in order to support the digital transition).74 ‘Small-​scale’ DAB (serving smaller geographic areas), originally the subject of a trial, has been brought into the legislative system for radio through the Broadcasting (Radio Multiplex Services) Act 2017.

14.3.3 Infrastructure 14.3.3.1  Must-​carry and must-​offer The availability of a service on a given platform is normally a matter for negotiation between service provider and distributor, but in some EU states also by ‘must carry’ or ‘must offer’ rules. A ‘must carry’ provision requires that the service be carried on a specified electronic communication network. Article 31 of the Universal Service Directive allows (subject to conditions) the imposition of must-​carry duties regarding specified services on providers of ECNs ‘where a significant number of end-​users of such networks use them as their principal means to receive radio and television broadcasts’. This is implemented in the UK through the Communications Act 2003, s 64 and General Condition 7 for communications licences. The Court of Justice has held that the criteria for designation must be precise regarding the applicable criteria and the services and networks in question.75 Beyond this, there is no general right of access for a content service to an ECS or ECN.76 Must-​carry provisions are not currently in force in the UK. Early iterations of this approach in the UK included a requirement for certain cable services to carry the public service channels, although this was not possible between 1990 and 1996.77 Broadcasters also argue that because cable services were not required to pay copyright fees for retransmission of a television service,78 such a provision would not

  Broadcasting Act 1990, s 54(6A).   Digital Economy Act 2010, s 32; Legislative Reform (Further Renewal of Radio Licences) Order 2015, SI 2015/​2052. 74   Broadcasting Act 1996, s 58ZA, inserted by Broadcasting Act 1996 (Renewal of Local Radio Multiplex Licences) Regulations 2015, SI 2015/​9 04. 75   C-​134/​10, Commission v Belgium, 3 March 2011. 76   Articles 2 and 12 Access Directive. See further Chapter 15. 77   Bonner, P and Aston, L, Independent Television in Britain, volume 6 (Basingstoke: Palgrave Macmillan, 2003), 395; Broadcasting Act 1990, s 78A (inserted by the Broadcasting Act 1996). 78   Copyright, Designs and Patents Act 1988, s 73. 72 73

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create any burden for cable providers.79 Now, however, fees are to be the subject of negotiation between broadcasters and cable providers,80 although government has expressed a view that the net fee should be zero.81 The public service channels and any other must-​carry service are also required (by way of the Communications Act 2003, ss 272 and 273)82 to be made available (in so far as possible) by the service provider through ECNs used by a significant number of end-​users as their principal means of receiving television broadcasts and through satellite services ‘used by a significant number of the persons by whom the broadcasts are received in an intelligible form as their principal means of receiving television programmes’. The first provision clearly echoes (but is not required by) Article 31 of the Universal Services Directive. These ‘must-​offer’ provisions mean that the providers are required to offer the channel to the network and satellite providers; the providers cannot charge their users for this service. 14.3.3.2  Electronic programme guides and conditional access An electronic programme guide is an important aspect of digital television broadcasting, as a tool for navigating through the available services. Regulation of EPGs is provided for in Article 5 and Annex I  of the Access Directive.83 The Communications Act 2003, s 310 charges Ofcom with a duty to draw up an EPG code of practice, which it has done.84 The legislation and code require EPG providers to give ‘appropriate prominence’ to public service digital channels (any BBC service, and Channel 3, Channel 4, Channel 5, and S4C, and now local television too), to make fair, reasonable, and non-​d iscriminatory arrangements with broadcasters for inclusion in an EPG, and to make adjustments in support of users with disabilities.

79   Oliver & Ohlbaum Associates, ‘PSB network platform re-​transmission and access charges in the UK’ June 2011 . 80   The wide scope of this provision (to include the internet) was initially confirmed in ITV v TVCatchup [2011] EWHC 1874 (Pat) and further explained as excluding mobile access in ITV v TVCatchup [2015] EWCA Civ 204. However, as part of the same proceedings, the CJEU subsequently found that s 73 was not compatible with EU Law (specifically, Directive 2001/​29/​EC on the harmonisation of certain aspects of copyright and related rights in the information society): Case C-​275/​15, ITV Broadcasting v TVCatchup. Meanwhile, s 73 has also been repealed: Digital Economy Act 2017, s 34. 81  . 82   Not in force until 2010: SI 2009/​2130. 83   See further Chapter 8. See also Walden, I, ‘Who owns the media? Plurality, ownership, competition and access’ in Goldberg, D, Sutter, G and Walden, I (eds), Media law and practice (Oxford: OUP, 2009) 42–​4 6. In the UK, the Freeview EPG is licensed as a ‘digital television additional service’: . 84  .

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EPG providers publish information on how channels can apply to be included in a guide.85 The relationship is one of contract; one broadcaster brought an unsuccessful claim against Freesat as a result of its ‘low’ channel number on the Freesat EPG.86 In the case of Sky, a significant constraint is that the capacity of some receivers is limited, so that new channels cannot easily be added to the EPG. As a result, it has been observed that a secondary market in EPG ‘slots’ is present.87 Conditional access systems facilitate pay-​t v (ie confirming that a user is a subscriber to the service in question). They were first regulated by European law under the Advanced Television Standards directive.88 Article 6 and Annex I of the Access Directive requires certain operators of conditional access services to offer that service to all broadcasters on a FRAND basis and to promote a common interface. States can amend or withdraw conditions for operators without significant market power. Separately, Directive 98/​84 requires the prohibition of various activities relating to ‘illicit devices which give unauthorised access’ to conditional access services (not just television but also radio and information society services). In the UK, Ofcom has power over the ‘technical platform services’ provided by Sky.89 This description comprises conditional access (including geographic masking), EPG (including regionalization), and access control (ie interactive) services. The Competition Appeal Tribunal considered a substantial number of objections to Sky’s approach in a complaint brought by a broadcaster, but found for Sky on all points.90 In 2015, regulation of Sky’s approach to access control (which dated from the Oftel era and was carried over under the 2003 Act) was replaced by a set of ‘voluntary commitments’ published by Sky, which Ofcom found

85   eg Digital UK, ‘Logical Channel Number policy’ 3 April 2017 ; Sky, ‘Method for allocating listings in Sky’s EPG’ May 2015. . 86   JML Direct v Freesat UK [2009] EWHC 616 (Ch); affirmed in [2010] EWCA Civ 34. Freesat is an EPG (and associated marketing campaign and approved hardware) which includes free-​to-​a ir services distributed via satellite. 87   Bulkley, K, ‘Why is Sky’s tightening of its EPG rules so sensitive?’ Broadcast, 16 November 2007 . Sky’s current approach to this secondary market (last updated 2015) is set out in section 4.2 of its allocation procedure; a major review of the EPG (by Sky) is now underway: Farber, A, ‘Sky plans EPG shake-​up’ Broadcast, 10 August 2017. 88   Directive 95/​47/​EC ‘on the use of standards for the transmission of television signals’, OJ L 281/​51, 23 November 1995. 89   Ofcom, ‘Provision of technical platform services: guidelines and explanatory statement’ 21 September 2006  . It was determined (pursuant to the Communications Act 2003, s 48)  that Sky is the only provider within the scope of the Directives: Oftel, ‘The regulation of conditional access’ 24 July 2003. . 90   Rapture TV v Ofcom [2008] CAT 6.

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appropriate.91 For other services (EPG and conditional access), regulation is still in place, and Sky publishes a detailed breakdown of prices in these categories.92 The BBC disputed the level of (and wider necessity for) the payments (for EPG and regionalization) it made to Sky;93 a 2014 agreement between the two organizations set the fee at zero, as part of a long-​term agreement that Sky would carry BBC linear and on-​demand services.94

14.4  CONTENT R E GUL ATION F OR R A DIO A ND TEL E V ISION 14.4.1  AVMSD requirements for TV services EU law requires provisions of national law regarding short extracts, and the right of reply, permits provisions on events of major importance, and also sets for ‘quotas’ in respect of European and independent productions and for measures in respect of accessibility. All of these provisions apply to television services only (ie not on-​ demand audiovisual media services). This Section considers the implementation of these five sets of provisions in the UK. Article 14 permits95 a state to draw up a list of events of ‘major importance for society’, which must be compiled in a clear and transparent way, and be verified by the European Commission as compatible with EU law.96 States can then prevent the exclusive broadcast of such events ‘in such a way as to deprive a substantial proportion of the public in that Member State of the possibility of following such events by live coverage or deferred coverage on free television’. In the UK, this 91   Ofcom, ‘Review of Sky’s access control services regulation’, 17 March 2015, ; Sky, ‘Voluntary commitments by Sky in relation to the provision of access control services’, 23 April 2015  . 92  . 93   Neilan, C, ‘BSkyB and BBC clash on fees’ Broadcast, 20 October 2010. ; Toynbee, P, ‘How the badly maimed BBC can stand up to parasitic Sky’ Guardian, 3 January 2012. . 94   Plunkett, J, ‘BBC and BSkyB reach agreement over retransmission payments’ Guardian, 28 February 2014 . 95   States are not required to compile a list. By 2002 only four lists had been approved within the EU (Ward, n 5, 66–​67); by 2008 this had doubled to eight ([2008] OJ C17/​7). As of 2017, one further has been added ([2015] OJ L27/​37) and a tenth is under consideration. Norway, as an EEA member, also has an approved list. 96   The Commission’s approval can be challenged; see for instance Case T-​385/​07, FIFA v Commission (unsuccessful General Court challenge to the listing of all games in the (football) World Cup final stage by the responsible bodies in Belgium), upheld in Case C-​204/​11 P, FIFA v Commission (parallel cases also saw the upholding of a similar designation in the UK); Case E-​21/​13, FIFA v EFTA Surveillance Authority (unsuccessful EFTA court challenge to a similar designation by Norway).

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is dealt with in Part 4 of the Broadcasting Act 1996,97 and the qualifying services (reception without charge and by at least 95 per cent of the population) are the BBC television broadcasting services (ie BBC1 and BBC2), channel 3 services (ie ITV1), Channel 4, and (since 2000) Channel 5.98 The UK list is divided into those events requiring live coverage (group A) (such as the Olympic Games and the FA Cup Final) and deferred coverage (group B) (such as the Commonwealth Games and the Ryder Cup). By way of support to the statutory provisions, the standard licences for television services ensure that these provisions are complied with.99 The UK is also responsible for ensuring that the ‘lists’ of other states are not violated by broadcasters under UK jurisdiction which are received in those states; this was considered and confirmed by the House of Lords in a 2001 decision.100 The right of reply is set out in Article 28;101 it requires states to provide for a right of reply or equivalent remedy for any person (including a legal person) whose legitimate interests have been ‘damaged by an assertion of incorrect facts’ in a television programme. In the UK, this is found in rule 7.11 of the Broadcasting Code as a requirement for programmes to allow the subject of significant allegations to respond. It is clear (as compared, for example, with the standalone right of reply ‘response’ provision now included in Irish legislation)102 that the approach is one where the right of reply is dealt with as an aspect of programme-​making rather than a separate, subsequent right. The AVMSD added a new provision (Article 15) on the right to reproduce in news reports short extracts of broadcast material (where it is the subject of exclusive rights). In 2013, the CJEU considered whether an aspect of this provision (Article 15(6) on limiting charges to directly incurred access costs) was incompatible with Articles 16 and 17 of the EU Charter of Fundamental Rights (on the freedom to conduct a business and on property rights respectively), upholding it.103 The UK has however not adopted specific legislation on this matter, considering that the existing fair dealing provisions of copyright law104 and associated case law already deals with the matter.105 97   Therefore predating the amendments of 1997 to the TVWF Directive. The aspects of listing required by the Directive but not already included in Part 4 were subsequently added. 98   SI 2000/​5 4; further services can be added pursuant to the Broadcasting Act 1996, s 98. 99 100   For example, condition 7 of the TLCS licence.   R (TVDanmark 1) v ITC [2001] UKHL 42. 101   See generally (including the influence of the Council of Europe) Keller n 2, 315; see also the broader Recommendation 2006/​952/​EC on the protection of minors and human dignity and on the right of reply in relation to the competitiveness of the European audiovisual and on-​l ine information services industry. 102   Broadcasting Act 2009, s 49; Broadcasting Authority of Ireland, ‘Right of reply scheme’ May 2011 . 103   Case C-​2 83/​11, Sky Österreich v ORF. 104   Copyright, Designs and Patents Act 1988, s 30 backed up by an exclusion of agreements which violate this provision in the Broadcasting Act 1996, s 137. 105   DCMS, ‘EU-​w ide standards for Audio Visual Media Services’ 18 December 2009.

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The fourth set of provisions has an impact on the content of audiovisual media services (and on the production industry) through requirements for European production and independent production. These are commonly referred to as quotas. States are required by Article 16 to ensure (‘where practicable and by appropriate means’ and to be ‘achieved progressively, on the basis of suitable criteria’) that a ‘majority proportion’ of transmission time of each broadcaster is comprised of European works. When calculating transmission time for this purpose, certain types of programme (namely news, sports events, games, advertising and teleshopping, and teletext) are excluded, and the requirement does not apply at all to local broadcasts (Article 18). Compliance is a condition of Ofcom licences in the UK.106 Services not receivable in the European Union or in a non-​EU language are also excluded in the UK. A similar approach is taken under Article 17 to European independent production, although the target in this case is 10 per cent of transmission time or (if permitted by the state in question, as the UK does)107 10 per cent of the broadcaster’s programming budget, including an ‘adequate’ proportion for works produced within the five years before transmission. This is reflected in UK law in the Communications Act 2003, s 309 in respect of a ‘range and diversity’ of independent programmes included in non-​public service DTPS (and condition 3 of the standard DTPS licence) and is also required (by licence) for TLCS; public service channels are dealt with separately and discussed later. The quotas in the Directive are floors rather than ceilings, and a state can impose further obligations on broadcasters under its jurisdiction, as the UK does for the public service channels. Some overlap with European matters (eg a 25 per cent quota for independent production, which was the subject of a vocal campaign in the 1980s)108 while others are UK-​specific (eg regional programming) (Communications Act 2003, ss 266–​268). The final set of provisions concerns accessibility. Member States are required to ‘encourage’ service providers (on demand or television) to make their services (gradually) accessible to users with visual or hearing disabilities. Although this general provision is now less relevant in the context of a detailed EU instrument on accessibility, it provides a basis for national provisions on offerings such as subtitling, sign-​language, and audio description. The corresponding and more

106   Ofcom, ‘European production quotas’ 10 February 2005. . 107  . 108  The ‘25% Campaign’:  Bonner, P and Aston, L, Independent Television in Britain, volume 5 (London: Macmillan, 1998) 185. Now found in the Communications Act 2003, s 277.

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detailed UK requirement109 is specific to television110 and applied to the public service channels (BBC1/​2, ITV, C4/​S4C, and Five) to varying degrees, and to a lesser extent other services (in categories based on channel size). Until recently an older distinction between ‘domestic’ and ‘non-​domestic’ services was maintained (the latter not being required to meet targets before 2014); this distinction, which is difficult to square with the Directive, is in the process of being phased out.

14.4.2  The Broadcasting Code (‘the Code’) Although licensing remains important, given the standard form of the licence (particularly TLCS), much of the detail of regulation is found in the application of the Broadcasting Code. The Code, updated frequently, is backed by statute. It is a single code but it can be divided into three themes: standards (Sections 1–​6), fairness and privacy (Sections 7–​8) (both applying to TV and radio), and commercial matters (Section 9 for TV, Section 10 for radio). It is promulgated in the context of Ofcom’s overarching duties, including protection of the public against offensive and harmful material in radio and TV services and having regard to freedom of expression.111 Ofcom has the duty to set, review, and revise standards to secure the ‘standards objectives’ (Section 319), subject to various forms of consultation (Section 324), and principles and practices to avoid unfair or unjust treatment or the unwarranted infringement of privacy (Broadcasting Act 1996, s 107). In turn, Ofcom is required to include conditions to secure the observation of these standards (Section 325) and with the fairness code (Section 326) in its Broadcasting Act licences. There are 13 standards objectives set out in the Communications Act, including the presentation of news with ‘due impartiality’ and ‘due accuracy’, the application of ‘generally accepted standards’ so as to protect the public against ‘offensive and harmful material’, and that the statutory restrictions on product placement (which transpose and add to the Directive in this regard) are complied with. The setting of the Code takes into account six factors, including the degree of harm and offence likely to be caused, the likely expectation of the audience as to what a programme will include, and the importance of editorial independence. The part (Sections 1–​6) of the Broadcasting Code on standards (ie what the Act refers to as the standards code) deal with the protection of under 18s, harm and

109   Communications Act 2003, s 303; Code on Television Access Services. Note that smaller channels can make a financial contribution (eg to the British Sign Language Broadcasting Trust) as an alternative to providing signed programmes. 110   For on-​demand services, the language of the Directive is simply reproduced (Communications Act 2003, s 368C(2)), but there are no equivalents in the legislation akin to those for television. 111   See discussion of ss 3(2)(e) and 3(4)(g) in R (Gaunt) v Ofcom [2011] EWCA Civ 692 [7]‌.

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offence, crime, religion, impartiality/​accuracy/​prominence, and elections/​referenda. The standards provisions are primarily derived from Section 319(a)–​(f) Communications Act. A small number are included on the basis of the Directive (eg aspects of Section 3 on crime implement the AVMSD requirement to exclude material that incited hatred),112 but many are specific to the UK (such as impartiality, which is not addressed by the Directive and is the subject of continued variation across Europe). The provisions on fairness and privacy in Sections 7–​8 are based on Section 107 of the Broadcasting Act 1996. They pertain to the relationship between broadcaster and individuals (or organizations)113, in the making or transmission of a programme, and as such there are some differences between these provisions and Sections 1–​6. ‘Practices to be followed’ (such as those regarding informed consent, opportunities to respond, and subterfuge) are set out, and the publication of Ofcom decisions includes the name (or pseudonym) of the complainant, who must (subject to narrow exceptions) be the person affected (Broadcasting Act 1996, s 111). There are two procedures for complaints: one for fairness/​privacy complaints,114 and one for all other Sections of the Broadcasting Code.115 Complaints pursuant to the Code can be brought to Ofcom or Ofcom can instigate its own investigation. Statutory preapproval of programmes was abolished in the Broadcasting Act 1990.116 The complaint must be brought within twenty working days of broadcast or of the determination of a complaint made directly to the broadcaster (Ofcom can consider later complaints but is not obliged to). If a potentially substantive prima facie issue is noted, a recording is requested and viewed by Ofcom. Broadcasters are obliged to keep recordings of their output: forty-​t wo days for radio, sixty days for television, and ninety days for PSB television channels. At that point a complaint can be dismissed without further consideration, or taken forward with (normally) the representations of the broadcaster then requested. Third parties can make representations if they wish. Subsequently, a preliminary view is drawn up by Ofcom and representations are again invited on it;   The CJEU has considered the interpretation of the underlying AVMS provisions: Case C-​2 44/​10, METV.   The right of a company to bring a complaint is confirmed by the Court of Appeal in R v Broadcasting Standards Commission (ex parte BBC) [2001] QB 885. 114  Ofcom, ‘Procedures for the consideration and adjudication of Fairness & Privacy complaints’ 3 April 2017  . 115   Ofcom, ‘Procedures for investigating breaches of content standards for television and radio’, 3 April 2017  . 116   See discussion in Bonner and Aston n 108, 382. 112 113

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finally, a decision is published in the fortnightly Broadcast Bulletin. Ofcom can issue a direction or a statutory sanction (for breach of licence). Failure to comply with a direction can also lead to a statutory sanction. In the case of fairness and privacy complaints, Ofcom makes what it calls an ‘Entertainment Decision’. It will not do so if certain criteria under the Broadcasting Act 1996 are present, eg it is the subject of court proceedings or it is frivolous. The time limits are different and in particular, a (private) hearing can be held. The final decision (referred to as an Adjudication) also appears in the Broadcast Bulletin and Ofcom can further direct that a summary of it be broadcast. Statutory sanctions, for breach of licence, which will include Code compliance as a condition, are also available. The most serious statutory sanction is the revocation of a licence. Ofcom’s general powers are found in Section 111 of the Broadcasting Act 1990. Ofcom now has a new power regarding radio services which have broadcast ‘material likely to encourage or incite the commission of crime or to lead to disorder’, introduced in 2017 and utilized almost immediately in the case of community radio service Iman FM117 (the broadcast of recorded lectures which Ofcom found ‘aimed to provide theological justification and spiritual sanction for Muslims to carry out acts of crime or disorder’—​a breach of the Code and sufficiently serious to justify suspension and revocation).118 Other sanctions include a fine, for most broadcasters, up to £250,000 or (if greater) 5 per cent of qualifying revenue, as well as a direction not to repeat a programme or to broadcast a correction or Ofcom’s findings. Ofcom has set out a procedure for the consideration of these sanctions, including written and/​or oral representations by the broadcaster.119 The fairness of these procedures has been tested on a number of recent occasions through judicial review at the High Court.120 The Code and the relevant Sections of the Communications Act have also been considered under human rights law, in the case instigated by Jon Gaunt.121 A  programme presented by Gaunt on TalkSport was the subject of a finding of

117   While one of the many matters regulated through the Broadcasting Code, Ofcom has specific powers (introduced in 2017) to suspend and revoke licences on this ground: Broadcasting Act 1990, s 111B, as inserted by Digital Economy Act 2017, s 91. 118  . 119   Ofcom, ‘Procedures for the consideration of statutory sanctions in breaches of broadcast licence’, 3 April 2017, . 120   Traveller Movement v Ofcom [2015] EWHC 406 (Admin) (unsuccessful challenge by a disappointed complainant, primarily to the way that Ofcom gives broadcasters but not those who have complained the opportunity to respond to a preliminary view in standards complainants); R (DM) v Ofcom [2014] EWHC 961 (Admin) (unsuccessful challenge by a broadcaster, referring to apparent bias and to irrationality). 121   R (Gaunt) v Ofcom [2011] EWCA Civ 692, affirming R (Gaunt) v Ofcom [2010] EWHC 1756 (Admin). See further Hare, I, ‘Insulting Politicians on the Radio?’, (2012) 4 Journal of Media Law 29,

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breach of Section 2 of the Code (but no sanction was applied) by Ofcom. The argument advanced was that Ofcom (a public authority for the purposes of Section 6 Human Rights Act 1998)  had violated Article 10 of the European Convention on Human Rights (ECHR) through a disproportionate restriction on freedom of expression. Gaunt established standing without difficulty and put forward arguments including his statements being a value judgement rather than a statement of fact, the importance of political speech, drawing on a range of decisions from the European Court of Human Rights (ECtHR), and the lower impact of radio as compared to television. He did not however challenge either the statutory provisions or the Code itself, and these provisions confirmed for ECHR purposes that the restriction was prescribed by law and pursuing a legitimate goal, leaving proportionality as the issue before the court. The analysis at first instance (in the High Court) is short; while the importance of freedom of expression is recognized (including ‘heated and even offensive dialogue which retains a degree of relevant content’, this does not extend to ‘gratuitous offensive insult or abuse’. Ofcom’s decision (including the lack of sanction on either Gaunt or TalkSport) was therefore found to be justified. This was confirmed by the Court of Appeal in a more detailed analysis; Neuberger MR noted that Ofcom should be ‘slow’ to find a violation of Section 2 of the Code, in the light of Article 10 and this particular interview, but that such a finding could not be excluded. He concluded that ‘the publication of the Finding, which contained no sanction, other than the stigma of the publication of an adverse finding by the statutory regulator’, was not an interference with Gaunt’s Article 10 rights. Ofcom’s approach to the matter was not criticized in any way and the finding itself was found to be proportionate.

14.5  ON - ​D EM A ND PRO G R A MME SERV IC E S 14.5.1  Implementation of the Directive When the implementation of the AVMS Directive was announced by Government, it was proposed that Ofcom be given the legislative powers to arrange co-​regulation of VOD, and that it would be expected that the Association for Television on Demand (ATVOD) could be a basis for co-​regulation. The statement also set out a clear expectation that the Advertising Standards Association (ASA) would be responsible for regulating advertising within on-​demand services. In 2009, the AVMS Directive was transposed into UK law,122 and Ofcom was given the powers

  SI 2009/​2979.

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to arrange for the co-​regulation of content and advertising in on-​demand services. Ofcom duly designated ATVOD and the ASA123 ATVOD was initially a self-​regulatory body, set up in response to the debates leading to the Communications Act 2003.124 Its members were cable or internet service providers.125 During its period of designation, its Board consisted of four ‘non-​i ndependent’ (ie industry) members and five independent members (one of whom is Chair). After designation, it was renamed as the Authority for Television on Demand.126 ATVOD’s designation was withdrawn at the end of 2015, and Ofcom now carries out the functions of regulating VOD itself.127 The ASA’s role has not changed. Regulation is through notification (in advance of starting to provide a service) rather than licensing. ATVOD had the power to request information and, if the service is subject to the notification procedure (ie is an on-​demand service for the purposes of the 2003 Act), take initial action or refer the matter to Ofcom. Sanctions for failure to notify include financial penalties, but ultimately ATVOD’s key power was to issue directions to a service provider (including for failure to notify), with provision of a service in violation of such a direction being a criminal offence.128 Ofcom retained powers in respect of financial sanctions.

14.5.2  Regulating on-​demand services 14.5.2.1  Scope in the legislation The requirements and definitions of the Directive are incorporated into UK law in the Communications Act 2003, s 368A(1) as five (cumulative) criteria for a service to be an ‘on-​demand programme service’:

123   Ofcom, ‘Proposals for the regulation of video on demand services’, 14 September 2009, ; Ofcom, ‘The regulation of video on demand services’, 18 December 2009, . 124   Tambini, D, Leonardi, D and Marsden, C, Codifying Cyberspace: Communications Self-​regulation in the Age of the Internet (London: Routledge, 2008) 99. 125   Woods, L, ‘Internet protocol TV: ATVOD’, in Marsden et al (eds), Options for and Effectiveness of Internet Self-​and Co-​regulation: Phase 2 case study report (RAND Europe, Cambridge 2008), 181–​182. 126   Criteria for designation of a regulatory body are set out in the Communications Act 2003, s 368B(9). Further amendments to the Communications Act 2003 facilitated co-​regulation through powers to require notification, charge fees and require the retention of recordings; these provisions were required to be notified to the European Commission under the Technical Standards Directives: see SI 2010/​419, inserting s 368D(3) (zb) into the Communications Act 2003; Directive 98/​3 4/​EC laying down a procedure for the provision of information in the field of technical standards and regulations, [1998] OJ L 204/​37; Directive 98/​4 8/​EC of the European Parliament and of the Council of 20 July 1998 amending Directive 98/​3 4/​EC [1998] OJ L 217/​18. 127  . 128   Communications Act 2003, s 386N.

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• its principal purpose is the provision of programmes the form and content of which are comparable to the form and content of programmes normally included in television programme services; • access to it is on-​demand; • there is a person who has editorial responsibility for it; • it is made available by that person for use by members of the public; • that person is under the jurisdiction of the United Kingdom for the purposes of the Audiovisual Media Services Directive. Further details were found in Ofcom’s Scope Guidance and ATVOD’s ‘Guidance on who needs to notify’, A failure to notify was initially addressed through a provisional view, leading where applicable to a Scope Determination (recording a breach of Sections 386BA and 386D(ZA) of the Communications Act 2003 (notification and fees respectively)), normally applying the above-​mentioned criteria in Section 368A(1) of the Communications Act. Determinations could be appealed to Ofcom. The question of how to apply the new system to on-​demand film services emerged at an early stage. VOD is a platform particularly suited for film; early projects (including NVOD) promoted the ability to access a catalogue of movies (including those first shown in cinemas). However, this can mean that there is a substantial regulatory difference between supply on a physical disc (ie DVD) and in electronic format through VOD. The former is subject to the Video Recordings Act 1984 (discussed below),129 while the latter is beyond its scope (although the BBFC offers to rate VOD works on a non-​statutory basis). On-​demand film services can therefore be required to notify if they fall within scope. The matter was considered at some length during the drafting of the scope guidance, particularly by reference to the similarity (explained by the BBFC but rejected by Ofcom) between an on-​demand film service and a DVD retail store. 14.5.2.2  Scope in Ofcom decisions The significance of the statutory definition of scope became apparent before long; the first point was typically sub-​d ivided into a ‘principal purpose’ test and a ‘comparability’ test.130 Audiovisual material made available on the internet in conjunction with the website of a print publication (ie video on the website of a newspaper or magazine) was a difficult regulatory issue. Self-​regulatory bodies in respect of the press (ie the

129   The 1984 Act, as amended, was re-​enacted in 2010 in order to address an initial failure to notify the European Commission under the Technical Standards Directives. 130   The definitions in the Directive have also been considered by the CJEU, in C-​374/​14, New Media Online v Bundeskommunikationssenat, 21 October 2015.

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Press Complaints Commission (PCC) and then the Independent Press Standards Organisation (IPSO)) applied the Editors’ Code to the websites of newspapers. The AVMSD excluded ‘electronic versions of newspapers’ (Recital 28). Eight service providers were then the subject of Scope Determinations (concerning audiovisual material on newspaper websites), and all eight refused to notify and/​or appealed the Determination to Ofcom.131 In Ofcom’s first ruling, concerning Sun TV,132 it reviewed the Directive and ATVOD’s guidance, and set aside ATVOD’s decision. The principal purpose test was that a relevant service would be more likely to have its own homepage, to have a separate section of a website where the audiovisual material is catalogued and accessed, to be styled/​presented as a television channel, to have more than bite-​ sized clips, to have limited or no links between audiovisual and other material, to have more audiovisual than written material (with the audiovisual material being the primary means), and overall not said to be integrated into nor ancillary to another service. ATVOD withdrew the other Scope Determinations in this category on the basis of these Ofcom findings. Following the Sun TV decision on principal purpose, Ofcom also heard a range of appeals on the ‘comparability’ ground concerning other sectors.133 These decisions saw Ofcom trying to operationalize the ‘television-​like’ language of the Directive, in contexts such as the duration of clips, the quality of production, and formal features like titles and credits. Quite a number of these appeals came from the providers of sexually explicit websites.134 Initially, a key (and unsuccessful) ground of appeal was that the content would not be permitted under the terms of the Broadcasting Code, because it was classified as R18 by the BBFC (or equivalent),135 and so did not meet the comparability test. Ofcom emphasized that the requirement was not that the services being compared be identical, interpreting ‘normally included’ as a general term rather than a specific reference to the current UK Broadcasting Code. Findings that adult services are on-​demand audiovisual media services has particular consequences, as the content requirements on the protection of minors (discussed below) require the use of access control. 131   The Independent Video; FT Video; The Guardian YouTube Channel; Guardian Video; Telegraph TV; Sun Video; News of the World Video; Sunday Times Video Library; Elle TV. 132  ; see further Katsirea, I, ‘Electronic press: “press-​like’’ or “television-​like’’?’ (2015) 23 International Journal of Law and Information Technology 134. 133   For a detailed discussion of these appeals, see Mac Síthigh, D, ‘ “TV-​l ike”: Aesthetics, Quality and Genre in the Regulation of Video-​on-​demand Services’, (2017) 14 Journal of British Cinema and Television 464. 134   For a detailed analysis of these decisions, see Petley, J, ‘The Regulation of Pornography on Video-​on-​ demand in the United Kingdom’, (2014) 1 Porn Studies 260. 135   Broadcasting Code s 1.17 contains this prohibition.

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While the majority of Scope Determinations and appeals to Ofcom concerned the application of the principal purpose and comparability tests, a smaller number have also considered editorial responsibility (ie that another party should notify), typically finding that the ‘lower level’ provider (eg the content provider rather than the platform operator) was the party subject to regulation. 14.5.2.3  Content regulation Regulation of incitement to hatred is required by Article 6 AVMSD (in respect of all audiovisual media services), incorporated into UK law for on-​demand services as Section 368E(1) of the Communications Act, and formed rule 10 of the ATVOD Rules. The requirement is that services ‘do not contain any incitement to hatred based on race, sex, religion or nationality.’ The protection of minors in respect of on-​demand services is required by Article 12 AVMSD, incorporated into UK law as Section 368E(2) of the Communications Act, and formed rule 11 of the ATVOD rules. The requirement on Member States is that appropriate measures be taken to ensure that services which ‘might seriously impair the physical, mental or moral development of minors are only made available in such a way as to ensure that minors will not normally hear or see’ such services. This is a less extensive intervention than is the case for television services, where programmes meeting the ‘might seriously impair’ test cannot be carried, and programmes ‘likely to impair’ are permitted subject to access restrictions. The Communications Act provision and ATVOD rule follow the Directive, substituting ‘under 18s’ for ‘minors’ and referring to ‘material’. ATVOD’s initial guidance stated that R18 or equivalent (legal) material, as well as other material (eg ‘content which promotes illegal or harmful activity’, ‘graphic images of real injury, violence or death presented with insufficient contextual justification’, and various types of pornographic material) met the ‘might seriously impair’ test and should therefore be the subject of content access control, ie age verification and PIN protection. A 2011 report by Ofcom (with input from ATVOD) to DCMS considered this test in detail, noted a wide range of approaches being taken across Europe, and reviewed the (inconclusive but not excludable) evidence of harm.136 The DCMS affirmed ATVOD’s approach but noted that further legal change could be necessary for ‘legal certainty’ as regards the protection of children.137 Such change came about in a 2014 amendment to the Communications Act, meaning that R18 or equivalent material (termed ‘specially restricted material’) required access control,

136   Ofcom, ‘Sexually explicit material and video-​on-​demand services’ . 137  .

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and material refused classification by the BBFC (or its equivalent) could not be included at all.138

14.5.3  Other schemes Audiovisual material supplied in the format of a video work on a video recording is generally subject to the Video Recordings Act without regard to whether it has previously been the subject of cinema exhibition, broadcast or any other format. There is a statutory obligation to submit the work to the designated authority (currently the British Board of Film Classification), and sale or supply of an unclassified or inaccurately labelled work is an offence. The BBFC classifies works by reference to age (eg 15, 18); a major difference with the regulation of broadcasting is that is based on prior approval rather than the complaints-​d riven approach of Ofcom and other broadcasting regulators.139 Special restrictions apply to R18 works, which can only be sold and supplied in licensed sex shops.140 Some video works are exempt eg music videos, but can in turn lose their exemption.141 Video games are also included within the definition of video works in the VRA, but exempted unless exemption is lost or if the game contains significant non-​ game material. The Digital Economy Act 2010 amended the VRA by reducing the scope for exemption (ie requiring classification for a wider range of works) and providing for a different authority to be designated as the classification body for video games. The Video Standards Council, acting as the Games Rating Authority, has been designated as this body, making use of the (previously self-​regulatory) PEGI classification system. In 2017, Parliament acted to introduce a new requirement to prevent minors from accessing certain material on the internet. Service providers (working on a commercial basis) must enforce access control/age verification in respect of R18 material and a subset of the 18 category (produced solely or principally for the purposes of sexual arousal).142 This legislation does not apply to services that fall within the on-​demand regulatory system discussed above. A regulatory body (likely to be the BBFC) will be designated under these new

138   Audiovisual Media Services Regulations 2014, SI 2014/​2916, amending Communications Act 2003, s 368E(d)(2). 139   Note however that BBFC decisions have an impact on broadcasting; the Broadcasting Code, for instance, prohibits the broadcast of a work refused classification or rated R18, and restricts the broadcast of works rated 18 to after 9pm on most services. 140   Video Recordings Act 1984, s 12; see further Hunter, IQ, ‘Naughty Realism:  the Britishness of British Hardcore R18s’, (2014) 11 Journal of British Cinema and Television 152. 141   The grounds for exemption were significantly narrowed in 2014: Video Recordings Act 1984 (Exempted Video Recordings) Regulations 2014, SI 2014/​2097. 142   Digital Economy Act 2017, pt 3.

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provisions; its powers will also include ordering ISPs to block access to non-​ compliant services and to notify payment service providers of non-​c ompliant activity. Finally, Section 127 of the Communications Act 2003 contains criminal offences of the improper use of a public ECN. A similar provision first appeared (regarding telephone) in the Post Office (Amendment) Act 1935, but the current provision has become one of the more commonly tried offences in relation to Internet communication.143 While this provision does not apply to programme services (as defined in the Broadcasting Act, see 14.3.1), it is one which easily applies to on-​demand services (whether subject to Part 4A of the Communications Act or not), PRS (see 14.7), and the internet in general. S127(1) deals with sending or causing to be sent a message or matter that is ‘grossly offensive or of an indecent, obscene or menacing character’, while s 127(2) deals with messages known to be false sent for the purpose of causing ‘annoyance, inconvenience or needless anxiety’. The House of Lords held in 2006 that the offence is the sending of the message rather than its receipt.144 Further elaboration of the scope of this clause came in Chambers (a high-​ profile case stated to the High Court from Doncaster Crown Court concerning an allegedly menacing message about a temporarily closed airport posted on Twitter)145 and in CPS guidelines on prosecuting cases involving communications sent via social media.146

14.6  A DV ER TISING 14.6.1  The ASA and associated bodies The regulation of advertising is made up of three primary components, with a significant role for the Advertising Standards Authority (ASA):147

143   See eg Sutherland, C and Dowling, S, ‘The nature of online offending’ (Home Office Research Report 82, October 2015). 144   DPP v Collins [2006] UKHL 40. 145   Chambers v DPP [2012] EWHC 2157 (Admin) (confirming that the post was a message sent by a public ECN, but that it was not menacing); see further McGoldrick, D, ‘The Limits of Freedom of Expression on Facebook and Social Networking Sites: a UK Perspective’, (2013) 13 Human Rights Law Review 125; Laidlaw, E, ‘What is a joke? Mapping the path of a speech complaint on social networks’ in Gillies, L and Mangan, D, (eds), The Legal Challenges of Social Media (Edward Elgar, 2017). 146  CPS, ‘Guidelines on prosecuting cases involving communications sent via social media’ (March 2016) (identifying priority categories of credible threats of violence, harassment and similar behaviour, and breaches of court orders and statue, and a fourth category, with a high threshold for deciding to prosecute, of other conduct falling within s 127 or other provisions). 147  ASA, ‘History of ad regulation’ .

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1. The regulation of broadcast advertising, through the broadcasting legislation and AVMSD, carried out in practice by the ASA applying the Code of Broadcast Advertising of the Broadcast Committee of Advertising Practice (BCAP); 2. The self-​regulation of other advertising, carried out by the ASA applying the Committee of Advertising Practice (CAP)’s code (Code of Advertising, Sales Promotion and Direct Marketing); 3. Consumer law of general application, eg the Unfair Commercial Practices (UCP) Directive 2005/​29, which is found in UK law as the Consumer Protection from Unfair Trading Regulations 2008.148 The ASA is funded by a levy (eg 0.1 per cent of spend on display advertising and broadcast airtime). The levies are collected by two industry boards, made up of trade associations such as the Advertising Association and the Periodical Publishers Association, which share the same staff and premises:  the Advertising Standards Board of Finance (ASBOF) and Broadcast Advertising Standards Board of Finance (BASBOF). The Boards appoint the chair of the ASA. The codes are written by the Committee of Advertising Practice (CAP) and the Broadcast CAP, which are made up of the same members as the finance boards; CAP/​BCAP also provide copy advice services to advertisers. It is also the industry that is responsible for much of the enforcement of the code. In principle it is subject to judicial review even for its non-​broadcast functions.149 An Independent Reviewer is funded by ASBOF/​BASBOF and conducts reviews of ASA decisions where new evidence is available or if there is a substantial flaw in the process or adjudication.

14.6.2  Non-​broadcast advertising The National Trading Standards Board acts as a ‘back-​stop’ for ASA non-​broadcast regulation, in the sense that it has statutory powers to enforce consumer law.150 The ASA can refer advertisers to the NTSB under non-​statutory principles of case

  SI 2008/​1277.   R v ASA ex parte The Insurance Service (1990) 2 Admin LR 77; R (Debt Free Direct) v Advertising Standards Authority [2007] EWHC 1337 (Admin). 150   This role was for many years played by the former Office of Fair Trading (OFT). Trading standards is primarily a local authority function in the UK. National Trading Standards is publicly funded and has a board comprised of trading standards officers (chosen on a regional basis from across England and Wales). In practice, Camden Council carries out the necessary work on behalf of NTSB. The statutory duty to enforce and associated powers (for all trading standards officers) include the Enterprise Act 2002, Part IV, and the Consumer Protection from Unfair Trading Regulations 2008, SI 2008/​1277 (which implements the Unfair Commercial Practices Directive). The Competition and Markets Authority also has enforcement powers. 148 149

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handling, although NTSB can also act without an ASA referral.151 Through CAP, decisions are also enforced in the form of ‘ad alerts’ regarding ASA decisions, asking for the withdrawal of trade privileges (eg bulk mail discount), require pre-​vetting of an advertiser, and asking an internet advertising platform to remove ads. Importantly, the ‘non-​broadcast’ remit of the ASA is wide-​ranging (in telecommunications terms, it includes mobile phone, email, VOD, and internet advertising) and has been extended a number of times; it now includes not just paid-​for online space (eg banner ads, which have been considered by the ASA since 1995) and the fast-​g rowing keyword advertising sector, but also promotional claims on an advertiser’s own website or on a social networking site, as part of the extended ‘online remit’ which has been in place since March 2011. A substantial proportion of ASA decisions now relate to internet advertising, and new sanctions include a list of misleading online advertisers152 and the possibility of a keyword advertisement being placed which would direct search engine users to information on the breach of the code on the ASA’s website.

14.6.3  VOD advertising The control of advertising in services categorized by the AVMSD and Communications Act as on-​demand programme services represents a new form of advertising regulation in the UK. Previously, VOD advertising was treated as another form of non-​broadcast advertising, ie subject to the CAP code and consumer law, and was subject to the voluntary levy. However, to fulfil the UK’s transposition obligation, it now falls within the Communications Act, which sets out the requirements for advertising in on-​demand AVMS. The Ministerial Statement on transposition of the AVMSD noted the Government’s support for continuing a ‘one-​stop shop’ approach to advertising regulation through the ASA, and Ofcom reported that its proposal to designate the ASA received universal support during its consultation.153 The ASA has been designated by Ofcom (under Section 368B of the Communications Act 2003)  in respect of on-​demand services—​but the ASA applies the requirements specific to on-​demand services through a new c­ hapter 30 in the CAP code. Statutory sanctions can only be exercised by Ofcom, and service

151   The Consumer Protection from Unfair Trading Regulations 2008, s 19, requires that enforcement authorities ‘shall have regard to the desirability of encouraging control of unfair commercial practices by such established means as it considers appropriate’. 152  . 153   Ofcom, ‘The regulation of video on demand services’ 18 December 2009   66.

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providers neither notify the ASA nor pay a fee. The system therefore combines aspects of broadcast and non-​broadcast advertising. The requirements of the AVMSD are those applicable to audiovisual commercial communications on all audiovisual media services, ie that advertising be recognisable (and not subliminal or surreptitious), not prejudice respect for human dignity or promote discrimination, nor encourage behaviour prejudicial to health and safety or grossly prejudicial to the protection of the environment. Tobacco and prescription medicine or treatment advertising is not permitted; advertising of alcohol is restricted ie not aimed at minors, not encouraging immoderate consumption (Articles 9 and 10). The protection of minors is also covered, in general terms (‘may not cause physical or moral detriment’) and specific (ie exploitation of credulity, inexperience or ‘pester power’ and showing of minors in dangerous situations).

14.6.4  Broadcast Advertising 14.6.4.1 General The AVMSD restrictions on the content of advertising are those of general application, with one exception: Article 22 sets out six further television-​specific restrictions on alcohol advertising, eg advertising must not ‘create the impression that the consumption of alcohol contributes towards social or sexual success’ or ‘place emphasis on high alcoholic content as being a positive quality of the beverage’. In the UK, statutory powers for the regulation of broadcast advertising are assigned to Ofcom by Section 319 of the Communications Act, including the drawing up of a code (s 321). However, some of these functions have been allocated to the ASA pursuant to a statutory instrument154 and memorandum of understanding.155 Ofcom has not designated the ASA ie it remains the sole regulator in certain areas: 1. Political advertising, which is a matter for UK law (Communications Act 2003, s 321) and which has always been banned outright, although challenged under the ECHR.156 2. Sponsorship and product placement (essentially AVSMD), discussed below 3. The timing and scheduling of advertising (AVMSD with some specific provisions for public service channels, incorporated in COSTA, discussed below). 154   Contracting Out (Functions Relating to Broadcast Advertising) and Specification of Relevant Functions Order 2004. 155  . 156   Upheld by the House of Lords R (Animal Defenders International) v Secretary of State for Culture, Media and Sport [2008] UKHL 15, but ECtHR decisions go in different directions, eg VgT v Switzerland (2001) 34 EHRR 159, TV Vest v Norway (2009) 48 EHRR 51 (political advertising bans, violation), and Murphy v Ireland (2003) 38 EHRR 212 (religious advertising ban, no violation).

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4. Undue discrimination by radio and TV services between advertisers. This is a long-​standing provision originally governing advertising on ITV.157 Enforcement is predominantly reserved to Ofcom, making use of the statutory sanctions for breach of licence (in the same way as discussed under the Broadcasting Code, above). The ASA can make use of powers under Section 325(5) of the Communications Act to require the exclusion of an advertisement from a broadcast. 14.6.4.2  Content In practice, the detailed rules on the content of advertising are found in the 32-​ part BCAP Code of Broadcast Advertising. Some are taken directly from the Communications Act eg rule 7 on political advertising, and in the case of television, form part of the implementation of the AVMSD, but many are much more detailed and not specifically mentioned in the Act eg rule 9 with ten rules on environmental claims, rule 20 with five rules on motoring. Particularly detailed provision is made regarding medicines and health (rule 11), weight control (rule 12) and food and nutrition (rule 13), which also incorporate aspects of UK and EU law on medicine and nutrition more generally. Clearcast, a company owned by a number of broadcasters (including ITV, Channel 4, Channel 5, Sky, and Turner), provides a ‘pre-​t ransmission clearance’ service for television (and VOD) advertising. It took over from the ITV-​owned (but funded by multiple broadcasters) Broadcast Advertising Clearance Centre (BACC) in 2008.158 The participating broadcasters159 require advertisements to be approved by Clearcast. Approval does not bind the ASA, but Clearcast’s reasons for approval will be included in the analysis; in a 2016 decision, it was confirmed that Clearcast decisions are not amendable to judicial review.160 Ofcom licences require broadcasters to make arrangements for ‘advance clearance’ of advertisements. 14.6.4.3  Scheduling The AVMSD contains in chapter VII a number of sections on television advertising, alongside the general requirements applicable to all audiovisual media services.

  Bonner and Aston vol 5, n 108, p 262.   Barnett, E, ‘BACC to change ownership and rebrand as Clearcast’ Media Week 11 September 2007. . At the launch of Clearcast, IDS (the advertising sales division of Virgin Media) was a shareholder, but it has since been dissolved (the Virgin channels were sold to Sky, and UKTV advertising sales formerly handled by IDS are now handled by Channel 4); Viacom was also listed as a shareholder. 159   Listed at . 160   Diomed Direct v Clearcast (High Court, May 2016). 157

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Timing and placement rules are included in Articles 19, 20, and 23. Advertisements and teleshopping must be kept separate from editorial content (by optical, acoustic and/​or spatial means); the integrity of programmes should be protected, with isolated ‘spots’ being the exception other than for sports events. 20 per cent of a clock hour of a television broadcast (ie 12 minutes) can be dedicated to advertising and teleshopping; Member States can set a lower limit for all or even for some broadcasters (eg pay TV), subject to considerations of proportionality.161 In general, the number and duration of breaks is a matter for national law, although the CJEU has intervened to give a broad definition to what falls within the definition of an advertising spot.162 General provisions on the minimum ‘gap’ between breaks are no longer included, but for some genres and types eg films, there may be one interruption for each 30 minutes. These rules are implemented and added to in the UK in the Code on the Scheduling, Transmission and Amount of Advertising (COSTA), which is provided for in Section 322 of the Communications Act. In particular, while the AVMSD no longer regulates the overall amount of advertising per day (ie as opposed to the amount of advertising in a given hour, which is capped at 12 minutes), COSTA adds a restriction of nine minutes average minutes per hour of advertising in a day (and three minutes teleshopping), which was confirmed after review in 2011.163 Advertising on public service channels is subject to further restrictions. It is limited to seven minutes per hour overall (eight minutes per hour between 6pm and 11pm) instead of nine, and a break can be no longer than three minutes 50 seconds, of which three minutes 30 seconds is advertisements. Longer breaks are permitted during what are defined as films in COSTA (ie films made for TV and cinematographic works, which in practice includes ‘single dramas’).164 The scheduling of radio advertising is a matter for domestic law. Chapter 10 of the Broadcasting Code requires separation of spot advertising from programming, but does not restrict solus advertising (a single spot instead of a break), nor the length and number of breaks or the overall or hourly amount of advertising. BCAP includes (in respect of both radio and television) a range of further restrictions on scheduling in rule 32, eg on advertisements broadcast in or adjacent to programmes ‘principally directed at or likely to appeal particularly to’ under 18s, or avoiding ‘unsuitable juxtapositions’ between programmes and advertisements.

162   Case C-​2 34/​12, Sky Italia v AGCOM [2014] 1 CMLR 22.   Case C-​2 81/​0 9, Commission v Spain.   Ofcom, ‘Regulating the quantity of advertising on television’ 15 December 2011  . 164   First introduced as a trial in 2011, and made permanent in a 2014 amendment to COSTA. 161

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14.6.5  Other commercial communication in AV media services 14.6.5.1 Teleshopping Teleshopping (defined by the Directive as ‘direct offers broadcast to the public with a view to the supply of goods or services  . . .  in return for payment’) is the subject of a number of specific provisions. Teleshopping spots are permitted within the scope of the controls on advertising breaks, but a teleshopping ‘window’ must be clearly identified and at least 15 minutes long (Article 24). In general, the restrictions applicable to advertising apply to teleshopping with some modification for teleshopping channels, with a specific exclusion in Article 21 for medical treatment and certain medicinal products.165 In the UK, the commercial public service broadcasters, formerly prohibited from broadcasting any teleshopping windows, can now do so between midnight and 6am. The classification of forms of participation TV as teleshopping underlines the importance of this provision. 14.6.5.2  Participation TV When a programme is designed primarily to promote a premium rate service (PRS) (see 14.7), then the programme is considered and regulated as an advertisement rather than a programme.166 This is considered in part in the Court of Justice decision in Kommunikationsbehörde v ORF.167 The characterization of what is referred to as Participation TV (PTV) as advertising rather than ‘editorial’ means that the content requirements of BCAP and potentially the scheduling requirements of COSTA will apply. On the other hand, the Broadcasting Code restriction on charging for participation in programmes (to PRS) does not apply to advertising. PTV has presented a number of regulatory challenges in the UK. It is now defined as a programme which has as its primary purpose the promotion of PRS or viewer-​paid interaction through other mechanisms. Many of these services, such as adult chat or dating services, make virtually all their income through PRS. PTV is now treated as a type of audiovisual commercial communication (ie teleshopping), meaning that the licence for a PTV service must specify that it is a teleshopping service, and it is subject to the BCAP code rather than the Broadcasting Code, with Ofcom remaining as the regulatory authority. A specific section within

165   Medicinal products which are subject to a marketing authorization within the meaning of Directive 2001/​8 3/​EC. 166   Ofcom, ‘Participation TV: regulatory statement, rules on the promotion of premium rate services’ 3 June 2010 . 167   C-​195/​0 6, [2007] ECR I-​8 817.

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BCAP regulates adult chat services in relation to timing (midnight to 5.30am on DTT, 9pm to 5.30am elsewhere) and placement (labelled as Adult in an EPG and licensed as such, or encrypted). The labelling requirement was a particularly difficult one as the Freeview platform (and other users of DTT) experienced difficulty in separating channels by genre, and PIN locking of channels was not universal as compared with satellite and cable platforms. The result was the more limited hours for DTT and a change to the EPG to include ‘bookends’ before and after adult channels (including adult chat PTV). 14.6.5.3  Sponsorship and product placement Sponsorship is generally permitted by the AVMSD under Article 10. Sponsorship cannot affect the editorial independence of the service provider, nor directly encourage the purchase of goods or services, particularly through ‘special promotional references’. It must be appropriately acknowledged, but sponsorship announcements are not counted towards the 20 per cent maximum time for advertising. Certain exclusions apply as to the sponsor (prohibiting sponsorship by ‘undertakings whose principal activity is the manufacture or sale of cigarettes and other tobacco products’ and restricting it in the case of undertakings making or selling medicinal products or medical treatment) and to the type of programme sponsored (news, current affairs). If the Member State chooses, it can prohibit showing a sponsor’s logo during further types of programme (children, documentaries, religious). The AVMSD added detailed provisions on product placement. It is stated that it is generally prohibited, but allowed for certain types of programme (unless a Member State intervenes to restrict it). The permitted genres are cinematographic works, films and series made for AV media services, sports and light entertainment, but not children’s programmes. ‘Prop placement’ (with no payment associated with it) is also permitted. As with sponsorship, there are prohibitions (on tobacco and prescription medicine) and requirements (no influence on editorial independence, no undue prominence, no direct encouragement to buy, appropriate identification). The UK added further restrictions for programmes produced under UK jurisdiction: product placement is not permitted for anything prohibited in the case of television advertising or a number of specific categories (alcohol, high fat, salt or sugar foods, gambling, baby milk, all medicinal products and certain smoking-​related products), nor in three further programme categories (religion, consumer advice, current affairs) (Communications Act 2003, s 6, Sch 11A). Sponsorship and product placement are regulated by ­ chapter  9 of the Broadcasting Code.

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14.7  PR EMIUM R ATE SERV IC E S Section 120 of the Communications Act 2003 defines a PRS as the provision of content by means of an ECN or allowing an ECS user to make use (by means of that service) of a facility available to users of that ECS. An example of the former is a chat service (live or recorded) and a telephone voting system is an example of the latter. There must be a charge for the service, paid in the form of a charge for use to the provider of the ECS through which the service is provided. Certain services are directed by Ofcom to be ‘controlled PRS’, and are regulated by the Phone-​paid Services Authority (formerly PhonepayPlus, and before that ICSTIS) and Section 120 of the Communications Act, being required to comply with the PSA Code approved by Ofcom under s 121. The PSA is also subject to judicial review.168 Other PRS (ie within s 120 but outside the direction) may be within the scope of the Act but not considered controlled PRS, in which case code compliance is voluntary. There are five types of controlled PRS: a service with a charge of more than 10 pence per minute, calls to services with certain prefixes (087, 090, 010, and 118) with a charge of more than 5 pence per minute, and three services of any charge: chatline, sexual entertainment service, or internet dialler software. A service accessed through an international call is not a controlled PRS. Ofcom also excludes from the definition of controlled PRS platforms where ‘the Communications Provider providing the ECS is also the service provider providing the service delivered by means of the ECS’, although the Payforit service (where other goods and services can be charged to a mobile phone bill) remains controlled PRS. This system succeeds a licence-​based system (where compliance with the code was a condition of a telecoms licence), no longer possible after the introduction of authorization and the abolition of telecommunications licensing in 2002/​3. The maximum penalty for breach of the Communications Act s 120 is currently £250,000169 (s 123); directions to communications providers that the provision of a particular PRS be suspended can also be issued (s 124). A Tribunal of three members without a commercial interest in PRS (one legally qualified and two lay), drawn from a panel, has a wide range of sanctions at its disposal, including formal warnings, fines, mandatory refunds for consumers, barring of services, and prohibitions on individuals. The PSA can take action to recover a debt (eg unpaid fines).170

  ICSTIS v Andronikou (liquidators of Allied Communications Ltd) [2007] EWHC 2307 (Admin).   This is the maximum per breach, so a single service provider can be fined in excess of this amount in the case of multiple breaches: Consumer Rights Act 2015, s 80. 170   ICSTIS v Andronikou (liquidators of Allied Communications Ltd) [2007] EWHC 2307 (Admin); PhonepayPlus v Ashraf [2014] EWHC 4303 (Ch). 168 169

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Section 120 of the Communications Act contains a broad definition of providers. These parties are referred to in the PSA Code as network operators and level 1 and level 2 providers. Network operators are (normally) ECNs; level 1 providers act as intermediaries (for example, providing a technical service or enabling it to be accessed by a consumer), while level 2 providers are essentially the service operators (ie responsible for content). If a controlled PRS is also an information society service (typically, if it is available on the internet) then the application of the code may be restricted (Section 5 of the PSA Code). First, services established in other Member States are only covered if they are or may be accessed within the UK and the (derogation) conditions are satisfied.171 Secondly, where the provision of information required by the PSA Code is contrary to the Electronic Commerce Directive (Article 15 on ‘no general obligation to monitor’ is specifically mentioned), it is not required. The general requirements of the code relate to legality, consumer protection (transparency and pricing, fairness, maximum charges), and privacy. The content requirements are principally avoiding the causing of harm or ‘unreasonable offence’ to consumers or the general public and a prohibition on incitement to hatred. There are some provisions in respect of children, eg a prohibition on PRS aimed at or likely to be particularly attractive to children containing ‘anything which a reasonable parent would not wish their child to see or hear in this way’ (rule 2.5.8). Some services, such as chat and psychic services, also attract special conditions above and beyond the general provisions of the PSA Code. PRS (or ‘other telephony services for which the revenue is shared’) can be included in programmes when it is subsidiary (ie allows viewers to participate or contribute directly) to the primary editorial purpose. No other payment method is permitted, other than (as Ofcom has determined) apps as a payment mechanism. The Broadcasting Code requires competitions and voting to be conducted fairly, according to rules and without misleading the audience (Broadcasting Code Sections 2.13–​2.16), and requires compliance with the PSA Code and that the cost of services be made clear (Broadcasting Code Sections 9.29–​9.30). Broadcast licences now provide (eg standard TLCS clause 6A) that the broadcaster is responsible for interaction with audiences, that the PhonepayPlus code is complied with, and where Section 120 PRS is used, that third party verification is in place. These provisions build on earlier iterations of the Code but respond to what were considered

171   An unsuccessful argument regarding the application of the derogation was made in R (Ordanduu and Optimus Mobile) v PhonepayPlus [2015] EWHC 50 (Admin).

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to be systemic failures in compliance during a period of rapid growth in the use of PRS, including competitions, quiz channels, audience voting and more.172

14. 8   CON V ERG ENC E A key theme in the review of legislation and policy regarding broadcasting remains that of technological convergence.173 The Audiovisual Media Services Directive constituted a move in this direction, although it is also based on a very significant distinction between linear and non-​l inear services, applying radically different regulatory models to each. These is of course a crucial third category, ie those services not within the scope of the Directive—​a lthough the interpretation of the Directive, and the proposed changes to it, moves services in and out of this category.174 The adoption of on-​demand services continues. This is a story that has been characterized by many false dawns, with early VOD trials taking place in the UK over 30  years ago, and rhetoric on interactive television reaching its height at the turn of the century. VOD is now widely available on the internet, particularly through the ‘catch-​up’ services provided by familiar broadcasters (eg the BBC’s iPlayer, Channel 4’s All4), by subscription (Amazon Prime, Netflix),175 and electronic sell-​through (iTunes). VOD services delivered via the internet can be accessed on other devices (games consoles, smartphones, tablets, and internet-​ enabled television sets). Since the last edition of this book, Netflix in particular has seen significant growth, and it and other providers become more active as commissioners of original content alongside what was for long their core catalogues of works previously broadcast or exhibited elsewhere. The BBC moved its BBC3 service to on-​demand only, and new devices and services (eg YouView, Freeview Play) provide end users with access to linear and on-​demand services through a single interface. Perceived disparities also influence the ongoing process of reviewing regulatory requirements, although sometimes on the premise of levelling down

172   Ayre, R, ‘Report of an inquiry into television broadcasters’ use of premium rate telephone services in programmes’ 18 July 2007 ; House of Commons Culture, Media & Sports Committee, ‘Call TV quiz shows’ 25 January 2007, HC 72 . 173   The author’s scepticism regarding convergence as the basis for regulation is set out further in Mac Síthigh, D, Medium Law (Routledge, 2017). 174   For instance, the ‘comparability’ test discussed in this chapter is under review, and (as noted above) a new category for video sharing platforms (in essence sitting between on-​demand services and non-​AVMS services) may be established. 175   Amazon Prime Video (formerly LoveFilm) continues to have mix of electronic sell-​through and subscription services.

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and sometimes levelling up. For instance, Ofcom asked in 2016 for comments on whether it should permit some post-​watershed content to be aired at other times where PIN restriction is in place.176 A  clear influence was competition from on-​ demand services, where although PINs and other forms of access control are used, these methods apply twenty-​four hours a day. In the other direction, the new requirements for sexually explicit web material in the Digital Economy Act 2017 were proposed as ways of ensuring that requirements currently applicable (in varying ways) to on-​demand and DVD services would also apply to the web more generally. The relationship between broadcasting and telecommunications continues to be a difficult one. Although the definitions applying to services delivered via various types of ECN are relatively clear, this does not mean that there is political or industry consensus on the appropriateness of applying any particular approach to regulation to a given platform or type of service available on a platform. The Leveson Inquiry, set up in response to the ‘phone-​hacking’ allegations against the News of the World and wider concern about press standards, also considered issues of media regulation more generally, including the distinction between print, broadcast, and internet regulation. A House of Lords committee also reported at length on how to rethink media regulation in light of technological change.177 In July 2013, the Department for Culture, Media, and Sport178 set out various thoughts in a Green Paper, including the merits of a ‘common framework for media standards’ and whether EPG prominence rules could be further developed.179 A proposed Communications Bill could have addressed some of these issues, but more importantly usefully consolidated the fragmented regulation of broadcasting (spread across the Broadcasting Acts 1990 and 1996, the Communications Act 2003, and subsequently amended including for the purposes of transposing the AVMSD and the Digital Economy Act 2010), removed otiose categories (perhaps analogue television and the public teletext service), and recognized the changes pertaining to ITV (including the future of non-​BBC public service broadcasting). Despite some helpful discussion papers and events from DCMS, though, no Bill ever came forward. Now, while the AVMS Directive is being reviewed, the UK is also preparing to withdraw from the European Union, with obvious consequences for the actors and priorities in the UK content and broadcast sectors, and so the effect of the broadcasting and communications legislation. Piecemeal amendment may be the main means of responding to change for some time. 176  . 177   House of Lords Select Committee on Communications, ‘Media convergence’ (HL 154, 2012–​2013). 178   Now, after a 2017 rebrand, the Department for Digital, Culture, Media, and Sport. 179  .

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15 INTER NE T SERVICE PROVIDER S CONTENT LIABILITY, CONTROL, AND NETWORK NEUTRALITY Christopher T. Marsden

1 5.1 Defining Information Society Service Providers  15.2 US Legislation on Intermediary Liability  15.3 Development of European Law  15.4 European Copyright Enforcement via ISPs  15.5 Graduated Response in Europe  15.6 European Hotlines to Remove Illegal Content  15.7 Development of Legal Debate Regarding Traffic Management  15.8 US Network Neutrality  15.9 European Legislation and Regulation of Network Neutrality  15.10 Concluding Remarks: From Mere Conduit to Interceptors of Content 

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This chapter examines the regulation of third party content transmitted by Internet Service Providers (ISPs), though that general term of art needs definition for the purposes of the chapter. The chapter considers in turn three aspects of the transmission of content over ISPs, though not the provision of content owned by or affiliated with those ISPs. The aspects considered are in turn: • The general liability of ISPs for third party content and its enforcement; • The self-​regulatory schemes1 established by ISPs to take down illegal content (eg the Internet Watch Foundation); • New laws and regulations regarding permissible Quality of Service (QoS) between ISPs, which is termed ‘network neutrality’. European law provides the 1  See definitions in Leveson, B, ‘An Inquiry Into the Culture and Ethics of the Press, Politicians and Police: Volume IV’ (2012) at 1739, para 2.31, .

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framework for ISP QoS to be regulated by National Regulatory Authorities (NRAs) in the 2009 and 2015 revisions to the Electronic Communications Services (ECS) package.2

15.1  DEFINING INF OR M ATION S O C IE T Y SERV IC E PROV IDER S The term ‘ISP’ has different legal meaning in different contexts, though it is used much more often than more legally specific terms. In Europe, a provider of internet access is an Electronic Communications Network Provider (ECNP), whereas a provider of content and services is termed an Information Society Service Provider (ISSP) under the Electronic Commerce Directive (ECD)3 or an Audiovisual Media Services provider.4 Under the European Framework Directive, ‘electronic communications service’ means a service normally provided for remuneration which consists wholly or mainly in the conveyance of signals on electronic communications networks, including telecommunications services and transmission services in networks used for broadcasting, but exclude services providing, or exercising editorial control over, content transmitted using electronic communications networks and services.5

The definition explicitly excludes ISSPs ‘which do not consist wholly or mainly in the conveyance of signals on electronic communications networks’. In the US, the access provider is an Internet Access Provider (IAP), and the service provider an Online Service Provider (OSP) under the Digital Millennium Copyright Act (DMCA),6 though a further distinction lies between access providers classified under Title I and Title II of the Communications Act 1934.7 In Section 512 an OSP is defined as ‘an entity offering transmission, routing, or providing 2   See Regulation (EU) 2015/​2120 of the European Parliament and of the Council of 25 November 2015 laying down measures concerning open internet access and amending Directive 2002/​22/​EC on universal service and users’ rights relating to electronic communications networks and services and Regulation (EU) No 531/​2012 on roaming on public mobile communications networks within the Union, OJ L 310, 26 November 2015, 1–​18. This amended Directive 2009/​140/​EC, OJ L 337/​37 18 December 2009; Directive 2009/​136/​EC, OJ L 337/​11 18 December 2009. 3   Directive 2000/​31/​EC, Art 2(a), OJ L 178/​1, 17 July 2000, reiterating Art 1(2) of Directive 98/​3 4/​EC (OJ L 204/​37, 21 July 1998) as amended by Art 1(2)(a) and Annex V of Directive 98/​4 8/​EC, OJ/​L 217/​18, 5 August 1998. 4   See Directive 2010/​13/​E U, Art 1(a)(i) and Art 2 of 10 March 2010 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services (Audiovisual Media Services Directive) (codified version) OJ/​L 95/​1, 15 April 2010. 5   Directive 2002/​21/​EC, OJ L 108/​33, Art 2(c). 6   Online Copyright Infringement Liability Limitation Act (OCILLA) which amended the 1976 Copyright Act, passed as a part of the 1998 Digital Millennium Copyright Act (DMCA) and referred to as the ‘Safe Harbor’ (sic) provision because it added Section 512 to Title 17 of the United States Code. 7   47 USC §201(a) and (b). See Chapter 5.

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connections for digital online communications, between or among points specified by a user, of material of the user’s choosing, without modification to the content of the material as sent or received’ or ‘a provider of online services or network access, or the operator of facilities thereof.’8 This broad definition includes network services companies such as access providers, search engines, bulletin board system operators, and even auction web sites. It should be noted that most (if not all) access providers are also service providers, and in fact the largest access providers are also amongst the largest service providers, for instance British Telecommunications (BT), AT&T, or Vodafone. In the first part of the chapter (Sections 1–​5), general liability limitations apply to all ISSP/​ISPs, though with some specific applications that only apply to access providers. In the second part of the chapter, the self-​regulatory hotline system (Section 6)  is more familiar to, and operated by, access providers, though some large ISSP/​ISPs are also members. In the final part of the chapter (Sections 7–9), the distinction is most important, as network neutrality relates to the manner in which access providers employ QoS across their networks, and how this in turn improves or degrades the end-​user’s experience of the ISSP/​ISP’s performance. To take the most-​used example, an access provider that also provides a bundled voice service to its subscribers may degrade the rival voice over internet protocol (VoIP) service of an ISSP/​ISP that needs that access to end-​users. This degradation may form a breach of network neutrality.

15. 2  US L E G ISL ATION ON INTER MEDI A RY L I A BIL IT Y It is instructive to note that since the US Supreme Court ruled in ACLU v Reno in 1997,9 it took over a decade for the senior European court (the CJEU) to consider ISP liability for third party violation of intellectual property rights (IPRs) against constitutional rights to free expression and privacy of personal data, in Perfect Communication10 and Scarlet Extended.11 Limiting liability for ISPs as publishers, rather than authors, of material hosted on behalf of third parties was established via early US caselaw,12 though the

  Digital Millennium Copyright Act 1998, s 512(k)(1)(A–​B).   American Civil Liberties Union v Reno (1997) 21 US 844 of 27 June No 96–​511. 10   Case C-​4 61/​10:  Bonnier Audio AB and others v Perfect Communication Sweden AB, OJ C 317, 20/​11/​ 2010 P. 0024—​0 024 final judgment 19 April 2012 at . 11   Case C-​70/​10 Scarlet Extended SA v Société Belge des auteurs, compositeurs et éditeurs (SABAM) OJ C 113, 1 May 2010: 20–​20. Decided 24 November 2011, OJ C 25/​6, 28 January 2012. . 12   Case law dates to the Bulletin Board Services of the 1980s, see generally references in Marsden, C, Oxford Bibliography of Internet Law, section ‘Origins of Internet Law’, (New York: OUP, 2012). 8 9

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difficulty of such limitations was recognized in the Communications Decency Act 1996 (CDA). Section 230 of the CDA provides that, ‘No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider’.13 Yen states, ‘the general philosophy motivating these decisions—​namely, that the liability against ISPs for subscriber libel would result in undesirable censorship on the internet—​remains vitally important in assessing the desirability of ISP liability’.14 Holznagel has indicated that US courts have applied these ‘safe harbour’ provisions to widely protect ISPs, even where (a) it was aware of unlawful hosted content; (b) it had been notified of this by a third party; (c) it had paid for the data.15 Frydman and Rorive observe that courts ‘in line with the legislative intent . . . applied the immunity provision in an extensive manner’.16 The liability exemption for third party content in non-​copyright cases was reaffirmed at state Supreme Court level in 2011.17

15.2.1  Digital Millennium Copyright Act 1998 (DMCA) Four major ISP categories qualify for protection under the DMCA s 512: • ‘Conduit Communications’ include the transmission and routing of information, which ISPs store only temporarily on their networks; (s 512(a)) • ‘System Caching’ refers to temporary copies of data made by service providers; (s 512(b)) • ‘Storage Systems’ refers to users’ information stored on a hosting service; (s 512(c)) • ‘Information Location Tools’ refer to services such as search engines, directories, or web links. (s 512(d)) There are five leading cases, as well as a statutory safe harbour applicable in the copyright context, which together set out the principles of application of DMCA

13   Section 30, 47 USC §230(c)(1) (Supp. II 1996). This language might shield ISPs from liability for subscriber copyright infringement as well. However, Section 230(e)(2) specifically states, ‘Nothing in this section shall be construed to limit or expand any law pertaining to intellectual property.’ 14   Yen, Alfred C, ‘Internet Service Provider Liability for Subscriber Copyright Infringement, Enterprise Liability, and the First Amendment’, (2000) 88 Georgetown Law Journal 1833–​1893. 15   Holznagel, B, ‘Responsibility for Harmful and Illegal Content as Well as Free Speech on the Internet in the United States of America and Germany’, in Engel, C and Keller, H, (eds), Governance of Global Networks in Light of Differing Local Values (Baden Baden: Nomos, 2000). 16   Frydman, B and Rorive, I, ‘Regulating Internet Content Through Intermediaries in Europe and the USA’, (2002) Zeitschrift fur Rechtssoziologie Bd.23/​H 1 July, Lucius et Lucius. 17   Delle v Worcester Telegram & Gazette Corp, 2011 WL 7090709 (Mass Super Ct 14 September 2011).

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s 512. In A&M Records v Napster,18 the court refused to extend the safe harbour provisions to the Napster software program and service, leaving open the question of whether peer-​to-​peer networks also qualify for safe harbour protection under Section 512. The second is In re Aimster Copyright Litigation19 (involving accessorial copyright infringement by an online intermediary based on its use of technology to blind itself wilfully to infringement by its users); the third Metro-​Goldwyn-​Mayer Studios, Inc v Grokster, Ltd20 (involving alleged accessorial copyright liability for online peer-​ to-​peer intermediaries that facilitated the illegal exchange of copyrighted material); the fourth Viacom et al v YouTube, Inc et al21 (involving alleged direct and accessory copyright liability for hosting of video clips where some were illegally posted in violation of copyright law), which was appealed with oral hearing by the 2nd Circuit on 18 October 2011. The fifth case is Tiffany (NJ), Inc v eBay, Inc22 (involving the hosting of Tiffany products for auction where the goods in question were largely, though not exclusively, counterfeits). The Supreme Court explained in Grokster:23 [o]‌ne infringes contributorily by intentionally inducing or encouraging direct infringement,[24] and infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it[25]. . . [t]he Copyright Act does not expressly render anyone liable for infringement committed by another,[26] these doctrines of secondary liability emerged from common law principles and are well established in the law.[27]

The Supreme Court distinguished the Sony doctrine, which had legalized the use of video recording equipment to record live television as an ancillary use,28 based on the fault-​based approach, in that Grokster had ‘an actual purpose to cause infringing use is shown by evidence independent of design or distribution of the product’29 noting ‘nor would ordinary acts incident to product distribution, such

  A&M Records, Inc v Napster, Inc, 239 F 3d 1004 (2001) (‘Napster’).   In re Aimster Copyright Litigation 334 F 3d 643 (7th Cir 2003). 20   Metro-​Goldwyn-​Mayer Studios, Inc v Grokster, Ltd 545 US 900 (2005) (‘Grokster’). 21   Viacom et al v YouTube, Inc et al 718 F Supp 2d 514 (SDNY 2010). See also Perfect 10, Inc v Amazon, Inc, 508 F 3d 1146, 1172–​73 (9th Cir 2007) (discussing and applying Grokster and Sony), and Perfect 10, Inc v Google Inc 416 F Supp (2nd 828) CD Cal 2006 (Thumbnails in Web searches were fair use. Framed inline images of full size were not infringing copies. 9th Circuit reversed the District Court’s holding of no Fair Use). 22 23   Tiffany (NJ), Inc v eBay, Inc 600 F 3d 93 (2nd Cir 2010).   Grokster, n 20, at 930. 24  Citing Gershwin Pub Corp v Columbia Artists Management, Inc, 443 F 2d 1159, 1162 (CA 2 1971). 25  Citing Shapiro, Bernstein & Co v HL Green Co, 316 F 2d 304, 307 (CA 2 1963). 26  Citing Sony Corp v Universal City Studios, 464 US [417] 434 (1984). 27  Citing Kalem Co v Harper Brothers, 222 US 55, 62–​6 3 (1911); Gershwin n 24, at 1162. 28   Sony v Universal City Studios, 464 US [417,] 434 (1984). For its UK equivalent, see CBS Songs v Amstrad Consumer Electronics [1988] AC 1013. 29   Grokster n 20, at 933–​934. 18

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as offering customers technical support or product updates, support liability in themselves’.30 This followed Napster, in which it was stated that knowingly failing to take steps to prevent infringement, while benefiting from said infringement, is grounds for contributory infringement, and that users of file-​sharing services infringe by both uploading and downloading works without permission.31 Lower courts have held that an alternative solution to take-​down, that of mandatory filtering for copyright infringement by websites prior to a finding of infringement, raises many technical logistics problems and is impractical.32

15.2.2  US ‘Graduated Response’ As an alternative to both technology and litigation,33 many ISPs and copyright holders entered into a Memorandum of Understanding in 2011 to warn users found to have shared infringing materials, a so-​called ‘Graduated Response’ agreement following a six-​step warning system for users.34 It also made provision for the establishment of a clearing house for copyright infringement within 60 days from the date of implementation of the agreement, which is to run for four years.35 Funding is provided 50 per cent by the participating rights-​holders and 50 per cent by the participating ISPs.

15.2.3  Civil and criminal liability Civil liability includes potential to pay damages for every copyrighted item copied, for attorney fees for copyright holders pursuing the case, and for exemplary damages for such ‘wilful’ abuse of copyright. By contrast, until 2012, it was assumed that criminal liability would be limited as ‘in exercising its power to render criminal certain forms of copyright infringement, [the United States]  . . .  acted with exceeding caution.’36 However, the proposed extradition to the United States

31   Ibid at 937.   Napster, n 18, at 1027.  See UMG Recordings v Veoh Networks, Inc, 665 F Supp 2d 1099, 1116–​18 (CD Cal 2009). Note that Universal v Reimerdes 273 F 3d 429 (2nd Cir 2001) affirmed DMCA anti-​c ircumvention provisions which made it illegal to reverse engineer or ‘hack’ (a term of art for computer scientists) Digital Rights Management systems. 33   See Varanini, E, ‘National Report:  United States, LIDC Congress in Oxford’ 22–​2 4 September 2011, at . 34   See Memorandum Of Understanding (2011) dated 7 June 2011, at , and for a critique see Goldman, E, and McSherry, C, ‘The “Graduated Response” Deal:  What if Users Had Been At the Table?’ Electronic Frontier Foundation at 18 July 2011. 35   See , note that there was no update to the website for the six months (to January 2012) following its first publication. 36   Dowling v United States, 473 US 207, 222 (1985). 30 32

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following the January 2012 arrest of Megaupload executives in New Zealand has caused some surprise and uncertainty in the application of criminal law,37 as it follows a 2005 restatement of enforcement policy.38 The ‘wilful’ requirement in criminal law must be proved beyond reasonable doubt.39 Nevertheless, a more aggressive prosecution of counterfeiting and other ‘piracy’ (sic) websites was signalled with the taking down of domain names belonging to suspected overseas ‘rogue sites’.40 The cooperation of several national police forces in the Megaupload case indicates a more general trend towards aggressive policing of counterfeiting which continues.

15.3  DE V ELOPMENT OF EUROPE A N L AW In European debate, the 1999 Commission proposals for the 2002 communications regulation package41 and the 1997 Bonn Ministerial Conference Declaration expressed the desire for end-​user filtering rather than intermediary liability.42 This policy led to the E-​Commerce Directive (ECD) of 2000, which enshrined this principle of the internet host ‘safe harbour’ of non-​l iability and leaving much detailed regulation via codes of conduct to the market actors.43 Benoit and Frydman establish that it was based on the 1997 German Teleservices Act,44 though with ‘slightly more burden on the ISPs in comparison with the former German statute’.45

15.3.1  Directive on electronic commerce (ECD) The ECD aimed to remove obstacles to cross-​border online services in the Internal Market by providing legal certainty to business and citizens in order to contribute to the better functioning of the Internal Market. As with only one other Directive,

37   See Department of Justice Office of Public Affairs (19 January 2012) Justice Department Charges Leaders of Megaupload with Widespread Online Copyright Infringement. 38   US ATTORNEY BULLETIN (2005) Novel Criminal Copyright Infringement Issues Related To The Internet available at . 39   See US Attorney Prosecuting IP Crimes Manual, Criminal Copyright Infringement Issues, §II.B.2 (2006), available at . 40   See Affidavit in Support of Application for Seizure Warrant Pursuant to 18 USC §§2323, 981, United States v Domain Names (defendants in rem), (31 January 2011) (No 18 MAG 262). 41   See COM(1999) 539. 42  Bonn Ministerial Declaration (1997) Europe paves the way for rapid growth of Global Information Networks, 8 July, copy located at . 43   See Art 1(1)(2), Art 16 and Recitals 32, 49, of 2000/​31/​EC. 44   German Teleservices Act 1997 (TDG) (‘Federal Act Establishing the General Conditions for Information and Communication Services’ of 22 July 1997, BGBl. I S. 1870). 45   Frydman and Rorive n 16, at 54.

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that on trans-​f rontier television,46 legal certainty offered by the application of the ‘country of origin’ principle (Internal Market clause) has been introduced, together with provisions concerning establishment, information and transparency requirements, provisions concerning commercial communications, electronic contracting, and the regulation of the liability of intermediary service providers (which is the primary concern of this chapter). The Internal Market clause is the core element of the ECD. It takes the form of two complementary provisions: • Member States must ensure that a provider of information society services established on its territory applies with the national provisions applicable which fall within the coordinated field.47 • In turn Member States may not, for reasons falling within the coordinated field, restrict the freedom to provide information society services from another Member State.48 15.3.1.1  Articles 12–​15: Scope and definition In Europe, ‘safe harbour’ protection of ISPs from liability was established by the ECD. The basics of ECD are that Article 12 protects the ISP where it provides ‘mere conduit’ with no knowledge of, nor editorial control over, content or receiver (‘does not initiate [or] select the receiver’). Article 13 allows for caching (‘automatic, intermediate and temporary storage of that information, performed for the sole purpose of making more efficient the information’s onward transmission’). Where ISPs provide hosting services, under Article 14 they are protected from liability, in two ways: [a]‌ the provider does not have actual knowledge of illegal activity or information and, as regards claims for damages, is not aware of facts or circumstances from which the illegal activity is apparent; or [b]‌ the provider, upon obtaining such knowledge or awareness, acts expeditiously to remove or to disrupt access of the information. Article 15 prevents Member States from imposing on internet intermediaries: • the general obligation to monitor the information which they transmit or store, • the general obligation actively to seek facts or circumstances indicating illegal activity.

47   See Chapter 14, Section 14.2.   ECD, Art 2(h).   A number of issues are excluded from ECD scope under Art 1(5) or Art 3 (derogations from the Internal Market clause listed in ECD annex). 46

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15.3.1.2  Notice and Take Down (NTD) Regime CJEU in its L’Oréal v eBay judgment49 confirmed that awareness in the sense of Article 14 can be obtained through a notice that is sent to an intermediary and that is sufficiently precise and substantiated. The Commission itself in 2012 concluded that ‘In practice a multitude of often very different procedures exist and it is not easy either for intermediary service providers or for victims of illegal content to determine which one applies and in what way.’50 Article 14.3 leaves Member States discretion to ensure that self-​regulatory NTD procedures are established. ECD contains no standard NTD procedure, even though a framework is established for self-​regulation. The relevant reference to the scheme can be found in Articles 14.3, 21.2 and Recital 46, which reads: In order to benefit from a limitation of liability, an ISSP, upon obtaining actual knowledge or awareness of illegal activities has to act expeditiously to remove or to disable access to the information concerned; the removal or disabling of access has to be undertaken in the observance of the principle of freedom of expression and of procedures established for this purpose at national level; this Directive does not affect Member States’ possibility of establishing specific requirements which must be fulfilled expeditiously prior to the removal or disabling of information.

The key provision here is the establishment of the concept of ‘actual knowledge’. ECD, though maintaining CDA/​DMCA mere conduit principles, limits them substantially, because when an ISP ‘obtains actual knowledge’ of a site containing infringement it must act ‘expeditiously to remove or disable access to the information concerned’. Whereas in some cases it might be easy to define what ‘actual knowledge’ means, when an ISP receives a notice from a hotline it may simply treat the complaint as actual knowledge and remove the content. This defers responsibility for judgment to ‘hotlines’, which might be better trained for such an investigation. What constitutes actual knowledge remains undefined, including for instance whether it must be a letter with proof of the identity of the complainant. The term ‘awareness’ seems even vaguer. Article 14 establishes the concept of ‘apparent’ illegal content, which the ISP needs to remove expeditiously, if made aware. Article 5(1) of the Copyright Directive drafted a year later establishes an exemption from liability for ‘Temporary acts of reproduction . . . transient or incidental [and] an integral and essential part of a technological process and whose sole purpose is to enable a transmission in a network between third parties by an intermediary’.51

  Case C-​324/​0 9 L’Oréal SA & Others v eBay International AG & Others, decided 12 July 2011.   SEC(2011) 1641 at p 25. 51   Directive 2001/​29/​EC of 22 May 2001, OJ L 167, 22 June 2001 P. 0010—​0 019. 49

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Article 21.2 provides that, when the Directive is re-​examined, the issues to be analysed include NTD procedures and attribution of liability following content removal. Rightswatch  An IPR hotline and clearing house which would mirror the European  hotlines dealing with some illegal materials, notably child abuse images (see Section 15.6) was proposed prior to the ECD drafting. RightsWatch was a multistakeholder project funded by the European Commission in the period from 1999–​200252 to standardize the NTD procedure in six steps: location, notification, verification, information, take down, and confirmation. It failed to gain support because of fundamental differences of approach between rights holders and ISPs. To illustrate NTD in action, consider the Code of Practice of the UK ISP Association (ISPA), which mentions the complaint procedure, but does not directly refer to the NTD procedure. All major ISPs in the UK have agreed to ‘use their reasonable endeavours to resolve a complaint within 10 working days of receipt of notice be it by email, letter, telephone call or in person’.53 The Code lays out a minimum liability NTD guideline: ISPA UK supports its Members in any independent decision taken by the Member to proactively limit the accessibility of illegal material via its service, but strongly states that no greater legal burden, standard of care or obligation should be placed on the Member who takes such action than is placed upon those Members who do not take such action.54

The wider European ISSP legal reaction to the failure of hotline initiatives in IPR cases was similar, and cooperation with rights holders would in general only occur under court order. Section 15.5 explains the range of enforcement powers in effect in Europe and the issue of ‘graduated response’ in European law, before Section 15.6 goes on to consider the NTD arrangements which have been introduced for illegal criminal content, notably child sexual abuse images.

15.3.2  US ‘Put Back’ Regime Contrasted An important difference between the US and EU is that the US legislation, and especially the DMCA, makes explicit the NTD procedures that must be followed in order to take down material, and includes an explicit put-​back provision where

52  Rightswatch Project IST-​1999-​10639 funded under the 5th Framework Programme (total 1.3  million euros) at . 53   The ISPA UK Code of Practice Statement of Policy, as amended 2007, at . 54   ISPA (2007) n 53.

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a complaint is erroneously made about copyrighted material. Note that this is limited to copyright. To qualify for exemption under the safe harbour provisions, the ISP must give notice to its users of its policies regarding copyright infringement and the consequences of repeated infringing activity. There are no specific rules about how this notice must be made, but it must be ‘reasonably implemented’ to properly inform subscribers and account holders.55 In order to ensure that copyright owners do not wrongly insist on the removal of materials that do not infringe their copyrights, the safe harbour provisions require ISPs to notify the subscribers if their materials have been removed and to provide them with an opportunity to send a written notice to the service provider stating that the material has been wrongly removed.56 The ISP must promptly notify the claiming party of the individual’s objection.57 If the copyright owner does not bring a district court lawsuit within 14 days, the ISP is required to restore the material online.58 If it is determined that the copyright holder misrepresented its claim, the copyright holder then becomes liable for any damages resulting from the improper removal of the material.59 The provisions also require the copyright owners to identify the copyrighted work, or a representative list of the copyrighted works, that is claimed to be infringed. In ALS Scan v Remarq Communities,60 the court found that the copyright owner did not have to point out all of the infringing material, but only substantially all of the material. ECD is less defined than the US framework, for two reasons: • It does not provide an exemption from liability, if the ISP acts according to a clearly defined procedure. This would remove the burden of investigation and judgment of the ISP, and transfer it to the parties involved, the complainant and the content provider. • It does not create an incentive for the ISP to properly investigate whether content is illegal, but rather to remove the content expeditiously. The lack of standard European NTD procedure poses several problems. ISPs are not able to know whether they are properly informed, whether the information (complaint) received is correct (founded) or not, and whether they can face liability claims by users when their pages have been shut down,61 and it is established ex

56 57   Digital Millennium Copyright Act 1998, s 512(i)(1)(A).   Ibid, s 512(g).   Ibid, s 512(g)(2). 59   Ibid, s 512(g)(2)(c).   Ibid, s 512(f). 60   ALS Scan v Remarq Communities, Inc, 239 F 3d 619 (4th Cir 2001). 61   In this regard, the DMCA provides that ‘a service provider shall not be liable to any person for any claim based on the service provider’s good faith disabling of access to, or removal of, material or activity claimed to be infringing or based on facts or circumstances from which infringing activity is apparent, regardless of whether the material or activity is ultimately determined to be infringed.’ Digital Millennium Copyright Act 1998, n 6, at (g)(1). 55

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post that the content was neither illegal nor harmful. Consequently there is a potential shortcoming in the protection of freedom of expression, as pointed out by the United Nations special rapporteur.62

15.3.3  Application of ECD—​United Kingdom United Kingdom courts struggled with issues of ISP liability throughout the late 1990s, prior to the drafting of the ECD.63 The Electronic Commerce (EC Directive) Regulations 2002 (SI 2002/​ 2013) (‘Regulations’) transpose the main requirements of ECD into UK law. The transposition is faithful to the original language, though there have since been several derogations by the UK authorities on public interest grounds,64 for instance relating to gambling and copyright enforcement. Enforcement powers in the UK lie with several regulators, for instance the Trading Standards Departments, the Office of Fair Trading, and Phone-​paid Services Authority,65 their powers assigned by Regulation 4(2) of the Regulations, ‘an enforcement authority. . . shall ensure [an ISSP] complies with . . . any power, remedy or procedure for taking enforcement action shall be available to secure compliance’.

15.3.4  Revision of ECD The manifest faults with the ECD, not least associated with the scope of ISSPs and the lack of a uniform NTD process, have not resulted in rapid revision, and its reform has been continually postponed. Article 21 ECD requires the Commission to submit to the European Parliament and the Council every two years a report on the application of ECD. The first review in 2003 was far too early to produce any but initial indications of the ECD’s adoption within Member States (and its non-​adoption in France at that point). A 2007 study was charged with the ambitious task of working out how effective ECD was. In November 2010, the European Commission concluded a thorough consultation on the ECD in which it invited

62   La Rue, F, Report of the Special Rapporteur on the promotion and protection of the right to freedom of opinion and expression, Human Rights Council Seventeenth session Agenda item 3, A/​H RC/​17/​27 of 17 May 2011 at . 63   See on hyperlinking, Shetland Times, Ltd v Jonathan Wills and Another, 1997 FSR (Ct Sess. OH), 24 October 1996. On application of the Defamation Act 1996, s 1, see Godfrey v Demon Internet Service [2001] QB 201, which also provides guidance on take-​down. Bunt v Tilley & Ors [2007] 1 WLR 1243, per Eady J at para 37. 64   See the Serious Crime Act 2007, s 57(5–​8). 65   Formerly Phone Pay Plus, renamed in 2016, and previously known since 1986 as ICSTIS. See Phonepay Plus, ‘UK regulator PhonepayPlus to rename as Phone-​paid Services Authority’, 12 July 2016 at  .

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comments on, among other matters, the interpretation of the provisions concerning intermediary liability. The Commission published a Communication on E-​Commerce, including the impact of ECD, in January 2012.66 In the subsequent five years, no further attempts were made through hard law and legislation to amend the ECD, and the ‘Gordian knot’ of intermediary liability (with the exception of copyright infringement) remains in place.

15.4  EUROPE A N COP Y R IG HT ENF ORC EMENT V I A ISP S Service providers can receive limited liability according to the activities in which they engage, not the type of service provider their overall business accounts for, as confirmed by the CJEU in 2010: Google v LVMH.67 The following section of this chapter considers the enforcement cases, which give guidance to national courts and legislators that was unfortunately missing in the 2008 CJEU decision in Promusicae, which simply and very unhelpfully instructed the Spanish court to observe a ‘fair balance to be struck between the various fundamental rights protected by the Community legal order’,68 in particular between ECD and various copyright and privacy rights. This section proceeds by considering L’Oréal v eBay, and Scarlet Extended, contrasted with a series of UK cases of particular interest involving blocking access to the Newzbin site, which then led to the blocking of live streaming of Premier League football games in FA Premier League v BT (2017).69

15.4.1  L’Oréal v eBay70 Online intermediaries are protected by the ECD from activities of users of their services. Governments are increasingly convinced by rights-​holders’ arguments that online intermediaries should help them in dealing with infringements of their rights due to three factors:

66   COM(2011) 942 A  coherent framework for building trust in the Digital Single Market for e-​commerce and online services, at . This document was published 11 January 2012. Note also COM(2011) 287 final Communication from the Commission ‘A Single Market for Intellectual Property Rights—​Boosting creativity and innovation to provide economic growth, high quality jobs and first class products and services in Europe’. 67   Joined cases C-​2 36/​0 8 to C-​2 38/​0 8, Google v LVMH, judgment of 23 March 2010, para 113. 68   Case C-​275/​0 6 Productores de Música de España (Promusicae) v Telefónica de España SAU, judgment of 29 January 2008 [2008] ECR I271 at para 70. 69   Football Association Premier League Ltd v British Telecommunications Plc and others [2017] EWHC 480 (Ch). 70   See further Headdon, Toby ‘Beyond Liability:  Injunctions after L’Oreal v eBay, Computers and Law’, (2011) at .

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• ISSPs have a contractual relationship with the infringing user and can enforce those terms, which may preclude any use of its service which infringes third-​ party rights; • ISSPs are in a position to ‘take down’ infringing content or even terminate infringing users; • It is more cost-​effective to pursue a single intermediary rather than all users. In this case, the CJEU was presented with the question of clarifying how to balance ISP and user rights in the ECD and data protection law,71 against rights holders’ need to enforce their IPR under both the 2001 Copyright and 2004 Enforcement Directives. Article 8(3) Copyright Directive72 provides:  ‘Member States shall ensure that  rightholders  are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe a copyright or related right.’ Recital 59 Copyright Directive states: In the digital environment, in particular, the services of intermediaries may increasingly be used by third parties for infringing activities. In many cases such intermediaries are best placed to bring such infringing activities to an end. Therefore, without prejudice to any other sanctions and remedies available, rightholders should have the possibility of applying for an injunction against an intermediary who carries a third party’s infringement of a protected work or other subject-​matter in a network. This possibility should be available even where the acts carried out by the intermediary are exempted under Article 5. The conditions and modalities relating to such injunctions should be left to the national law of the Member States.

The Copyright Directive addresses only copyright law. The 2004 Enforcement Directive73 addresses ‘intellectual property rights’ although the precise scope is not particularly clear. The third sentence of Article 11 provides that ‘Member States shall also ensure that rightholders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right, without prejudice to Article 8(3) of [the Copyright] Directive.’ Article 9 of the Directive provides an equivalent provision for interlocutory injunctions. Article 3 of the Directive requires that remedies (which includes injunctions) ‘. . .  shall be fair and equitable and shall not be unnecessarily complicated or costly, or entail unreasonable time-​l imits or unwarranted delays’ and ‘. . . shall also be effective, proportionate and dissuasive 71   Particularly Directive 95/​4 6/​EC of 24 October 1995, OJ L 281/​31 (OJ L 281, 23 November 1995 P. 0031—​ 00501995); Directive 2002/​58/​EC, OJ L 201/​37 (OJ L 201, 31 July 2002 P. 0037—​0 0472002). 72   Directive 2001/​29/​EC. 73   Directive 2004/​4 8/​EC of 29 April 2004 on the enforcement of intellectual property rights, OJ L 195, 2 June 2004 P. 0016—​0 025.

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and shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse.’74 Recital 24 goes on to state that these may include ‘prohibitory measures’ aimed at preventing further infringements of intellectual property rights and ‘corrective measures’ such as recalling, removing from distribution, or destroying infringing goods and materials used to create them. Article 2(3) of the Directive makes it clear that it ‘shall not affect’ the provisions of ECD. The CJEU in its L’Oréal ruling explained that injunctions may be available against an intermediary to prevent not only the continuation of a specific act of infringement but also ‘the repetition of the same or a similar infringement in the future, where such injunctions are available under national law’. An appropriate limit may be to impose a ‘double requirement of identity’:  future infringements would have to be committed by the same third party and in respect of the exact same IPR (the Commission described such a requirement as a ‘Notice & stay down’ obligation75). However, on what national courts must do, the CJEU stated that ‘conditions and procedures’ are the responsibility of Member States’ courts. It did state that the scope of the injunction should follow Promusicae but also be determined by feasibility, cost, proportionality of potential measures.76 Technical measures that could be taken might include blocking a particular infringing user’s access to a service or utilizing content filtering applications and web proxy servers to remove infringing content.

15.4.2  Scarlet Extended (2011) In Scarlet Extended (2011), the CJEU had to balance rightsholders against ISP and users’ rights. The CJEU recognized that the risk of preventing access to lawful content through overblocking or overfiltering is a relevant factor to take into account. Scarlet Extended may prove little more useful than Promusicae, beyond specific

74   Recital 6 and Article 1 of the Enforcement Directive offer a limited explanation of what is covered. Paragraph 2.2 of the July 2011 ‘Synthesis of Comments on the Commission Report on the Application of [the Enforcement Directive]’ reported on feedback regarding the introduction of a pre-​defined list of intellectual property rights covered by the Directive. 75   See Question 57 in European Commission (2010) Public consultation on the future of electronic commerce in the internal market and the implementation of the Directive on electronic commerce (2000/​31/​ EC), at . 76   Article 2(3) of the Enforcement Directive requires that measures are ‘effective, proportionate and dissuasive’. Article 3 of the Enforcement Directive requires that measures be fair and equitable, not unnecessarily complicated or costly, or entail unreasonable time-​l imits or unwarranted delays. There can be no general obligation to monitor, as in Article 15 ECD. Injunctions must not create barriers to legitimate trade. Injunctions must strike a fair balance following Promusicae which requires Member States to balance competing interests.

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facts of the case itself: the Belgian court ordered an ISP to filter all traffic for copyright infringement and pay for the privilege of enforcing for copyright! Paragraphs 43–​4 4 in Scarlet Extended are critical for general guidance: The protection of the right to intellectual property is indeed enshrined in Article 17(2) of the Charter of Fundamental Rights of the European Union (‘the Charter’). There is, however, nothing whatsoever in the wording of that provision or in the Court’s case-​law to suggest that that right is inviolable and must for that reason be absolutely protected. [44] As paragraphs 62 to 68 of the judgment in Promusicae make clear, the protection of the fundamental right to property, which includes the rights linked to intellectual property, must be balanced against the protection of other fundamental rights.

Article 16 of the Charter of Fundamental Rights states that: ‘freedom to conduct a business in accordance with Community law and national laws and practices is recognised.’ CJEU stated that the Belgian injunction in issue would be a serious infringement of the freedom of the ISP concerned to conduct its business, since it would require that ISP to install a complicated, costly, permanent computer system at its own expense. The Belgian court’s order would have emasculated Article15 ECD. This reasoning was reconfirmed and extended to social networking sites by the February 2012 decision in SABAM v Netlog.77 Scarlet Extended is a short decision (as is Netlog), and the question asked was set at the most extreme end of the scale, an injunction that was: (a) preventative; (b) entirely at the ISP’s expense; (c) for an unlimited period; (d) applied to all customers indiscriminately; (e) for all kinds of communications. Useful guidance for national courts in the judgment included that the complexity/​cost of the proposed Belgian system weighed against it, that IP addresses are personal data, that the Belgian injunction was overbroad and could interfere with lawful as well as unlawful use.78 Confirmation that IP addresses may be considered personal data arrived in autumn 2016 in Case 582/​14, Patrick Breyer v Germany.79 URL blocking (ie proxy for all http traffic) is clearly too indiscriminate whereas the BT Cleanfeed

77   Case C-​360/​10 SABAM v Netlog, decided 16 February 2012, reported at . 78  See Scarlet n 11, at para 52: ‘injunction could potentially undermine freedom of information since that system might not distinguish adequately between unlawful content and lawful content, with the result that its introduction could lead to the blocking of lawful communications’. See further SABAM v Netlog n 77, at paragraphs  36–​38. 79   Case 582/​14, Patrick Breyer v Germany, 19 October 2016, ECLI:EU:C:2016:779.

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system used in Newzbin2 was already in place and cheap, and BT’s estimate of the cost was so low that it was essentially negligible.

15.4.3 UK—​Newzbin There were three judgments in the Newzbin saga which confirmed ECSPs must cooperate in blocking access to infringing websites. First came the decision of Kitchen J that resulted in an order against Newzbin Ltd directly in 2010,80 then the judgment of Arnold J in July 2011 (BT/​Newzbin No 1) to grant an order against BT to block Newzbin access to its subscribers,81 followed by the detail of the order on 21 October 2011 (BT/​Newzbin No 2).82 This was the first order in the UK under Section 97A of the Copyright Designs and Patents Act 1988, an amendment made in 2003.83 Section 97A of the Copyright Designs and Patents Act 1988 implements Article 8.3 of Directive 2001/​29/​EC, though it was already possible under UK law to seek injunctions against intermediaries, to notify an intermediary of an injunction served on an infringer, and an intermediary was liable for contempt of court if it aids and abets an infringer. The Newzbin website indexed (but did not store) USENET content, with subscribers offered normal (free) and premium membership. Premium members were able to obtain easy access to films available in binary format on USENET—​ in most cases with infringement of copyright. Six film studios sued Newzbin for damages and an injunction to prevent it ‘from including in its indices or databases entries identifying any material posted to or distributed through any Usenet group in infringement of copyright.’ On the basis of a number of factors, Kitchen J found that Newzbin were secondary copyright infringers. The injunction granted by Kitchen J required Newzbin to filter any material that matched the studios’ copyright works in a database that the studios supplied. The studios wanted a much wider injunction, that covered all infringing material, whether or not it belonged to them. The judge refused to permit film studios to use s 97A against ISPs—​t hough using a new power for the courts to grant injunctions against service providers (like Newzbin) that had actual knowledge of infringement.84 A  wider injunction

80   Twentieth Century Fox Film Corporation v Newzbin Ltd [2010] EWHC 608 (Ch) . 81   Twentieth Century Fox Film Corporation v British Telecommunications Plc (No 1) [2011] EWHC 1981 (Ch) 28 July 2011. 82   Twentieth Century Fox Film Corporation and Others v British Telecommunications Plc (No 2) [2011] EWHC 2714 (Ch) 26 October 2011. 83   As amended by the Copyright and Related Rights Regulations 2003, reg 27(1). This implemented the Copyright Directive 2001/​29/​EC, Art 8(3). 84   Newzbin Ltd (2010) at para 135.

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would be uncertain in scope, and the judge was clear that the injunction should go no further than he had indicated. The rights holders pursued an alternative strategy as Newzbin moved out of jurisdiction to Sweden and the order could not be satisfactorily enforced, using eBay v L’Oréal to persuade Arnold J to rule that BT Retail, the UK’s biggest ISP, should block Newzbin access using its Cleanfeed technology. As explored further in Section 15.6 below, BT’s Cleanfeed technology is a two-​stage system of IP address re-​routing and deep packet inspection (DPI)85 based URL blocking. The relevant part of the injunction is as follows, The technology to be adopted is:  (i)  IP  address blocking in respect of each and every IP address from which the said website operates or is available and which is notified in writing . . . (ii) DPI based blocking utilising at least summary analysis in respect of each and every URL available at the said website and its domains and sub domains and which is notified in writing . . .  2. For the avoidance of doubt paragraph 1(i) and (ii) is complied with if the Respondent uses the system known as  Cleanfeed  and does not require the Respondent to adopt DPI based blocking utilising detailed analysis.

Arnold J limited the injunction to, ‘all BT’s services which incorporate Cleanfeed whether that is imposed on the customer or taken as an option’. The judge agreed that it was inappropriate to order BT’s access and upstream divisions (BT Wholesale, BT OpenReach) to block Newzbin. Arnold J also explained he added words, ‘any other IP address or URL whose sole or predominant purpose is to enable or facilitate access to the Newzbin2 website’ because Newzbin had offered anti-​blocking software to users. To prevent the downloading of such software, film companies asked for an order to permit them to notify additional IP addresses and URLs to BT, to block those sites too. The film companies asked for the order to refer to sites whose predominant purpose is to facilitate access to Newzbin while BT preferred that an order should be restricted to sites whose sole purpose was to enable or facilitate such access. The judge sided with the film companies: the order could otherwise be circumvented by Newzbin’s posting a weather forecast to the page from where anti-​blocking software could be downloaded. BT argued that film companies should pay costs of the order, using the precedent of Norwich Pharmacal, in which case the House of Lords held costs should be borne by the party seeking disclosure.86 The judge rejected BT’s argument at paragraph 32:

85   See Bendrath, R and Mueller, M, ‘The End of the Net as We Know It? Deep Packet Inspection and Internet Governance’, (2010) at . 86   Norwich Pharmacal Co v Customs and Excise Commissioners [1973] UKHL 6, [1974] AC 133.

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The Studios are enforcing their legal and proprietary rights . . . specifically their right to relief under Article 8(3). BT is a commercial enterprise which makes a profit from the provision of the services which the operators and users of Newzbin2 use to infringe the Studios’ copyright. As such, the costs of implementing the order can be regarded as a cost of carrying on that business.

He argued controversially that it was implicit in Recital 59 of the Copyright Directive that the EU chose to impose costs on the intermediary, supported by the CJEU in L’Oréal v eBay87 at paragraph 139 that such measures ‘must not be excessively costly’. The cost in this case to BT ‘would be modest and proportionate’ supported by evidence filed by BT, which estimated initial costs of implementation at £5–​10,000 and £100 for each subsequent notification. Arnold J did not ‘rule out the possibility that in another case the applicant may be ordered to pay some or all of the costs of implementation . . . in the event of any material change of circumstances including . . . costs, consequences for the parties and effectiveness of technical means from time to time.’ BT claimed that the order sought by the studios was not ‘prescribed by law’, citing the Advocate General’s opinion in Scarlet Extended.88 Arnold J took the view that the order sought by the studios was clearly distinguishable from that in Scarlet and was well within the range of orders against ISPs anticipated under Section 97A of the CDPA and Article 8(3) of the Copyright Directive. Arnold J also commented on whether it was proportionate to interfere with the BT subscribers’ ECHR Article 10(1) rights in order to protect the studios’ rights protected by Article 1 of the First Protocol. He concluded that it was. Arnold J may clarify whether other online intermediaries will be required to employ technological solutions when giving judgment in L’Oréal v eBay in 2012, having received CJEU guidance. The Newzbin judgments broke new ground in several respects. Section 97A(1) applies to all ISSPs. Arnold J’s judgment in Newzbin (No 1) made clear that ISPs are ‘service providers’ under CDPA s 97A(3), defining ‘service provider’ under the Electronic Commerce Regulations 2002 as a person providing information society services (see Recital 17 ECD). CDPA s 97A(1) requires the applicant to prove that the service provider had ‘actual knowledge of another person using their service to infringe copyright’ or as the case may be a ‘performer’s property right’ by sending an email to service provider setting out the full name and address of the sender of the notice and details of the infringement in question. In Newzbin (2010), Kitchin J at paragraph 135 explained that service of such a notice was not a precondition of a finding that a service provider has actual knowledge of a person using its service to 87   L’Oréal v eBay [2009] EWHC 1094 (Ch), paras 426–​431; Case C-​324/​0 9 L’Oréal v eBay, Advocate General’s Opinion of 9 December 2010, paras 119–​120. 88   Opinion of Advocate General Villalon dated 14 April 2011 in Case C-​70/​10 Scarlet Extended.

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infringe copyright. Between 2010 and 2011, judicial opinion shifted from Kitchin J who did not see fit to order ISPs to block Newzbin because the scope of such an order would be very uncertain, to Arnold J at paragraph 182 in Newzbin (No 2) who viewed his Order as ‘very different’ and did not ‘suffer from that vice’. As a result, at a local level the UK rights holders requested BT to block access to the file sharing website Pirate Bay,89 and several other major retail ISPs complied with the Newzbin judgment through the winter of 2011–​12, further blocking access to The Pirate Bay following judgment on 2 May in Dramatic Entertainment Limited v British Sky Broadcasting Limited.90 Graham Smith had presciently argued that ‘Newzbin2 is a first step in a long game, Scarlet has limited how far that can go’, and that ‘The discussion in Newzbin2 was entirely domestic, predicated on infringements of UK copyright. It now appears that future cases will have to take cross-​border issues into account, at least where an ISP has customers in more than one EU country.’91 Other EU countries have also seen successful applications for injunctions under Article 8(3).92 More generally, the European Commission has recognized that the position is becoming very uncertain for ISPs, and has agreed in the course of 2012–​ 13 to review the ECD particularly in the case of NTD procedures. It issued a 2013 working paper on its progress,93 since superseded by the 6 May 2015 proposals on the Digital Single Market Strategy, which may result in legislative action from 2018 onwards.94

15.5  G R A DUATED R E SP ONSE IN EUROPE Graduated response has been employed on a voluntary basis in the US, as we saw, whereas Rightswatch failed to achieve commonality of purpose between rights holders and ISPs, resulting in the extensive litigation described in Europe.

  ’Arts Group tell BT to block access to The Pirate Bay’, BBC, 4 November 2011.  Dramatic Entertainment Limited v British Sky Broadcasting Limited [2012] EWHC 1152 (Ch) 2 May at: . 91  Smith, G, ‘SABAM/​ Scarlet meets Newzbin2—​ but will they play nicely together?’ Cyberleagle, 28 November 2011. 92   Court of Appeal of Antwerp Case 2010/​A R/​2541 VZW Belgian Anti-​Piracy Federation v NV Telenet 26 September 2011. 93   Commission staff working document, Report on the implementation of the e-​commerce action plan (23 April 2013). 94   European Commission (2016) Proposal for a Regulation of the European Parliament and of the Council on addressing geo-​blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market and amending Regulation (EC) No 2006/​2004 and Directive 2009/​22/​EC, 25 May. 89

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‘Graduated response’ seeks ISP cooperation (through legislation, court order, but preferably voluntary cooperation) in the following cases: • Identifying users from IP addresses identified by rightsholders; • Passing on allegations of infringement to identified filesharers; • Imposing sanctions on filesharers, eg the French ‘HADOPI’ law ‘three strikes’. The backdrop to the 2009 European Parliament net neutrality debates was a series of laws aggressively aimed at individual internet users and lobbied for by copyright holders, notably the music and film producers and distributors lobby. In Sweden, this included the sensational case in which the founders of Pirate Bay, a website that assisted file sharers, were successfully criminally prosecuted for aiding and abetting copyright infringement.95 Solutions to the copyright holders’ dilemma were extended nationally to include: • traffic slowing, restricted access to certain sites, monitoring (DPI), disconnection; • blocked access for users to certain sites eg Pirate Bay, Newzbin. The following sections explain the legislative approach adopted in France and the United Kingdom.

15.5.1  Infringement and limiting internet users’ access French Law n.2004–​575 relating to trust in the digital economy, Article 6 paragraph I–​1 states that: ‘Persons whose activity consists in providing public access to online communication services must inform their subscribers of the existence of technical means to limit access to certain services or must select and provide their subscribers with at least one of these means’96. In addition to this mandating of ISPs to educate users about blocking services, in 2009 the French anti-​piracy law introduced ‘graduated response’ against illegal content downloading: 1. HADOPI, the body created for this purpose, will send the infringer a warning email. 2. If the infringement is repeated within six months, a new email is sent together with a warning by registered letter.

95   See Case B13301-​0 6 decided 17 April 2009, which was appealed to the Swedish Supreme Court and rejected on 1 February 2012, confirming the custodial sentences as reduced in the Court of Appeal. See Torrent Freak, ‘Pirate Bay Founders’ Prison Sentences Final, Supreme Court Appeal Rejected’, 1 February 2012 at . 96   Meyer, T, (2017) ‘HADOPI: 2009 Graduated Response in France’ in Meyer, T (ed), The Politics of Online Copyright Enforcement in the EU: Access and Control (Springer Verlag, 2017), 165–​204 DOI 10.1007/​978-​3-​319-​ 50974-​7_​4.

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3. If the infringement is repeated within a year, the internet user is penalized according to the gravity of the act. The sanction can be the denial of internet access ranging from one month to a year during which time the internet user must continue to pay the ISP subscription and is included on a black list that forbids her to subscribe to any other ISP. The passage of the ‘HADOPI law’97 on 13 May 2009 was immediately referred by 60 members of the French parliament to the Constitutional Court, which on 10 June struck down the elements of the law which create a punishment prior to judicial instruction.98 The Court took a rights-​based approach, as one would expect of a constitutional court, forcing a ruling of the judicial authorities, in accordance with Article 11 of the Charter of Fundamental Rights, now made European law by the Treaty of Lisbon from 1 December 2009. The HADOPI itself was suspended in July 2013, as a result of political pressure from the minister from August 2012, and a consultation which concluded that the state would not allow HADOPI to pursue suspected infringers in such a manner.99

15.5.2  United Kingdom—​Digital Economy Act 2010 (DEA) Sections 9–​18 In the United Kingdom, ‘graduated response’ was seen as an attractive option by both outgoing Labour and incoming coalition administrations in 2010, and the DEA offers two new possibilities: • acting against individuals, if copyright infringement may be detected via a router they control, via a procedure under section 11 of the Act, for Ofcom to publish a ‘Code about obligations to limit internet access’ (Initial Obligations Code); • The Secretary of State has a potential new power which can be granted by consent of Parliament under DEA s 17 to ‘by regulations make provision about the granting by a court of a blocking injunction in respect of a location on the internet which the court is satisfied has been, is being or is likely to be used for or in connection with an activity that infringes copyright.’100 97   TA No 81 (2009) Act to promote the dissemination and protection of creation on the Internet [‘HADOPI Law’] creating the High Authority for the dissemination of works and protection of rights on the internet (HADOPI). 98   Conseil Constitutionnel (2009) Decision No 2009-​580 DC of 10 June 2009. 99   Décret n° 2013-​596 du 8 juillet 2013 supprimant la peine contraventionnelle complémentaire de suspension de l’accès à un service de communication au public en ligne et relatif aux modalités de transmission des informations prévue à l’article L.  331-​21 du code de la propriété intellectuelle, at . 100   Note the powers for rightsholders compared with CDPA s 97(A): 97A requires that the service provider’s service ‘is being used’ to infringe copyright (present tense); Section 17 works even if infringement stopped forever and also if there has not yet been any infringement but it is likely to happen. Section 97A requires a service

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This potential Section 17 power (as well as the overall graduated response scheme in Sections 9–​18) was challenged by BT and TalkTalk. They argued that under ECD the role of ISPs was ‘passive’ as mere conduits. They also argued that IP addresses of their users are personal data. The High Court at first instance dismissed most of the ISP claims, but chose to move from a 50/​50 cost split to 75/​25 in favour of ISPs under the scheme.101 Arguably, this helps make it ‘Scarlet Extended proof’ as it ensures costs are more reasonably allocated on the rightsholders. BT/​ TalkTalk successfully appealed the first instance judgment in October 2011 on all grounds except Article 15 ECD but lost their appeal in the Court of Appeal on 6 March 2012.102 Ofcom spent several years consulting with the ECSPs and copyright holders over its Initial Obligations Code, first published in 2010 then revised in 2012. Its costs and procedures for section 11 made it a lightweight UK version of HADOPI (the latter had a €12m annual budget and sent a million notices to subscribers warning of potential infringement and subsequent disconnection, though the latter was not implemented). A draft revised Code was laid before Parliament in 2011,103 and extensive consultation took place in 2011–​12104. Since 2012, Ofcom—​partly funded by the Intellectual Property Office—​has also focused on measuring the changes in privacy and content consumption, in particular the move towards streaming rather than peer-​to-​peer downloading.105 The proposed appeals panel which would have regulated disconnections was not in fact implemented as the Secretary of State has not tabled the secondary legislation necessary.106 The perceived failure of HADOPI in 2012–​13 must have contributed to this inactivity. provider to know about infringement, s 17 does not. Under s 17, a web location blocked may not be guilty of copyright infringement, but may merely be used to facilitate access to locations that are. Section 97A may not be used to prevent access to sites that are not themselves infringing. Section 17 DEA is thus much wider than s 97A—​i f implemented. 101   British Telecommunications Plc R (on the application of) v Secretary of State for Business, Innovation and Skills [2011] EWHC 1021 (Admin). 102   BT Plc and Another, R (on the application of) v Secretary of State for Business, Innovation and Skills [2011] EWCA Civ 1229 (7 Oct), Court of Appeal decision of 6 March in R v Secretary of State for Culture, Olympics, Media and Sport [2012] EWCA Civ 232 at . 103   Draft Online Infringement of Copyright (Initial Obligations) (Sharing of Costs) Order 2011 (draft Costs Order) January 2011, —​it continues to be draft and may never be implemented. 104   Government would have to notify the Revised Code in draft to the European Commission under the Technical Standards Directive (98/​3 4/​EC). 105   IDATE (2015) Online Content Study: Changes in the distribution, discovery and consumption of lawful and unauthorised online content MC 359 (Lot 3 Label 9 and Label 13) Final report for OFCOM, November 2015, at . 106   Lloyd, I (2014) Information Technology Law (4th edn, Oxford University Press, 2014), 358–​362 sets out the procedure, see also Ofcom (2010) Implementing the online piracy provisions of the Digital Economy Act, presentation to E-​Commerce Directive Expert Group, 23 September at .

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15.6  EUROPE A N HOTL INE S TO R EMOV E IL L E G A L CONTENT ISPs and their content hosting partners are the key link between content and end-​ users and hence their position as the only feasible point of control for governments who wish to block or filter content that is considered unsuitable for end-​users. ISPs required to block access to specific websites have therefore relied on three mechanisms: IP address filtering, DNS poisoning, and keyword searching.107 A fourth possibility is to use a hybrid which combines two or more of these systems. All rely on one or a combination of: • upstream labelling applied by content creator ◦ to protect content from unauthorized use with technological ‘locks’; ◦ to filter out insecure or potentially unwanted content (‘blacklisting’); or ◦ to only access trusted content (‘whitelisting’); or • flagging of potentially harmful sites by users and ISPs, ◦ with users of the ISP contacting a ‘hotline’ (a contact centre designed to report and investigate the complaint). • ISP blocking technologies (eg ‘Cleanfeed’). European ISPs self-​regulate in an environment conditioned by the 1998 European Council Recommendation on the Protection of Minors,108 which recommended governments to ensure they individually or collectively adopt Codes of Conduct on illegal and harmful content supported by the ECD. Financial and legal support for the development of website quality labels became part of the Safer Internet Action Plan in its first version 1999–​2002 (parallel to RightsWatch in the period of implementation of ECD), and extended to 2013.109 Note the importance of coordination mechanisms such as the EC Safer Internet Forum, together with European organizations representing hotlines, national ISP associations, child safety and awareness networks, and user awareness nodes (INSAFE). Conventional labelling and rating methods may not be easily applicable to inappropriate user-​generated and posted content. European funding continues for hotlines to remove suspected child pornography via reports to the police in each Member State. The 107   Brown, I, ‘Internet filtering—​be careful what you ask for’, in Kirca, S and Hanson, L, (eds.), Freedom and Prejudice: Approaches to Media and Culture, (Istanbul: Bahcesehir University Press, 2008) pp 74–​91. 108   European Council Recommendation of 24 September 1998 on the development of the competitiveness of the European audiovisual and information services industry by promoting national frameworks aimed at achieving a comparable and effective level of protection of minors and human dignity, at OJ L 270, 7 October 1998, p 48. 109  Decision 1151/​2003/​EC of 16 June 2003, amending Decision 276/​1999/​EC adopting a Multiannual Community Action Plan on promoting safer use of the Internet by combating illegal and harmful content on global networks. See Safer Internet programme, with resources of €55m in the period 2009–​13, following earlier programmes from 1999–​2002, 2002–​4, and 2005–​8, at .

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pan-​European hotline association INHOPE contributes to the EC Safer Internet Forum with all the SIAP-​funded programs. EuroISPA110 recognized the development of a European network of hotlines to remove illegal content in its 2004 memorandum of Understanding with INHOPE.111

15.6.1  Illegal content and European legislation Blocking schemes (including coordination between police forces to improve and extend databases of websites for blocking) have been implemented in Denmark, Norway, Sweden, and other countries,112 causing significant controversy in view of their potential for application of the ECD where ISPs typically also host content, and the lack of transparency and appeal for content providers so blocked. The Finnish government has encouraged ISPs to implement a ‘voluntary’ system that blocks access to a secret list maintained by the police of IP addresses hosting websites suspected to contain child pornography. Several European states have laws against Holocaust denial, while many ban materials promoting racial hatred. There are different legal prohibitions in Member States: in the UK, child chatroom ‘grooming’, in Spain adolescent anorexia/​bulimia, in Germany and France hate speech, in Ireland stricter pornography rules than the UK, in Norway suicide sites. Norway in 2007 tried to introduce filtering of suicide sites, sites which are actually not illegal under Norwegian law.113 (This refers to the media-​described practices of ‘suicide predators’—​aiding and abetting suicide.) INHOPE stated the difficulties in applying common standards in different countries, In Europe alone, the age of a ‘child’ ranges from 14 to 18  years of age. In some countries knowingly possessing child pornography is also a criminal offence. Sometimes the definition of child pornography includes computer generated or altered images and even cartoon characters.114

These prohibitions were harmonized in a 2003 protocol to the Council of Europe Cybercrime Treaty of 2001.115 Signatories must criminalize the making available of,

110   Nash, Richard, INSAFE Newsletter, September 2007, . 111   EuroISPA-​I NHOPE, ‘EuroISPA and INHOPE lay foundations for cooperation’, 28 January 2004. 112   Brown (2008), above n 107, at p 75. See further van Eijk, NANM, et al, ‘Moving Towards Balance: A study into duties of care on the Internet’, 2010, University of Amsterdam/​WODC (Research and Documentation Centre of the Ministry of Security and Justice), at . 113  Norwegian Parliament study group on internet filtering law proposal at NOU-​2007-​2:  . 114  Callanan, Cormac and Nikos Frydas (2007) INHOPE Global Internet Trend Report at . 115   See CETS No: 185 Council of Europe Convention on Cybercrime of 23 November 2001, entered into force 1 July 2004 at .

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any written material, any image or any other representation of ideas or theories, which advocates, promotes or incites hatred, discrimination or violence, against any individual or group of individuals, based on race, colour, descent or national or ethnic origin, as well as religion if used as pretext for any of these factors . . . [and] . . . material which denies, minimises, approves of or justifies crimes of genocide or crimes against humanity.116

15.6.2  UK Internet Watch Foundation ISPs have cooperated with the police in the creation of NTD mechanisms and notification to police of suspected child sexual abuse images, with arrangements varying from self-​regulation in cooperation with police to a fully-​fledged regulatory arrangement. The leading early example was the UK Internet Watch Foundation (IWF) whose governance arrangements are examined briefly below.117 15.6.2.1  Creation of IWF The Internet Watch Foundation was founded in 1996 as the UK ISP industry hotline for the removal of sexual abuse content. Note that UK filtering systems do not currently allow for police intervention, but Scandinavian models do. Hotlines are exemplars of user reporting and ISP removal of illegal content. It is claimed as a success in its core remit: increased number of cases of reported illegal content; removing supply of such material from UK content hosts, through the hotline reporting mechanism, while the URL database for the filtering systems is designed to control inadvertent access to such material; involvement in UK Government and police initiatives; and international support for INHOPE and coordinated police activities. As internet use developed, it became apparent that in addition to the positive aspects of internet use, there was a potential for misuse. In particular, although child pornography has always existed, the internet was perceived as giving greater

116   Article 6.1, Additional Protocol to the Convention on Cybercrime, concerning the criminalisation of acts of a racist and xenophobic nature committed through computer systems, Strasbourg, 28 January 2003. 117   For comprehensive analyses, see Marsden, C, ‘Internet Co-​regulation’, (Cambridge: Cambridge University Press, 2011) at Chapter 6, pp 164–​197; McIntyre, TJ, ‘Blocking child pornography on the Internet: European Union developments’, (2010) 24(3) International Review of Law, Computers and Technology 209–​221; McIntyre, TJ and Scott, C, ‘Internet Filtering: Rhetoric, Legitimacy, Accountability and Responsibility’ in Brownsword, R, and Yeung, K (eds), Regulating Technologies, (Oxford: Hart Publishing, 2008) at ; Akdeniz, Yaman, Internet Child Pornography and the Law:  National and International Responses, (Aldershot:  Ashgate, 2008); Edwards, Lilian, ‘IWF v Wikipedia and the Rest of the World (except OUT-​LAW)’ (2008) panGloss, at ; Clayton, Richard, ‘Technical aspects of the censoring of Wikipedia, Light Blue Touchpaper’, 11 December 2008, at ; Akdeniz, Yaman, ‘Who Watches the Watchmen? The role of filtering software in Internet content regulation’, in The Media Freedom Internet Cookbook, (Vienna: Organisation for Security and Cooperation in Europe, 2004) at .

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opportunities for the dissemination of this type of material.118 Facilitated by government, certain ISPs, the Metropolitan Police, the Home Office, and a body called the Safety Net Foundation agreed the R3 Safety Net Agreement.119 In September 1996, this agreement was made between the Internet Service Providers Association (ISPA), the London Internet Exchange (LINX), and the Safety Net Foundation which was subsequently renamed IWF. From the perspective of industry, consumer protection issues (or the public benefit generally) were seen as a side benefit though not the driving force for the establishment of IWF. IWF is a charity in the form of a corporation limited by guarantee and was founded by industry to provide an online reporting mechanism for content that was alleged to be illegal. The IWF set up a subsidiary company, to run in line with IWF’s main objectives and IWF itself obtained charitable status, registered on 5 December 2005. Its mission is, ‘To work in partnership with internet service providers, telecommunication companies, mobile operators, software providers, the police, Government and the public to minimise the availability of online illegal content, particularly child sexual abuse images.’ IWF coordinates with the police and a number of government agencies and service providers (such as the CAIC list initiative). The core of IWF activities is an NTD system relating to online child pornography.120 IWF is funded by industry members,121 funding under the Safer Internet Action Plan and specific project funding.122 The scope of IWF activities are limited, concerning limited types of content, essentially child pornography123 and obscenity.124 It does not cover issues such as paedophile conversations intended to persuade children to engage in illegal sexual acts, a process known as ‘grooming’ (an offence under the Sexual Offences Act 2003), though it has agreed since 2010 to cooperate on extreme

118  —​note The Metropolitan Police sent a letter to all ISPs on 9 August 1996 requesting them to censor Usenet news groups, threatening otherwise the prosecution of ISPs in relation to illegal material therein. 119   Internet Service Providers Association, LINX, and Safety-​Net Foundation (1996) R3—​R ating, Reporting, Responsibility for Child Pornography and Illegal Material on the Internet, at . 120  KPMG Peat Marwick and Denton Hall ‘Review of the Internet Watch Foundation’, (1999) London,  KPMG. 121   A full list of donors is listed at: . 122   The Annual Report is available on the Internet Watch Foundation website: . 123   Including copying images as well as making originals: see R v Fellows and Arnold (1997) 1 CAR 244, the Court of Appeal held that computer data that represented the original photograph in another form was ‘a copy of a photograph’ under Section 7(2) of the 1978 Act. Downloading an indecent photograph from the internet is therefore ‘making a copy of an indecent photograph’. 124   IWF cooperates with the Home Office in relation to Section 63 of the Criminal Justice and Immigration Act 2008, see . It has always cooperated with police to report illegal material under the Obscene Publications Act 1959.

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pornographic adult images.125 It ceased responsibility for racial hatred material in 2011, handing over to a police website called ‘True Vision’.126 Nor do its activities include P2P services, online games, ‘happyslapping’,127 and torture websites.128 The original case-​by-​case take down notices were supplemented by the total removal of newsgroups in 2002 and the 2007 initiative, the CAIC blocklist. The implementation of automated filtering based on this list by British Telecom and others encompasses over 90 per cent of consumer internet users. The Sex Offences Act 2003 amends the protection awarded to children under the Protection of Children Act 1978.129 As a result, the Chief Constables’ Association and the Crown Prosecution Service entered into a memorandum of understanding about the reporting of such offences which, inter alia, recognizes the role of the IWF and states that reports made to the IWF in line with its procedures will be accepted as a report to the relevant authority for the purposes of the Sex Offences Act 2003, s 46.130 This was significant in clarifying the legal exposure of IWF and its employees under UK criminal legislation. 15.6.2.2  Reform of IWF In the UK, British Telecom and other large ISPs block customer access to sites that have been identified as containing child pornography by IWF.131 BT in 2003 developed a system called ‘Cleanfeed’ which blocks end-​users’ access to pages containing illegal child pornography images.132 ‘Cleanfeed’ was implemented in 2004.133 The 125   Online non-​photographic visual depictions of the sexual abuse of children, Sections 62–​69 of the Coroners and Justice Act 2009. IWF stated: ‘Following consultation with our Funding Council of industry members, in October 2009 the IWF Board informed government of our agreement to fulfil this role from 6 April 2010.’ See . 126   Internet Watch Foundation, ‘Incitement to racial hatred removed from IWF’s remit’, 11 April 2011 at . 127   The term used for mobile phone-​c aptured videos of assaults on victims posted on the internet. 128   Grooming, peer-​to-​peer services, and such like fall within the responsibility of the Child Exploitation and Online Prevention Centre, an affiliate of the Serious Organised Crimes Agency: see . 129   Section 45 amends the Protection of Children Act 1978. The same amendment applies to the offence of possessing an indecent photograph or pseudo-​photograph of a child at Section 160 of the Criminal Justice Act 1988 (Section 160(4) applies the 1978 Act definition of ‘child’). The 2003 amendments were made necessary in order to prevent law enforcement personnel falling foul of the law, as downloading paedophile images was an offence in view of the Court of Appeal decision in R v Jayson [2002] EWCA Crim 683, CA. 130  Crown Prosecution Service and Association of Chief Police Officers, ‘Memorandum of Understanding Between Crown Prosecution Service and the Association of Chief Police Officers concerning Section 46 Sexual Offences Act 2003’, 6 October 2004, at . 131  Clayton, R, ‘Failures in a Hybrid Content Blocking System, presented at the Workshop on Privacy Enhancing Technologies’ 2005, Dubrovnik, at . 132   See Internet Watch Foundation 7 June 2004 announcement at . 133  Truman, Nick, ‘The Experience of BT in Online Child Protection’, paper presented at the Effective Strategies for the Prevention of Child Online Trafficking Pornography and Abuse, 2009, Bahrain, at .

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CAIC list is the database used by ISPs following the example of BT’s ‘Cleanfeed’.134 The CAIC list is the Child Abuse Database Service: a list of URLs which have been reported to the police so that an ISP can block the website (the website owner does have a right of appeal but this is uncertain in effect as it is often difficult for the retail ISP to determine whether the wholesale ISP has blocked the site).135 In May 2006 a Home Office minister told Parliament that ISPs would be required to implement CAIC: ‘If it appears that we are not going to meet our target through co-​operation, we will review the options for stopping UK residents accessing websites on the IWF list.’136 The Home Office has stated that filters could be extended to other topics such as the ‘glorification of terrorism’:137 ‘our policy is to pursue a self-​regulatory approach wherever possible. However, our legislation as drafted provides the flexibility to accommodate a change in Government policy should the need ever arise.’138

15.6.3  Developments since 2011 After extensive debate, the European Union passed Directive 2011/​92/​EU on 13 December.139 Article 25(2) of the Directive states: Member States may140 take measures to block access to web pages containing or disseminating child pornography towards the Internet users within their territory. These measures must be set by transparent procedures and provide adequate safeguards, in particular to ensure that the restriction is limited to what is necessary and proportionate, and that users are informed of the reason for the restriction. Those safeguards shall also include the possibility of judicial redress.

The type of blocking proposed is based on examples from Nordic countries and also the UK ISP British Telecom with its ‘Cleanfeed’ blocking system. In

134   Hutty, Malcolm ‘Cleanfeed: the facts’ 2004, LINX Public Affairs, at . 135   Internet Watch Foundation (2008) Child Sexual Abuse Content URL List, at . 136   Hansard (2006) Vernon Coaker, Hansard HC vol 446 col 715W (15 May 2006) Written Answers. 137   Terrorism Act 2006, s 21 adds a new s 3(5A) to the Terrorism Act 2000, which specifies that the power to proscribe under s 3(5)(c) shall encompass the ‘unlawful glorification of the commission or preparation (whether in the past, in the future, or generally) of acts of terrorism’. Glorification requires the reasonable expectation that the audience will emulate terrorism in present circumstances (s 3(5B)), and it comprises any form of praise or celebration (s 3(5C)). See further Home Affairs Select Committee, Roots of violent radicalisation: Written evidence submitted by Professor Clive Walker, School of Law, University of Leeds (RVR10), at paras 13–​14. 138   Hutty, M, ‘Government sets deadline for universal network-​level content blocking’ London Internet Exchange Public Affairs blog, 17 May 2006, at . 139   Directive 2011/​92/​E U of 13 December 2011 on Combating the Sexual Abuse and Sexual Exploitation of Children and Child Pornography, and Replacing Council Framework Decision 2004/​6 8/​J HA, L335/​1. 140   An earlier draft was politically highly controversial as it included the mandatory ‘shall’ rather than the final version’s ‘may’.

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Recital 47, the Directive explains that ‘The measures undertaken by Member States in accordance with this Directive in order to remove or, where appropriate, block websites containing child pornography could be based on various types of public action, such as legislative, non-​legislative, judicial or other.’ This leaves to Member States the decision whether to adopt legal measures, and notes ‘this Directive is without prejudice to voluntary action taken by the Internet industry to prevent the misuse of its services or to any support for such action by Member States.’ Furthermore it states that, ‘Any such developments must take account of the rights of the end users and comply with existing legal and judicial procedures and the European Convention for the Protection of Human Rights and Fundamental Freedoms and the Charter of Fundamental Rights of the European Union.’ Legal problems will remain in that governments cannot delegate their human rights responsibilities for regulating the internet,141 in favour of instructing private companies to control extreme user speech.142 A leading example in the case of hate and racist speech is the Code of Conduct signed with leading internet platform companies such as Google and Facebook in May 2016.143 Hotlines may offer IAPs the ability to filter for content with user consent—​ expressed in assent to a change in Terms and Conditions of the contract, for example. Where the filter list is not supplied or approved by government, as for instance with the self-​regulatory IWF scheme, this may potentially infringe the Open Internet Regulation described in the next section. The four largest UK consumer IAPs in 2013 agreed to install the IWF filter by default as an ‘unavoidable choice’ for new customers under the auspices of the Department for Culture’s multi-​stakeholder UK Council for Child Internet Safety (UKCCIS). They signed a Code of Conduct that was formally self-​regulatory, yet brokered by government, specifically the Department for Education.144 By 2015, two of the four (Sky and TalkTalk) had adopted a system whereby adult filtering would be by default turned on unless customers expressed a wish to opt out. Note

141   Convention for the Protection of Human Rights and Fundamental Freedoms (European Convention on Human Rights or ECHR). 142   See All Party Parliamentary Communications Group, ‘Can we keep our hands off the net?’ 2009, Final Report, October at ; Callanan, Cormac, Gercke, M, De Marco, E, Dries-​Z iekenheiner, H, Internet blocking: balancing cybercrime responses in democratic societies, (Dublin:  Aconite Internet Solutions, 2009)  at . 143   IP-​16-​1937, ‘European Commission and IT Companies announce Code of Conduct on illegal online hate speech,’ Brussels, 31 May 2016, at . 144  Department for Education, Home Office Press release:  ‘Parents asked if adult websites should be blocked’, Tim Loughton, and The Rt Hon Lynne Featherstone, 28 June 2012.

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that network-​level opt-​out blocking has existed in mobile networks since 2004 under the auspices of the Independent Mobile Classification Body, which in 2013 was taken over by the cinematic film censor British Board of Film Classification (BBFC).145 In 2017, the Digital Economy Act came into force, requiring under Part  3, sections 14–​21, default adult filters on legal pornography with a verifying authority, likely to be the BBFC. These provisions came into force on 31 July 2017.146 This is a clear example of how the ‘filter default’ became a slippery slope down which UK adult internet access has slipped.147 Despite trenchant criticism by independent child protection experts, this law is to be enforced in 2018.148 IAPs now have to filter for not only potentially illegal material, but also adult content. Furthermore, Nominet, the UK domain name authority (formally independent of government though regulated by the Digital Economy Act 2010149), has been screening domain registrations for potential ‘trigger words’ in a policy change announced in 2013 resulting from a report by Lord Macdonald, a key change urged by IWF since at least 2004.150 Other chapters in this book cover the filters imposed for terrorist and hate materials. It is clear that filtering of content has developed from a child protection issue to a wider range of regulatory prior censorship tools.

15.7  DE V ELOPMENT OF L E G A L DEB ATE R E G A R DING TR A FFIC M A N AG EMENT Dividing net neutrality into its forward-​looking positive and backward-​degrading negative elements is the first step in unpacking the term, in comprehending that there are two types of problem: charging more for more, and charging the same for less. Abusive discrimination in access to networks is usually characterized in telecoms as a monopoly problem, manifested where one or two ISPs have dominance,

  Mac Síthigh, D, Medium Law (Routledge, 2017), at 60 and Marsden, n 117, at 139–​143.   Digital Economy Act 2017 (Commencement No 1) Regulations 2017, SI 2017/​765. 147  Schellekens, M, ‘Liability of Internet Intermediaries:  A Slippery Slope?’, (2011) 8:2 SCRIPTed 154 DOI: 10.2966/​scrip.080211.154. 148   Kelion, L, ‘Porn ID checks set to start in April 2018’, BBC News, 17 July 2017, at . 149   Sections 19–​21 of the Digital Economy Act 2010 give government reserve powers to replace Nominet under new s 124O, Communications Act 2003. 150   Nominet, ‘Update on registration policy’, 8 August 2013, 14:50, at . 145

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typically in the last mile of access for end-​users.151 ISPs can discriminate against all content or against the particular content that they compete with when they are vertically integrated. Conventional US economic arguments have always been broadly negative to the concept of net neutrality, preferring the introduction of tariff-​based congestion pricing.152 Hahn and Wallsten explain that net neutrality153 ‘usually means that broadband service providers charge consumers only once for Internet access, don’t favor one content provider over another, and don’t charge content providers for sending information over broadband lines to end users.’ This is the focus of the problem: Network owners with vertical integration into content or alliances have enhanced incentives to require content owners (who may also be consumers) to pay a toll to use the higher speed networks that they offer to end-​ users. Note all major consumer ISPs are vertically integrated to some extent, with proprietary video, voice, portal and other services. As network neutrality extends to all consumer ISPs symmetrically, it may not be subject to competition law assessments of dominance, as abuse of dominance is not necessarily an accurate analysis of the network neutrality problem, at least in Europe.154 Dominance is neither a necessary nor sufficient condition for abuse of the termination monopoly to take place, especially under conditions of misleading advertising and consumer ignorance of abuses perpetrated by their ISP.155 The US regulator FCC has acted on several network neutrality complaints (notably those against Madison River in 2005 and Comcast in 2008156) as well as introducing the principle in part through several merger conditions placed on dominant ISPs, but delayed its report and order on net neutrality until its eventual publication in the Federal Register in September 2011, whereupon it was instantly challenged by various interested parties and would be litigated in 2014. Development of European legal implementation of the network neutrality principles was initially slow, with the European Commission referring much of the detailed work to the new Body of European Regulators of Electronic

151   I have argued that the real problem lies in the ‘middle mile’ of interconnection, in Marsden, C, Network Neutrality: Towards a Co-​regulatory Solution (London: Bloomsbury Academic, 2010). See further Marsden, C, Network Neutrality: From Policy to Law to Regulation (Manchester: Manchester University Press, 2017) 152  See David, P, ‘The Evolving Accidental Information Super-​H ighway’, (2001) 17(2) Oxford Review of Economic Policy pp 159–​187. 153   Hahn, Robert and Wallsten, Scott, ‘The Economics of Net Neutrality’ (2006) AEI Brookings Joint Center for Regulatory Studies: Washington, DC at . 154   See Marsden (2010), n 151, at 1. 155   Some authors question the distinction between degrading and prioritizing altogether, as they find that the latter naturally presupposes the former. See eg Chirico, F, Van der Haar, I, and Larouche, P, ‘Network Neutrality in the EU’, TILEC Discussion Paper (2007), . 156   Comcast v FCC (2010) No 08-​1291, delivered 6 April.

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Communications (BEREC), which developed an extensive work programme on net neutrality from 2010.157 At European Member State level, the Netherlands Telecommunications Act 2012 Article 7.4a was ratified on 9 May 2012 and implemented in 2014, with revisions in 2015 and apparent striking down where over-​ reaching European law in 2017.158 Slovenia, Finland (via universal service rules), and EEA member Norway (via a co-​regulatory agreement) also implemented net neutrality in the period to 2015.159

Table 15.1  Notable net neutrality laws or regulation Country

Legislation/​regulation

Published

Date enforced

Norway

160

Guidelines

24/​2/​2009

Chile

Law 20.453162

18/​8/​2010

Decree 368, 15/​12/​2010163

Netherlands

Telecoms Act 2012164

7/​6/​2012

Guidelines 15/​5/​2015165

Slovenia

Law on Electronic Communications 2012166

20/​12/​2012

Zero rating 2015

Finland

Information Society Code (917/​2014)167

17/​9/​2014

2014

India

Regulations (No. 2 of 2016)

8/​2/​2016

8 August 2016

Brazil

Law No. 12.965 Decree No. 8771/​2016

11/​5/​2016

No implementation to mid-​2017168

161

Zero rating NKOM 2014

157   BEREC (16) 127 BEREC Guidelines on the Implementation by National Regulators of European Net Neutrality Rules, issued 30 August. 158   Netherlands Department of Economic Affairs, ‘Net Neutrality Guidelines May 15th, for the Authority for Consumers and Markets (ACM) for the enforcement by ACM of Article 7.4a of the Netherlands Telecommunications Act 2012’ (2015). 159   See further Marsden (2017), n 151, at Chapter 7. 160   See guidelines at Nkom, ‘Net Neutrality’ (2014)  at . 161   Olsen, T, ‘Net Neutrality Activities at BEREC and Nkom, Norwegian Communications Authority’ (2015), slide 5, at . 162   See The Chilean ‘Law 20.453, which enshrines the principle of net neutrality for consumers and Internet users’ (2010), at . 163   See . 164   See  . 165   Netherlands Department of Economic Affairs, Net Neutrality Guidelines May 15th, for the Authority for Consumers and Markets (ACM) for the enforcement by ACM of Article 7.4a of the Netherlands Telecommunications Act 2012 (2015). 166   See . 167   ‘No. 003-​02-​10/​2012-​32’, at . 168   For updates, see ‘Ministry of Justice’, (2016) at .

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15.7.1  Common carriage in telecoms In the US, it was established in 1901 that a public telegraph company (and more especially the largest) has a duty of non-​discrimination towards the public.169 Telecoms networks were established to be common carriers as they achieved maturity, following telegraphs, railways, canals, and other networks. Noam explained in 1994, it is not the failure of common carriage but rather its very success that undermines the institution. By making communications ubiquitous and essential, it spawned new types of carriers and delivery systems.170

He forewarned that net neutrality would have to be the argument employed by those arguing for non-​d iscriminatory access, as well as accurately predicting the death of common carriage ten years later. Common carriers are under a duty to carry goods lawfully delivered to them for carriage. The duty does not prevent carriers from restricting the commodities that they will carry. Carriers may refuse to carry dangerous goods, improperly packed goods, or those that they are unable to carry (on account of size, legal prohibition, or lack of facilities). This definition offers several reasons not to common carry that can be extended to ISPs—​spam and viruses for instance may be refused. In common-​law countries such as the UK and USA, carriers are liable for damage or loss of the goods that are in their possession as carriers, unless they prove that the damage or loss is attributable to certain excepted causes (eg ‘Acts of God’). That provides several more reasons for loss—​one thinks of the loss of undersea cables, or alleged foreign power Denial of Service (DoS) attacks. It might be stretching a definition to suggest that P2P streams can be ‘jettisoned’ in order to allow other traffic to progress during peaktime congestion. Thus twenty-​fi rst century ISPs who choose to traffic manage on a discriminatory fashion could not be considered common carriers.

15.7.2  Interoperability principles for information providers Network neutrality171 is the latest phase of an eternal argument over control of communications media. The internet was held out by early legal and technical

 See Western Union Telegraph Co v Call Publishing Co, 181 US 92, 98 (1901).   Noam (1994) at p 435, explaining that: ‘When historically they [infrastructure services] were provided in the past by private firms, English common law courts often imposed some quasi-​public obligations, one of which one was common carriage. It mandated the provision of service of service to willing customers, bringing common carriage close to a service obligation to all once it was offered to some.’ 171   See Marsden, C, ‘Network Neutrality:  A Research Guide’ in Brown, Ian, (ed), Handbook Of Internet Research (Cheltenham: Edward Elgar, 2012). 169 170

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analysts to be special, due to its decentred construction,172 separating it from earlier ‘technologies of freedom’ including radio and the telegraph. It is important to recognize the end-​to-​end principle governing internet architecture.173 The internet had never been subject to regulation beyond that needed for interoperability and competition, building on the Computer I and II inquiries by the Federal Communications Commission (FCC) in the United States, and the design principle of End-​to-​End (E2E). That principle itself was bypassed by the need for greater trust and reliability in the emerging broadband network by the late 1990s, particularly as spam email led to viruses, botnets, and other risks. The lack of trust on the internet, combined with a lack of innovation in the QoS offered in the core network over the entire commercial period of the internet since NSFNet was privatized in 1991–​95 meant that development was focused almost entirely in the application layer, with Peer-​to-​Peer (P2P) programmes such as low-​g rade Voice over Internet Protocol (VoIP) and file-​sharing as well as the World Wide Web (WWW) designed during this period. However, ‘carrier-​g rade’ voice, data, and video transmission was restricted to commercial Virtual Private Networks (VPNs) that could guarantee trust, with premium content attempting to replicate the same using Content Delivery Networks (CDNs) such as Akamai, or the ISPs’ own local loop offerings deployed within the user’s own network. Network engineer Crowcroft makes three major points: the internet was never intended to be neutral; there has been virtually no innovation within the network for thirty years; ‘network-​neutrality has in fact stifled evolution in the network layer’.174 Network congestion and lack of bandwidth at peak times is a feature of the internet. It has always existed. That is why video over the internet was, until the late 1990s, simply unfeasible. It is why VoIP has patchy quality, and why engineers have been trying to create higher QoS. ‘End to end’ is a two-​edged sword, with advantages of openness and a dumb network, and disadvantages of congestion, jitter, and ultimately a slowing rate of progress for high-​end applications such as High Definition video.175 End-​to-​End may have its disadvantages for those introducing zoning as compared with QoS, and in this it has obvious parallels with

172   The ‘Internet’ is a network of Autonomous Systems, of which about 40,000 are of a scale that is relevant. See Haddadi, Hamed et  al, Analysis of the Internet’s structural evolution, Technical Report Number 756 Computer Laboratory UCAM-​CL-​T R-​756 ISSN 1476-​2986 (2009). 173   See Saltzer, JH, Reed, DP, and Clark, DD, End-​to-​end arguments in system design, 2 ACM Transactions On Computer Systems (1984) p 288. 174   Crowcroft, Jon, ‘The Affordance of Asymmetry or a Rendezvous with the Random?’, (2011) Convergence and Communications Review, 12. 175   Clark, David, ‘Network Neutrality: Words of Power and 800-​Pound Gorillas’, (2007) 1 International Journal of Communication 701–​708; Peha, JM, ‘The Benefits and Risks of Mandating Network Neutrality, and the Quest for a Balanced Policy’, (2007) 1 International Journal of Communication 644, 644–​659.

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‘common carriage’ under the Telecommunications Act, and its alter ego ‘information services’.

15. 8  US NE T WOR K NEU TR A L IT Y While issues about potential discrimination by ISPs have been current since at least 1999,176 the term ‘network (net) neutrality’ was coined by Tim Wu in 2003.177 In the period since, the debate was dismissed as ‘an American problem due to abandonment of network unbundling’ and common carriage. Competition is ‘inter-​ modal’ between cable and telecoms, not ‘intra-​modal’ between different telecoms companies using the incumbents’ exchanges to access the ‘Last Mile’.178 Instead of regulated access to both cable and telecoms networks, there are now less regulated ‘information’ not ‘telecommunications’ services. The Regional Bell Operating Companies (RBOCs) re-​emerged in 2006 as two local long-​distance internet-​wireless combines, now called AT&T and Verizon.179

15.8.1  Internet policy statement—​the ‘Four Freedoms’ 2004–​5 Chair Michael Powell of the FCC decided that a statement of consumer-​oriented open access policy should persuade ISPs to avoid egregious discrimination. In February 2004, he declared: ‘I challenge the broadband network industry to preserve the following Internet Freedoms: Freedom to Access Content; Freedom to Use Applications; Freedom to Attach Personal Devices; Freedom to Obtain Service Plan Information.’180 The ‘Four Freedoms’ were applied in the Internet Policy Statement in which the FCC adopted this policy, though no specific regulation181.

176   See Lemley, MA and Lessig, L, ‘The End of the end-​to-​end: preserving the architecture of the internet in the broadband era’, (2000) available at UC Berkeley Law & Econ Research Paper No 2000-​19; Stanford Law & Economics Olin Working Paper No 207; UC Berkeley Public Law Research Paper No 37. See further Chapter 1 in Marsden (2010), n 151, and Marsden, ‘Pluralism in the multi-​channel market. Suggestions for regulatory scrutiny’, (1999) 4 International Journal of Communications Law and Policy at: . 177   Wu, T, ‘Network Neutrality, broadband discrimination’, (2003) 2 Journal on Telecommunications and High-​Tech Law 141. 178  Communications Act of 1934 as amended by Communications (Deregulatory) Act of 1996, 47 USC §§153(20) (definition of ‘information service’), 153(10) (definition of ‘common carrier’), 153(43) (definition of ‘telecommunications’), and 153(46) (definition of ‘telecommunications service’). 179   See Federal Communications Commission ‘FCC approves SBC/​AT&T and VERIZON/​MCI mergers’ 31 October 2005 at . 180  Powell (2004) Four Freedoms speech, at . 181   FCC 05-​151, adopted 5 August 2005.

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15.8.2  Regulatory actions by the FCC 2005–​10 There were three major enforcement actions by the FCC under the policy, against Madison River (2005), AT&T/​BellSouth (2007), and Comcast (2008). The first regulatory action to prevent blocking of access was against a small ISP that had been blocking a rival VoIP service, Madison River.182 After Madison River, the larger scale regulatory action came in the merger of AT&T/​BellSouth (2007), when the merged company undertook various commitments not to block other companies’ applications directed to their users.183 AT&T agreed to: • follow the FCC’s four Internet Freedoms for thirty months; • apply network neutrality principles for its broadband ISP between subscribers and the first internet exchange point for two years; • but it expressly reserved the option not to apply network neutrality principles for its IP Television (IPTV) service, and to any service beyond the first Internet Exchange point. FCC then made an Order of 1 August 2008 against Comcast, a major cable broadband ISP.184 FCC ordered Comcast to within 30 days: 1. disclose to the Commission the precise contours of the network management practices at issue, including equipment utilized, when employed, when and under what circumstances used, what protocols affected, and where deployed; 2. submit a compliance plan to the Commission to transition from discriminatory to non-​d iscriminatory network management practices by the end of 2008; and 3. disclose to the Commission and the public the details of the network management practices that it intends to deploy following the termination of its current practices, including the thresholds that will trigger any limits on customers’ access to bandwidth. FCC found that ‘Comcast has an anti-​competitive motive to interfere with customers’ use of P2P applications.’ This is because P2P offers a rival TV service delivery

182   Madison River Communications, LLC, Order, DA 05-​5 43, 20 FCC Rcd 4295 (2005), available at . 183   In AT&T Inc and BellSouth Corp (2007) Application for Transfer of Control, 22 FCC Rcd 5562, note the dissent at Appendix F, slip op p 154. 184   Federal Communications Commission, Formal Complaint of Free Press and Public Knowledge Against Comcast Corp for Secretly Degrading Peer-​to-​Peer Applications; Broadband Industry Practices; Petition of Free Press et  al for Declaratory Ruling that Degrading an Internet Application Violates the FCC’s Internet Policy Statement and Does Not Meet an Exception for ‘Reasonable Network Management’ 2008, Memorandum Opinion and Order, 23 FCC Rcd 13028 (‘ComcastOrder’).

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than cable, which the FCC found ‘poses a potential competitive threat to Comcast’s video-​on-​demand (VOD) service.’ FCC concluded that Comcast’s conduct blocked internet traffic, rejected Comcast’s defence that its practice constitutes reasonable network management, and ‘also concluded that the anticompetitive harms caused by Comcast’s conduct have been compounded by the company’s unacceptable failure to disclose its practices to consumers.’ FCC Chairman Martin was not condemning ‘metered broadband’. Comcast announced a 250 Gigabyte monthly limit in early September 2008, replacing its previous discretionary Terms of Use reasonable caps. The FCC justified its regulatory authority to issue the order, invoking its Title I ancillary jurisdiction under the Communications Act to regulate in the name of ‘national Internet policy’ as described in seven statutory provisions, all of which speak in general terms about ‘promoting deployment’, ‘promoting accessibility’, ‘reducing market entry barriers’. Comcast appealed to the District of Columbia Court of Appeals, to overturn the order on these grounds, winning in 2010 because the FCC failed to tie its assertion of ancillary authority to any ‘statutorily mandated responsibility’.185 This decision occurred as the FCC was then consulting on a draft NPRM, with the perhaps inevitable result that the FCC NPRM was immediately appealed in 2010, and finally overturned in 2014 (with the exception of consumer transparency requirements that stayed in force throughout).

15.8.3  Open Internet Report and Order 2010 The FCC extended a consultation on net neutrality or ‘the open Internet’ over 2009–​ 10, with over 27,000 submissions. This process was finishing just as the Court of Appeal in April 2010 in Comcast v FCC judged that the FCC’s regulatory actions in this area were not justified by its reasoning under the Communications Act 1996. The successful Comcast appeal meant that the FCC had to either: reclaim Title II common carrier authority for ISPs under the 1996 Telecommunications Act, ask Congress to re-​legislate to grant it Title I  authority, or try to assert its own Title I authority subject to legal challenge. It adopted this last course in its Order of 23 December 2010,186 4. The Report and Order was then subjected to an unusual delay in publication in the Federal Register until September 2011, following which it required 60 days before both pro-​and anti-​net neutrality organizations were able to

  Comcast Corp. v FCC, 600 F.3d 642, 2010 United States Court of Appeals for the District of Columbia.   See FCC Report and Order (2010) Preserving the Open Internet, 25 FCC Rcd 17905 and FCC Report and Order, In The Matter Of Preserving The Open Internet And Broadband Industry Practices, GN Docket No 09-​ 191, WC Docket No 07-​52, FCC 10-​201 §21–​30 (2010). 185

186

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771

formally make representations to bring the question of the FCC authority under the Communications Act to court. A case before the DC Appeals Court led to FCC defeat in 2014187.

15.8.4  Open Internet Order 2015 As a result of its court defeat, FCC decided in 2014 to implement a new NPRM that reclassified broadband internet access services (BIAS) as Title II common carriers, finalizing the rules in February 2015. A case by the telecoms operators appealed that decision, in United States Telecom Association v FCC. The FCC ruling was upheld in the DC Court of Appeals in June 2016.188 Regulation prior to the 2015 Open Internet Order189 is well-​documented, with the 2010 Order190 both highly controversial in its exclusion of mobile (‘wireless’) resulting in several data caps being imposed, notably by AT&T in 2011,191 zero ratings plans being adopted (see below), and the Order itself becoming incapable of effective enforcement following litigation which ended in 2014192 and resumed in 2015. The DC Court of Appeals decision on 14 June 2016193 will possibly be further appealed to the Supreme Court.194 The 26 February 2015 Open Internet Order applied from 12 June 2015.195 FCC claimed that the Order offered ‘Bright Line Rules’: • No Blocking: broadband providers may not block access to legal content, applications, services, or non-​harmful devices. • No Throttling:  broadband providers may not impair or degrade lawful internet traffic on the basis of content, applications, services, or non-​h armful devices. 187   In Re: Federal Communications Commission, In the Matter of Preserving the Open Internet, Report and Order, FCC 10-​201, 76 Fed Reg 59192 (2011), 23 September 2011, Consolidation Order, 1 (Judicial Panel on Multidistrict Litigation, 6 October 2011), at . 188   United States Telecom Association v Federal Communications Commission, Decided June 14, 2016, DC Cir., No. 15-​1063. 189   2015 Open Internet Order, 30 FCC Rcd., at 5706 190   FCC (2010) Report and Order Preserving the Open Internet, 25 FCC Rcd 17905. 191   Kang, C and Tsukayama, H, ‘AT&T to Throttle Data Speeds for Heaviest Wireless Users’ (2011), at . 192   Verizon v Federal Communications Commission, 740 F.3d 623 (D.C. Cir. 2014); 11–​1355, 14 January 2014. 193  United States DC Court of Appeals No. 15-​1063 United States Telecom Association, et  al. v Federal Communications Commission 14 June 2016. 194   FCC, ‘Internet Policy Statement 05–​151’ (2014), at . FCC, Madison River Communications, LLC, Order, DA 05–​543, 20 FCC Rcd 4295 (2005). 195   FCC, ‘Protecting and Promoting the Open Internet’, GN Docket No. 14-​2 8, Report and Order on Remand, Declaratory Ruling, and Order, FCC 15-​2 4 (2015), at .

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• No Paid Prioritization: broadband providers may not favour some lawful internet traffic over other lawful traffic in exchange for consideration of any kind—​in other words, no ‘fast lanes’. This rule also bans IAPs from prioritizing content and services of their affiliates.

15.8.5  Regulating Zero Rating and NPRM 2017 Zero rating is a common practice in mobile network offers to consumers—​giving consumers ‘free’ data access as a sweetener to a particular data capped monthly pre-​ paid mobile subscription. Note if there was no monthly data cap, there would be no need for zero rating.196 In the US, T-​Mobile offered thirty-​t hree zero-​rated music services in its Music Freedom Plan since 2014,197 which avoided any negative regulatory scrutiny in part due to its offer being non-​exclusive, relating to music rather than heavily congesting and expensive video, and T-​Mobile as smallest of the national mobile IAPs. As Goldstein argues:  ‘if a zero-​rating plan were exclusive to one company that offers a particular type of service, that likely would draw more scrutiny from the FCC’.198 FCC found itself most able to enforce net neutrality with decisions inserted into merger approvals, as previously in the mergers of AT&T/​BellSouth (2007) and Comcast/​NBC Universal in 2011. The 2015 merger of DirecTV into AT&T imposed such conditions on zero rating.199 Comcast’s attempted takeover of Time Warner Cable abandoned in 2015 would also have been likely to see such conditions

196   See Marsden, C, (2016) ‘Better Regulation of Net Neutrality:  A Critical Analysis of Zero Rating Implementation in India and the United States’, Part I, Chapter  4, 52–​8 5 in Belli (ed), Net Neutrality Reloaded. Zero Rating, Specialised Services, Ad Blocking and Traffic Management (2016) United Nations Internet Governance Forum, Dynamic Coalition on Net Neutrality, at . For economic analysis, see OXERA, ‘Zero rating: free access to content, but at what price?’, July 2016, at . 197   Northrup, L, ‘T-​Mobile Now Exempts 33 Streaming Music Services From Data Limits, Adds Apple Music, Consumerist’ (2015), at . 198   Goldstein, P, ‘Net Neutrality Rules won’t Force Carriers to Get FCC Permission for New Plans’ (2015), at . 199   Telecom Paper, ‘FCC Set to Approve AT&T’s DirecTV Takeover with Conditions’ (2015), at (‘If approved by the commissioners, 12.5 million customer locations will have access to a competitive fibre connection from AT&T. The additional roll-​out is around ten times the size of AT&T’s current FttP deployment and increases the national residential fibre build by over 40 percent. . . AT&T will not be permitted to exclude affiliated video services and content from data caps on its fixed broadband connections. It will also be required to submit all competed interconnection agreements with the FCC.’)

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imposed alongside interoperability/​neutrality in its dealing with third party device authentication—​which concerns the freedom to attach devices to the network.200 In its AT&T/​DirecTV approval of 27 July 2015, the FCC stated at paragraph 395: ‘we require the combined entity to refrain from discriminatory usage-​based allowance practices for its fixed broadband Internet access service.’201 Moreover, in response to accusations that AT&T ignored previous commitments in mergers, the FCC at paragraph 398  ‘require that AT&T retain both an internal company compliance officer and an independent, external compliance officer’. The FCC announced in July 2015 how to receive case-​by-​case advice about future plans, for instance zero rating schemes or specialized services, that may risk breaching net neutrality: ‘new process involves requesting and receiving an advisory opinion on specific, prospective business practices’.202 At paragraph 30–​31 it explained that: Although advisory opinions are not binding on any party, a requesting party may rely on an opinion if the request fully and accurately contains all the material facts and representations necessary for the opinion and the situation conforms to the situation described in the request for opinion.203

FCC ‘may later rescind an advisory opinion, but any such rescission would apply only to future conduct and would not be retroactive’.204 The new FCC Chair following the election of President Donald Trump, Ajit Pai, and his Republican colleague (there were only three Commissioners in the first half of 2017) issued a new NPRM in May 2017 for three months’ consultation.205 It was finally adopted in December 2017.206 The Order guts the existing rules of their enforcement power, while staying any investigations into BIAS discrimination in favour of their zero rated video and audio services (ie not counting to the monthly data cap).

200   Brodkin, J, ‘Comcast to Stop Blocking HBO Go and Showtime on Roku Streaming Devices’ (2014) Ars Technica, Condé Nast Digital, at . 201  FCC, In the Matter of Applications of AT&T Inc. and DIRECTV For Consent to Assign or Transfer Control of Licenses and Authorizations MB Docket No. 14-​9 0 (2015), at . 202  FCC, Open Internet Advisory Opinion Procedures, Protecting and Promoting the Open Internet, GN Docket No. 14-​28 (2015), at . 203  Ibid. 204  Ibid. 205   WC Docket No. 17-​108, In the Matter of Restoring Internet Freedom Adopted: May 18, 2017 Reply Comment Date: 16 August 2017. 206   WC Docket No. 17-​108, In the matter of Restoring Internet Freedom, Declaratory Ruling, Report and Order, 14 December 2017 (FCC 17-​166).

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Table 15.2 below illustrates the decade-​long battle to implement net neutrality.

Table 15.2 United States Regulation and Litigation on Open Internet 2007–​15207 Phase of Regulation

Phase 1: Policy 2005–​10

Phase 2: Open Internet under Title I, 2010–​14

Phase 3: Title II Open Internet, 2014–​

Challenge to Existing Regulation

Internet Policy Statement Open Internet Order 2005 following ‘Four Freedoms’ speech 2004

Response to Verizon v FCC (2014)

Commission Proceeding

Comcast investigation 2007–​8208

Preserving the Open Internet (2009)209

Protecting and Promoting Open Internet 2014210

Date adopted

2008

21 December 2010211

Open Internet Order 26 February 2015212

Legal effect

No general effect

December 2010

12 June 2015

Date struck down

Comcast v FCC Court of Appeals 6 April 2010

Verizon v FCC Court of Appeals 14 January 2014213

NPRM drafted May 2017—​deregulatory intent

Many lawyers would predict another decade’s litigation and regulation will still not resolve the issue.

15.9  EUROPE A N L E G ISL ATION A ND R E GUL ATION OF NE T WOR K NEU TR A L IT Y In its initial explanation of its reasons to review the 2002 Directives,214 the Commission in 2006 noted the US debate but did no more than discuss the

207   An excellent narrative account of the policy and judicial history is Feld, H, ‘Net Neutrality in Court This Week: The Story of How We Got Here’, Public Knowledge, 2 December 2016, at . 208   Complaint of Free Press & Public Knowledge Against Comcast Corp., File No. EB-​08-​IH-​1518 (filed 1 November 2007); Petition of Free Press et al. for Declaratory Ruling, WC Docket No. 07-​52 (filed 1 November 2007). 209   FCC, (2009) In the Matter of Preserving the Open Internet, Broadband Industry Practices (Proceeding 09-​191). 210   FCC, (2014) In the Matter of Protecting and Promoting the Open Internet GN Docket No. 14-​28 Notice of Proposed Rulemaking Adopted: 15 May 2014 Comment Date: 15 July 2014 Reply Comment Date: 10 September 2014. 211   GN Docket No. 09-​191, WC Docket No. 07-​52, Report and Order, 25 FCC Rcd 17905, 17910, para 13. 212   Adopted on 26 February 2015, in effect 12 June 2015. 213   Verizon v FCC, 740 F. 3d 623 -​ 2014. 214   See Directive 2002/​21/​EC (‘Framework Directive’), Directive 2002/​20/​EC (‘Authorisation Directive’), Directive 2002/​19/​EC (‘Access Directive’), Directive 2002/​22/​EC (‘Universal Service Directive’), Directive 2002/​58 on Privacy and Electronic Communications.

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theoretical problem.215 Over 2007–​8, the volume of regulatory reform proposals in the USA,216 Japan, Canada, and Norway had grown along with consumer outrage at ISP malpractice and misleading advertising, notably over notorious fixed and mobile advertisements which presented theoretical laboratory maximum speeds on a dedicated connection with no-​one else using it and subject to ‘reasonable terms of usage’—​which meant capacity constraints on a monthly basis, some of these on mobile as low as 100MB download totals.217

15.9.1  Net neutrality in 2009 Directives Net neutrality became a significant issue, together, with graduated response, in the voting on the First Reading of the 2009 telecoms package, in May 2009. The European Parliament voted down the reforms at First Reading prior to imminent parliamentary elections in June. Amendments on consumer transparency and network openness were offered to the Parliament in the Conciliation process, collated in the European Commission ‘Declaration on Net Neutrality’,218 appended to 2009/​140/​EC: The Commission attaches high importance to preserving the open and neutral character of the Internet, taking full account of the will of the co-​legislators now to enshrine net neutrality as a policy objective and regulatory principle to be promoted by [NRAs] (Article 8(4)(g) Framework Directive), alongside the strengthening of related transparency requirements (Articles 20(1)(b) and 21(3)(c) and (d) Universal Service Directive) and the creation of safeguard powers for [NRAs] to prevent the degradation of services and the hindering or slowing down of traffic over public networks (Article 22(3) Universal Service Directive).

There, in summary, are the concerns about ISPs discriminating against content they dislike, or in favour of affiliated content.219 The Directives became effective in

215   COM(2006) 334 final Review of the EU Regulatory Framework for electronic communications networks and services, Brussels, 29 June 2006 at section 6.2–​6.4. 216   See Scott Marcus, J, ‘Network Neutrality: The Roots of the Debate in the United States’, (2008) 43 Intereconomics 30–​37; Jasper P Sluijs, ‘Network Neutrality Between False Positives and False Negatives: Introducing a European Approach to American Broadband Markets’, (2010) 62 Federal Comm Law Journal 77–​117; Cave, M and Crocioni, P, ‘Does Europe Need Network Neutrality Rules?’, (2007) 1 International Journal of Communication 669–​679; Valcke, P, et al, ‘Guardian Night or Hands off? The European Response to Network Neutrality: Legal Considerations on the Electronic Communications Reform’, (2008) 72 Communications and Strategies 89–​112. 217  Leading to a significant emphasis on net neutrality in SEC(2007) 1472 Commission Staff Working Document: Impact Assessment at 90–​102 (2007). 218   European Commission, Declaration on Net Neutrality, appended to Dir 2009/​140/​EC, O J L 337/​37 at p 69, 18 December 2009 at . 219   See Jasper P Sluijs, Florian Schuett, and Bastian Henze, Transparency regulation in broadband markets: Lessons from experimental research, (2011) 35 Telecommunications Policy 592–​6 02 for an experimental analysis of transparency regulation in broadband.

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Member States in May 2011220 stating that Member States may take action to ensure particular content is not discriminated against directly (by blocking or slowing it), or indirectly (by speeding up services only for content affiliated with the ISP). The 2009 Declaration, and the more legally relevant Directive clauses, relied heavily on the implementation at national level and proactive monitoring by the Commission itself, together with national courts, and privacy regulators where content discrimination contains traffic management practices which collate personal subscriber data.221 Nevertheless, it laid out the principle of openness and net neutrality. The Commission itself emphasized in 2010 that it would introduce ‘a particular focus on how the “net freedoms” of European citizens are being safeguarded in its annual Progress Report to the European Parliament and the Council’.222 Article 22(3) of the Universal Service Directive, stipulated that regulatory authorities should be able to set minimum quality-​of-​service standards: ‘In order to prevent the degradation of service and the hindering or slowing down of traffic over networks, Member States shall ensure that [NRAs] are able to set minimum quality of service requirements’. As with all telecoms licensing conditions, net neutrality depends on the physical capacity (or its inexact surrogate, the user’s monthly data cap) made available, and it may be that de facto exclusivity results in some services for a limited time period as capacity upgrades are developed.223 Regulations passed in licensing can affect network neutrality at a fundamental level. Interoperability requirements can form a basis for action where an ISP blocks an application.

15.9.2  Reasonable Network Management and Regulatory Consultation One of the several principles of network neutrality promulgated by both the FCC and European Commission is that only ‘reasonable’ traffic management measures (TMM) be permitted, and that the end-​user be informed of this reasonableness via clear information. Both the FCC and the European Commission have relied on non-​binding declarations to make clear their intention to regulate the 220  Directive 2009/​ 136/​ EC (the ‘Citizens Rights Directive’) and Directive 2009/​ 140/​ EC (the ‘Better Regulation Directive’) both of 25 November 2009, which must be implemented within 18 months. 221   See Directive 95/​4 6/​EC of 24 October 1995, OJ L 281/​31 (1995); Directive 2002/​58/​EC, OJ L 201/​37 (2002); Directive 2006/​2 4/​EC of 15 March 2006 on the retention of data generated or processed in connection with the provision of publicly available electronic communications services or of public communications networks and amending Directive 2002/​58/​EC OJ L105/​5 4 (2006). 222  Ibid. 223   See GN Docket No 09-​191 Broadband Industry Practices WC Docket No 07-​52 ‘In the Matter of Further Inquiry into Two Under-​Developed Issues in the Open Internet Proceeding Preserving the Open Internet’, and Andersen et al, Joint Reply Comments Of Various Advocates For The Open Internet, 4 November 2010, Comments on Advancing Open Internet Policy Through Analysis Distinguishing Open Internet from Specialized Network Services.

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‘reasonableness’ of traffic management practices. In Canada, the CRTC has relied on inquiries to the dissatisfaction of advocates. Little was done to define reasonableness and transparency by the European Commission prior to 2012, with that role given over to BEREC. Ofcom confined itself to measuring ISP broadband performance, and making it easier for consumers to switch to rival providers. Ofcom has continually attempted since 2008 to reach a self-​regulatory solution, creating the unedifying spectacle of appearing to drag unwilling ISPs to the table to agree on what is at least formally ‘self-​regulation’ though with the strongest of regulator pressure applied. Ofcom’s consultation closed on 9 September 2010.224 Ofcom tried to encourage industry self-​ regulation via transparency Codes of Conduct, which were unconvincing as recalcitrant industry players agreed to only minimal restrictions on their commercial freedom to impose arbitrary limits on consumers’ behaviour. These obligations were to be implemented by May 2011, and details remained to be worked out. By 2011, with the timetable for implementation of 2009/​140/​EC growing near, the government-​f unded Broadband Stakeholder Group (BSG) finally produced a Code of Conduct. The UK Ofcom Draft Annual Plan 2012–​13225 had a small section on traffic management which is bland and uninformative,226 but promised a ‘summer 2012’ update and the announcement that Ofcom would ‘undertake research on the provision of “best-​efforts” internet access.’ This holding pattern continued until the implementation of the 2015 Regulation.227

15.9.3  Revisions to dispute settlement BEREC noted in 2010 that legal provisions in the Directives permit greater ‘symmetric’ regulation on all operators, not simply dominant actors, but ask for clarification on these measures: ‘Access Directive, Art 5(1) explicitly stated that NRAs are able to impose obligations “on undertakings that control access to end-​users to make their services interoperable” ’. Furthermore, the new wider scope for solving interoperability disputes could be used from 2011: revised Article 20 of the Framework Directive now provides for the resolution of disputes between undertakings providing electronic communications networks or services and also between such undertakings and others that benefit from obligations of access and/​or interconnection (with the definition of ‘access’ also modified in Article 2 Access Directive as previously stated). Dispute resolutions

 .  Ofcom (2012) Draft Annual Plan 2012/​13, at . 226 227   Ofcom (2012) at paragraphs 5.40–​5.42.   See Marsden (2017), n 151, at Chapter 6. 224 225

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cannot be considered as straightforward tools for developing a regulatory policy, but they do provide the option to address some specific (maybe urgent) situations. The potential outcome of disputes based on the transparency obligations can provide a ‘credible threat’ for undertakings to behave in line with those obligations, since violation may trigger the imposition of minimum quality requirements on an undertaking, in line with Article 22(3) Universal Service Directive.

This repaired a lacuna in the law, in that the 2002 framework did not permit formal complaints to be made by content providers regarding their treatment by ISPs.

15.9.4  Interpretation by European Commission, BEREC, and Member States The European Commission closed a consultation on network neutrality implementation on 30 September 2010.228 BEREC issued their response to the EC consultation in September 2010.229 They concluded that mobile should be subject to the net neutrality provisions, listing some breaches of neutrality: ‘blocking of VoIP in mobile networks occurred in Austria, Croatia, Germany, Italy, the Netherlands, Portugal, Romania and Switzerland’.230 BEREC explained: ‘mobile network access may need the ability to limit the overall capacity consumption per user in certain circumstances (more than fixed network access with high bandwidth resources) and as this does not involve selective treatment of content it does not, in principle, raise network neutrality concerns.’231

They explain that though mobile will always need greater traffic management than fixed (‘traffic management for mobile accesses is more challenging’232), symmetrical regulation must be maintained to ensure technological neutrality: ‘there are not enough arguments to support having a different approach on network neutrality in the fixed and mobile networks. And especially future-​oriented approach for network neutrality should not include differentiation between different types of the networks.’ BEREC in December 2011 published its guidelines on transparency and QoS233 On transparency, ‘BEREC stated that probably no single method will be sufficient’234 and points out the limited role of NRAs.

228  . 229   BoR (10) 42 BEREC Response to the European Commission’s consultation on the open Internet and net neutrality in Europe, at . 230   BoR (10) 42 at p 3.    231  BoR (10) 42 at p 11.    232 Ibid. 233  Documents BoR 53(11) Quality of Service and BoR 67(11) Transparency, at . 234   See BoR 67 [11] at p 5.

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The Netherlands became the first European nation to formally introduce mandated network neutrality in 2012, implementing that law in late 2013, prompting a new European Regulation on the subject that was negotiated for two years before being passed in 2015.235

15.9.5  European Open Internet On 27 October 2015 the Open Internet Regulation was approved by the European Parliament.236 The Regulation states that the safeguard of equal and non-​ discriminatory treatment of internet traffic became urgent and necessary because ‘a significant number of end-​users are affected by traffic management practices which block or slow down specific applications or services’. The spread of such discriminatory practices had been clearly demonstrated by a joint investigation of BEREC and the European Commission in 2012.237 Reactions to the vote were quite heterogeneous, with the European Commis­ sioners cheering the rules as excellent news but the Netherlands and Slovenian governments pointing out that their domestic laws passed in 2012 were now potentially in conflict with the Regulation.238 Guidelines were to be issued by BEREC in August 2016 to enforce the rules, and the NRAs’ individual and collective actions in enforcing that set of guidelines develop. The Regulation is hideously badly written even by the standards of European law. In particular, it introduces two new definitions which have no objective justification, both signifying ‘Electronic Communications Service Provider’ (ECPS), the European version of an Internet Access Provider (IAP). Article 2 sets out these definitions based on previous e-​communications law,239 but adds two new types, PECP and IAS: (1) ‘provider of electronic communications to the public’ [PECP] means an undertaking providing public communications networks or publicly available electronic communications services; (2) ‘internet access service’ [IAS] means a publicly available electronic communications service [PECD] that provides access to the internet, and thereby connectivity to virtually all end points of the internet, irrespective of the network technology and terminal equipment used.   See further Marsden, n 151, esp. Chapter 4.   Regulation (EU) 2015/​2120 of 25 November 2015 laying down measures concerning open internet access and amending Directive 2002/​22/​EC on universal service and users’ rights relating to electronic communications networks and services and Regulation (EU) No 531/​2012 on roaming on public mobile communications networks within the Union, OJ L 301/​1. 237  . 238  IP-​ 15-​ 5927 (2015) Press Release and MEMO-​15-​5275 Roaming charges and open Internet:  questions and answers, 27 October 2015, at . 239   Art 2 of Directive 2002/​21/​EC. 235 236

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‘Virtually all’ may have the meaning ‘substantially all’ or ‘most that are technically possible’. Is this all end-​user points or content providers or both? It is at least a close approximation of the FCC term broadband IAS: A mass-​market retail service by wire or radio that provides the capability to transmit data to and receive data from all or substantially all Internet endpoints . . . This term also encompasses any service that the Commission finds to be providing a functional equivalent of the service described in the previous sentence, or that is used to evade the protections set forth in this Part.240

The assumption is that creating a new definition captures services otherwise excluded by Framework Directive 2002/​21/​EC, Article 2: (c) ‘electronic communications service’ means a service normally provided for remuneration which consists wholly or mainly in the conveyance of signals on electronic communications networks, including telecommunications services and transmission services in networks used for broadcasting, but exclude services providing, or exercising editorial control over, content transmitted using electronic communications networks and services; it does not include information society services, as defined in Article 1 of Directive 98/​34/​EC, which do not consist wholly or mainly in the conveyance of signals on electronic communications networks;

The Regulation states that the open internet—​not net neutrality, which is not defined or written in the Regulation—​is to be preserved in Articles 3–​6, which impose duties on IAPs, NRAs, and the Commission itself. Article 3(1) states the 2004 Powell Four Freedoms, Article 3(2) that contracts/​practices cannot limit those rights, and Article 3(3) that traffic must be treated equally: 1. End-​users shall have the right to access and distribute information and content, use and provide applications and services, and use terminal equipment of their choice, irrespective of the end-​user’s or provider’s location or the location, origin or destination of the information, CAS, via their IAS. This paragraph is without prejudice to Union law, or national law that complies with Union law, related to the lawfulness of the CAS. 2. Agreements between PIAS and end-​users on commercial and technical conditions and the characteristics of IAS such as price, data volumes or speed, and any commercial practices conducted by PIAS, shall not limit the exercise of the rights of end-​users laid down in paragraph 1.

240   See FCC (2015) In the Matter of Protecting and Promoting the Open Internet, GN Docket No. 14-​2 8 Report and Order On Remand, Declaratory Ruling, And Order Adopted: 26 February 2015 Released: 12 March 2015 at 10 para 25. Used in both the 2010 and 2015 Open Internet Orders.

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3. PIAS shall treat all traffic equally, when providing IAS, without discrimination, restriction or interference, and irrespective of the sender and receiver, the [CAS], or the terminal equipment used.

Immediately the general condition is detailed, and three justified exceptions are identified: The first subparagraph shall not prevent providers of IAS from implementing reasonable TMM. In order to be deemed to be reasonable, such measures shall be transparent, non-​d iscriminatory and proportionate, and shall not be based on commercial considerations but on objectively different technical [QoS] requirements of specific categories of traffic. Such measures shall not monitor the specific content and shall not be maintained for longer than necessary. PIAS in particular shall not block, slow down, alter, restrict, interfere with, degrade or discriminate between specific CAS, or specific categories thereof, except as necessary, and only for as long as necessary, in order to: (a) comply with Union legislative acts, or national legislation that complies with Union law, to which the provider of [IAS] is subject, or with measures that comply with Union law giving effect to such Union legislative acts or national legislation, including with orders by courts or public authorities vested with relevant powers; (b) preserve the integrity and security of the network, of services provided via that network, and of the terminal equipment of end-​users; (c) prevent impending network congestion and mitigate the effects of exceptional or temporary network congestion, provided that equivalent categories of traffic are treated equally.

Article 3(4) is a basic privacy reminder.241 Article 3(5) sets out a specialized services (‘fast lane’) exception: 5. PECP, including PIAS, and providers of CAS shall be free to offer services other than IAS which are optimised for specific CAS, or a combination thereof, where the optimisation is necessary in order to meet requirements of the CAS for a specific level of quality. PECP, including PIAS, may offer or facilitate such services only if the network capacity is sufficient to provide them in addition to any IAS provided. Such services shall not be usable or offered as a replacement for IAS, and shall not be to the detriment of the availability or general quality of IAS for end-​users.

241   ‘Any TMM may entail processing of personal data only if such processing is necessary and proportionate to achieve the objectives set out in paragraph 3.  Such processing shall be carried out in accordance with Directive 95/​4 6/​EC . .. TMM shall also comply with Directive 2002/​58/​EC.’

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O’Donoghue and Pascoe argue the Regulation is ‘expressed in extremely telegraphic terms . . . not exactly a model of clarity and consistency’.242 Because the exception in Article 3(5) provides a general right not a derogating exception (as with other elements of Article 3), they argue the ‘concept of necessity under Article 3(5) is not only independent of how that concept would be defined in other contexts under EU law, but is even distinct from how necessity is defined in other aspects of the Regulation’. They also argue that judging which qualities are ‘necessary’ is aided by a High Court case accepting reduced latency as a vital element in Google Maps service.243 While this remains to be seen, I agree with their conclusion that ‘the concept of “reasonable traffic management measures” (TMM) is nebulous and is therefore likely to lead to litigation’.244 They see the best line of attack as ‘to challenge various aspects of the Regulation, or at least certain suggested interpretations of it, on the basis that they would be inconsistent with the concept of non-​discrimination as a (higher) general principle under EU law’. They also see litigation grounds on compatibly with fundamental rights provided by the EU Charter, including the freedom to conduct a business under Article 16 and the right to property under Article 17 . . . restrictions on the provider’s right to operate its business in accordance with its own wishes, and those of its customers, should be more limited than the terms of the Regulation might suggest on its face.245

Telecoms operators may if necessary launch litigation based on these arguments. Article 4 on transparency may have the most immediate impact on users, as it enforces proper information on use of the PIAS, and took effect from 29 November 2015: 1. PIAS shall ensure that any contract which includes IAS specifies at least the following: (a) information on how TMM applied by that provider could impact on the quality of the IAS, on the privacy of end-​users and on the protection of their personal data; (b) a clear and comprehensible explanation as to how any volume limitation, speed and other quality of service parameters may in practice have an impact on IAS, and in particular on the use of CAS; (c) a clear and comprehensible explanation of how any services referred to in Article 3(5) to which the end-​user subscribes might in practice have an impact on the IAS provided to that end-​user;

242   O’Donoghue, R and Pascoe, T, Net Neutrality in the EU: Unresolved Issues Under the New Regulation, 15 March 2015, at SSRN: . 243   Ibid, at 8. 244   Ibid, at 11.   245  Ibid, at 13.

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This mandates minimal consumer protection by IAPs within minimal consumer protection by regulators: (d) a clear and comprehensible explanation of the minimum, normally available, maximum and advertised download and upload speed of the IAS in the case of fixed networks, or of the estimated maximum and advertised download and upload speed of the IAS in the case of mobile networks, and how significant deviations from the respective advertised download and upload speeds could impact the exercise of the end-​users’ rights laid down in Article 3(1); (e) a clear and comprehensible explanation of the remedies available to the consumer in accordance with national law in the event of any continuous or regularly recurring discrepancy between the actual performance of the IAS regarding speed or other quality of service parameters and the performance indicated in accordance with points (a) to (d). Providers of IAS shall publish the information referred to in the first subparagraph.

There is then a requirement that users can actually enforce measures, but contract termination is not specified: 2. PIAS shall put in place transparent, simple and efficient procedures to address complaints of end-​users relating to the rights and obligations laid down in Article 3 and paragraph 1 of this Article. 3. The requirements laid down in paragraphs 1 and 2 are in addition to those provided for in Directive 2002/​22/​EC and shall not prevent Member States from maintaining or introducing additional monitoring, information and tran­ sparency requirements, including those concerning the content, form and manner of the information to be published. Those requirements shall comply with this Regulation and the relevant provisions of Directives 2002/​21/​EC and 2002/​22/​EC. 4. Any significant discrepancy, continuous or regularly recurring, between the actual performance of the [IAS] regarding speed or other [QoS] parameters and the performance indicated by the [PIAS] in accordance with points (a)  to (d)  of paragraph 1 shall, where the relevant facts are established by a monitoring mechanism certified by the [NRA], be deemed to constitute non-​c onformity of performance for the purposes of triggering the remedies available to the consumer in accordance with national law. This paragraph shall apply only to contracts concluded or renewed from 29 November 2015.

Minimal harmonization clauses inside Regulations are very rare, and it will be of more general interest to analyse the outcome of this process.

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Article 5(1) (Supervision and enforcement) is the teeth of the Regulation: NRAs shall closely monitor and ensure compliance with Articles 3 and 4, and shall promote the continued availability of non-​discriminatory [IAS] at levels of quality that reflect advances in technology. For those purposes, NRAs may impose requirements concerning technical characteristics, minimum [QoS] requirements and other appropriate and necessary measures on one or more [PECP], including providers of [IAS]. NRAs shall publish reports on an annual basis regarding their monitoring and findings, and provide those reports to the Commission and to BEREC. 2. At the request of the [NRA], [PECPs], including [PIAS], shall make available to that [NRA] information relevant to the obligations set out in Articles 3 and 4, in particular information concerning the management of their network capacity and traffic, as well as justifications for any [TMM] applied. Those providers shall provide the requested information in accordance with the time-​limits and the level of detail required by the [NRA].

Article 5(3) sets out BEREC’s duty:  ‘By 30 August 2016, in order to contribute to the consistent application of this Regulation, BEREC shall, after consulting stakeholders and in close cooperation with the Commission, issue guidelines for the implementation of the obligations of [NRAs] under this Article.’ Article 6 deals with penalties: Member States shall lay down the rules on penalties applicable to infringements of Articles 3, 4 and 5 and shall take all measures necessary to ensure that they are implemented. The penalties provided for must be effective, proportionate and dissuasive. Member States shall notify the Commission of those rules and measures.

Notification is thus required by the governments on behalf of NRAs. Finally, Article 9 instructs that provisions will be reviewed by 2019: By 30 April 2019, and every four years thereafter, the Commission shall review Articles 3, 4, 5 and 6 and shall submit a report to the European Parliament and to the Council thereon, accompanied, if necessary, by appropriate proposals with a view to amending this Regulation.

Given this short timetable, it may be that the 2019 review recommends codifying the BEREC Guidelines, which are discussed in the next section.

15.9.6  BEREC Net Neutrality Guidelines 2016 The European Economic Area implementation of the Open Internet Regulation (EU/​ 2021/​2015) has been clarified with BEREC Guidelines issued on 30 August 2016.246 These provide guidance to national regulators on implementation of the 2015 246  Body of European Regulators of Electronic Communications (2016) BEREC Guidelines on the Implementation by National Regulators of European Net Neutrality Rules. BoR (16) 127.

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Regulation, and were primarily drafted by the UK (Ofcom) and Norwegian regulators. BEREC’s guidelines at paragraph 45 expressed agnosticism on zero rating: ‘It is not the case that every factor affecting end-​users’ choices should necessarily be considered to limit the exercise of end-​users’ rights.’ BEREC at paragraph 46 warned that the combination of the largest mobile operator with largest social network provider could produce an anti-​competitive discriminatory access agreement: a practice is more likely to limit the exercise of end-​user rights in a situation where, for example, many end-​users are concerned and/​or there are few alternative offers and/​or competing ISPs for the end-​users to choose from.

BERC at paragraph 48 stated: Price differentiation between individual applications within a category has an impact on competition between providers in that class . . . and thereby undermine the goals of the Regulation [more] than would price differentiation between classes of application . . . the lower the data cap, the stronger such influence is likely to be.

15.9.7  Open Internet Access (EU Regulation) Regulations 2016 The UK government enacted the Open Internet Access (EU Regulation) Regulations 2016,247 which set out powers to fine access providers who restrict internet access to subscribers or fail to cooperate with Ofcom investigations: 19.—​(1)  Where OFCOM determine that there are reasonable grounds for believing that a person is breaching, or has breached an obligation under Articles 3, 4 or 5 of the EU Regulation or under these Regulations they may give that person a notification under this regulation. . . . 21.—​(1)  The amount of a penalty notified under regulation 19  . . .  is to be such amount as OFCOM determine to be—​ (a) appropriate; and (b) proportionate to the breach in respect of which it is imposed, but in the case of a breach of an information requirement not exceeding £2,000,000, and in the case of any other breach of the EU Regulation or these Regulations, not exceeding ten per cent, of the turnover of the notified person’s relevant business for the relevant period.

15.9.8  Other National Regulator Responses to Regulation 2120/​2015/​EU National regulators’ implementation of the 2015 Regulation has resulted in several decisions to prevent telecoms operators from zero rating their affiliated content, following interpretation of Paragraphs 45–​48 of the BEREC Guidelines 2016, but also 247   The Open Internet Access (EU Regulation) Regulations 2016, SI 2016/​6 07, at .

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the striking down of the provisions in the earlier and broader Netherlands Telecoms law of 2012. The Rotterdam administrative court of first instance in 2017 struck down the Netherlands Telecoms Law 2012, Article 7(4) on net neutrality248 : ACM (Dutch regulator) has ordered T-​Mobile to discontinue the provision and execution of the Data Free Music service under forfeiture of a penalty payment. At the hearing it appears that Vodafone Ziggo disagrees with the far-​reaching suspension by ACM of the burden during a possible preliminary question. The objection lodged at the sitting—as part of the plea note—indicates that the court should have been forwarded within the meaning of Article 7:1a. ACM takes the view that zero rating is contrary to Article 3, second and third paragraphs, of the Network Neutrality Regulation and with Article 7.4a, third paragraph, of the Telecoms Law 2012. The court is of the opinion that the neutrality regulation and in particular Article 3 of the Regulation undoubtedly contains no categorical prohibition of price discrimination (‘acte clair’). Article 7.4a, third paragraph, is therefore unequivocally contrary to the network neutrality regulation. In this connection, the court notes that no other conclusion is possible than the national legislature has acted against by better understanding by Article 7.4a, third paragraph, in spite of the establishment history and the text of Article 3 of the Network Neutrality Regulation.

If similar conclusions are reached in investigations and cases in Slovenia, Sweden, and Germany, then there may be rapid harmonization on the basis of the Regulation.249 If the question is referred to the Court of Justice of the European Union, it may be that the UK leaves the European Union prior to the settlement of that law. UK regulator Ofcom concluded two internal investigations into mobile networks’ zero rating in 2016/​17, deciding in one case that it:  ‘would be unlikely to have a significant impact on end user rights or on innovation in the online services market. We have therefore not opened a formal investigation into the product.’ In the other case, the high data caps meant it was ‘likely to limit harmful effects of the zero-​rating practice on end user rights’ as suggested by paragraph 48 of the BEREC Guidelines.250 In each case it considered the five pertinent BEREC factors: the goals of the Regulation; the market positions of the ISP and content and application

248   ROT 17/​4 68, ROT 17/​1160, and ROT 17/​1932, T-​Mobile v Ziggo BV, Ziggo Services BV, Vodafone Libertel BV, 20 April 2017, at . 249   European Commission, ‘Digital Single Market Reports and studies:  Annual country reports on open internet from national regulators—​2017’, 20 July 2017 at . 250  Ofcom, ‘Monitoring compliance with the EU Net Neutrality regulation:  A report to the European Commission’, 2017, at 8–​9.

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providers involved; the effects on consumer and business customer end-​user rights; the effects on CAP end-​user rights; and the scale of the practice and presence of alternatives.

15.10  CONC LUDING R EM A R K S: FROM MER E CONDUIT TO INTERC EP TOR S OF CONTENT The European legal basis for regulatory intervention is an enabling framework to prevent competition abuses and prevent discrimination, under which national regulators need the skills and evidence base to investigate unjustified interference with ISPs’ traditional mere conduit status and non-​d iscrimination. Regulators’ proactive approach to monitoring and researching non-​neutral behaviours will make ISPs much more cognizant of their duties and obligations. The pace of change in the relation between architecture and content on the internet requires continuous improvement in the regulator’s research and technological training. Regulators are required to monitor both commercial transactions and traffic shaping by ISPs to detect potentially abusive discrimination via greater research towards understanding the nature of congestion problems on the internet and their effect on content and innovation. The issue of uncontrolled internet flows versus engineered solutions is central to the question of an open versus regulated internet.251 What is at risk is the future of internet development for innovators. This raising of barriers is summarized by AT&T’s Jack Osterman reacting to Paul Baran’s original concept of the internet: ‘First,’ he said, ‘it can’t possibly work, and if it did, damned if we are going to allow the creation of a competitor to ourselves.’252 Regulations are intended to prevent unregulated non-​t ransparent controls exerted over traffic, whether imposed by ISPs for financial advantage or to use this new technology to filter, censor, and enforce copyright and other laws against internet users. Unravelling the previous ISP limited liability regime risks the free flow of information for economic and social advantage. Regulation may guard against behaviours both by ISPs violating network neutrality or acting precipitously to remove illegal content, and by copyright holders acting to force ISPs to act as third party policemen of their property rights. The reform of ECD and the rational and considered implementation of appropriate

251   Kahn, Robert E, and Vinton G Cerf, ‘What Is The Internet (And What Makes It Work)’ (1999) Internet Policy Institute, Washington DC at . 252   Hafner, Katie, and Lyon, Matthew, Where Wizards Stay Up Late, (Washington DC: Free Press, 1996) pp 52–​6 6 describes Osterman’s response to Baran’s revolutionary concept.

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levels of network neutrality, together with the continued development of NTD for illegal third party content, will be vital to the continued health of the internet access market. The UK Parliament passed a Statutory Instrument in 2016 implementing the EU Open Internet Regulation, signalling its intention to conform to the European legal framework for the foreseeable future. Brexit may or may not mean Brexit, but the UK’s continued tangible interconnection with the European open Internet suggests that a continued harmonization of regulation in this area will apply.

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16 INTERNATIONAL REGUL ATORY   L AW Ian Walden

16.1 Introduction  16.2 International Network Infrastructure  16.3 International Telecommunication Union  16.4 World Trade Organization  16.5 Concluding Remarks 

791 793 806 827 844

16 .1 INTRODUC TION Telecommunications is an inherently trans-​national technology. As such, the development of telecommunications has always required substantial cooperation and agreement between nation states. Cooperation can be seen at a number of different levels, including the need for adherence to certain standards, both technical and operational. Historically, the need for ongoing cooperation between states has meant the establishment of inter-​governmental organizations, of which the International Telecommunication Union (ITU) lays claim to the oldest pedigree of any such organization. These inter-​governmental institutions have been responsible for laying down much of the framework that comprises international telecommunications law and regulation. In addition, the nature of the industry demands the construction of communications links across jurisdictions subject to both domestic and international law. As such, the telecommunications industry has been subject to treaties and conventions established under public international law for the treatment and use of common natural resources, specifically the law of the sea and outer space law. Over the past thirty years, the sources of international telecommunications law has diversified as the industry and national markets have undergone fundamental change. At a technical level, the need for internationally agreed standards has expanded exponentially with the growth of data communications and the range of services being made available over communication networks. The rate of

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technological change has required more flexible and dynamic decision-​making procedures and institutions. Historically, standards-​making bodies comprised monopolistic operators that were part of a national public administration. With market liberalization, the numbers of participants in the standards-​making process has risen dramatically, whilst conversely the effective role of governments has diminished significantly. As a consequence, we are witnessing a period of change in those international institutions to which the attention of telecommunications lawyers has traditionally been focused. International industry associations have emerged to challenge the primacy of inter-​governmental organizations. At the same time, governments, particularly among developed nations, are increasingly looking to scale-​down their involvement in the governance of the telecommunications sector, driven both by a desire to reduce demands on public finance, as well as through a recognition that they are not necessarily best placed to make appropriate decisions in such a rapidly evolving environment. International telecommunications organizations such as the ITU are also experiencing institutional competition from other inter-​governmental bodies, particularly the World Trade Organization (WTO). While the associated multinational trade agreements have focused on telecommunications as a distinct economic activity, a tradable service, rather than simply as a medium or conduit for conducting trade. As the industry undergoes fundamental structural shifts, with operators merging to become global entities as well as pondering the consequences of convergence, attention has shifted to issues of market access as the primary concern in international telecommunications law. The ITU has experienced a loss of status in the face of such new priorities and is therefore engaged in a re-​examination of its role in the changing environment. Despite the global trend towards market liberalization, there continues to be an inevitable divergence of view between developed nations and developing nations towards the telecommunications sector. Whilst all nations recognize the critical role of telecommunications in a nation’s economic infrastructure and development, many countries continue to see telecommunications as a public resource and even a natural monopoly in which governments have a right and obligation to intervene. Developing countries are experiencing considerable pressure to embrace the credo of market liberalization from a number of directions. Firstly, the need to attract foreign investment into the domestic telecommunications market. Secondly, developments in technology, particularly internet-​related, increasingly erode the ability of states to exercise effective regulatory control over the sector. Thirdly, developmental organizations, such as the World Bank and the European Bank of Reconstruction and Development (EBRD), have imposed liberalization conditions as part of their loan programmes for infrastructure investment projects in telecommunications.

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This chapter broadly examines three substantive aspects of international telecommunications law: • the construction of international telecommunications network infrastructure, both satellites and submarine cables; • the structure and operation of the ITU and its rule-​making activities; and • the impact of the WTO and its trade agreements on national telecommunication markets and legal regimes.

16 . 2  INTER N ATION A L NE T WOR K INFR A S TRUC T UR E As at a national level, the physical construction of telecommunications networks is subject to a particular regulatory framework not applicable to the provision of services over such networks. For example, issues concerning rights of way across public and private property are a central element in the licensing of a public telecommunications operator.1 At an international level, similar issues arise concerning the rights and obligations of those wanting to construct either wireless (ie satellite) or wireline (ie cable) networks between sovereign jurisdictions. This section reviews the law governing the launch and operation of communication satellites2 and the laying of submarine cables.

16.2.1  Satellite regulation The launch of TELSTAR I in 1962 marked the beginning of satellite technology for use in telecommunications, broadcasting, and for military purposes. Satellites are now also used for weather forecasting, earth observation, and navigation purposes, such as GPS technology. Satellites primarily operate as radio relay stations, receiving and retransmitting signals between uplink and downlink frequencies, through ‘transponders’, from and to receivers and transmitters on earth, as well as between satellites, known as ‘extraplanetary links’. Modern satellites may also carry out more complex on-​board signal processing than simply acting as a relay. Satellite systems can be distinguished into geostationary and non-​geostationary systems. A geostationary system (GEO) is based above the equator (around 36,000 kms) and revolves at the same speed as the earth, thereby appearing to be stationary (ie a synchronous orbit). An advantage of GEOs is the ability to provide continuous and relatively comprehensive coverage of the earth with only three

  See further Chapter 6, Authorization and Licensing.   Issues relating to the assignment of frequency spectrum and orbital slots are discussed in Section 16.3.2.

1 2

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satellites,3 although providers may operate more.4 Disadvantages of such systems include the fact that the equator can only accommodate a limited number of systems; while the quality of communications is diminished somewhat by the transmission delay caused by the substantial distance travelled by signals to and from such satellites, particularly for voice telephony. Recent developments in the satellite market have been in the proliferation of non-​geostationary systems operating in medium earth orbits (MEOs), operating at around 10,000 kms above sea level, and low earth orbits (LEOs), operating at around 1,500 kms above sea level. Such systems require a considerably greater number of satellites than GEO systems to ensure continuous coverage.5 The launch and operation of satellites is subject to international space law. Historically, satellite systems were developed under international conventions between States, such as INTELSAT, INMARSAT, and EUTELSAT. However, the current non-​geostationary systems are multinational private consortia operating under private agreement and subject to national legal regimes. 16.2.1.1  International space law International space law comprises a set of agreed principles embodied in a series of treaties and conventions. These principles encompass the launch and operation of satellites, particularly in respect of liability for any damage caused by the satellite or any other space object. In 1962, the UN General Assembly adopted a declaration comprising nine fundamental legal principles governing the use to be made of ‘outer space’.6 This declaration formed the basis of the ‘Outer Space’ Treaty agreed in 1967.7 This Treaty continues to be one of the primary international legal instruments governing the launch and operation of telecommunications satellites. In terms of economic exploitation, the Treaty declares that outer space and celestial bodies may not be subject to national appropriation (Article II). States are

3   An idea published by Arthur C Clarke in Wireless World in 1945. Coverage does not really extend to regions above latitudes 75° north or south. The angle of elevation in northern Europe does significantly limit reception. 4   Inmarsat, Section 16.2.1.2, for example, has three constellations of 11 satellites. 5   eg the O3b MEO system will initially use 12 satellites at an altitude of 8,062 km; Iridium’s LEO system uses 66 satellites at an altitude of 785 km; Globalstar’s LEO system will use 24 satellites at an altitude of 1,414 km. 6   Resolution 1962 (XVIII), adopted at UN General Assembly, 13 December 1963 (GAOR Annexes (XVIII) 28, p 27). The physical boundaries of outer space are somewhat unclear, although 100 km above sea level, representing the boundary between the lower and outer atmosphere, is a generally accepted figure: see ‘The legal regime of airspace and outer space: the boundary problem’ in Cheng, C, Studies in International Space Law (Oxford: Clarendon Press, 1997) 425–​456. 7  Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies (London, Moscow, and Washington, 27 January 1967; TS 10 (1968); Cmnd 3519).

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also responsible under international law for their activities in outer space, whether carried out by governmental or non-​governmental authorities; the latter requiring authorization and ongoing supervision (Article VI). Liability for damage caused by any object placed in space would rest jointly with the State that launches, or procures the launch of, the object, and the State ‘from whose territory or facility an object is launched’ (Article VII). Jurisdiction and control over any object in outer space remains with the State that has registered the object, whilst ownership is unaffected by the presence of the object in space or its return to Earth outside of the registering State (Article VIII). To facilitate international cooperation in the use of outer space, States are required to provide information to the United Nations regarding their activities in, and use of, outer space (Article XI). The liability provisions of the Outer Space Treaty were elaborated further in a 1972 Convention on International Liability for Damage Caused by Space Objects (‘Liability Convention’).8 Reflecting the terms of the 1967 Treaty, liability lies with the ‘launching State’; this encompasses both the State that launches or procures the launch of the space object and the State from where it was launched (Article I).9 In certain circumstances, this definition could result in there being three potential ‘launching states’; for example, where a satellite supplier based in the UK arranges for the launch of satellite for a customer based in France, under a ‘delivery in-​orbit’ arrangement, from a launch service provider based in Kazakhstan.10 Where a launch has involved two or more States, then liability is joint and several (Article V), unless agreed otherwise privately by the parties.11 Liability results from damage caused by a ‘space object’, which includes its ‘component parts’ and the ‘launch vehicle and parts thereof’ (Article I(d)). The concept of ‘damage’ is defined under the Liability Convention in the following terms: . . . means loss of life, personal injury or other impairment of health; or loss of or damage to property of States or of persons, natural or juridical, or property of international intergovernmental organisations (Article I(a)).

Consequential losses, such as future traffic revenues, do not seem to be encompassed within this definition.12

8   London, Moscow and Washington 29 March 1972; TS 16 (1974); Cmnd 5551. The Treaty entered into force for the United Kingdom on 9 October 1973. 9   Launching also includes any attempts. 10   See . 11   eg an agreement between Russia and Khazakstan. 12   See generally Beer, T, ‘The specific risks associated with collisions in outer space and the return to earth of space objects—​t he legal perspective’, (2000) XXV(2) Air and Space Law, pp 42–​50.

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Liability is absolute under the Convention where the damage is caused on the Earth or to an aircraft (Article II).13 The only formal claim that has been submitted under Article II was by Canada in 1979, claiming C$6m from the Soviet Union for damage caused by the radioactive debris from the re-​entry of Cosmos 954 in January 1978. The claim was settled in 1981 for C$3m, but without liability being acknowledged.14 Liability is fault-​based where the damage is to the space object of another launching state caused elsewhere than on the Earth (Article III), which raises the potential for complex evidential and causation issues in the event of a claim. In 2009, a first example of a collision between intact satellites occurred between the Iridium 33 and a defunct Russian satellite, Kosmos 2251.15 As well as the direct damage caused to the colliding space objects, the resultant debris could also have caused damage to other satellites, resulting in a third party claim against the two states involved in the initial collision (Article IV.1(b)). In another incident, in 2010, Intelsat announced it had lost control of Galaxy 15, leading to potential interference with the transmission of AMC 11, a satellite owned by SES World Skies; although it subsequently regained control in December 2010.16 Such dangers and potential liabilities can be expected to become more common as the space segment becomes increasingly crowded. A State may claim damages either on behalf of itself; its natural or legal persons (ie the State of nationality); or for those sustaining damage whilst in its territory (Article VIII). Alternatively, such persons may be able to seek remedies under other rules of international or domestic law. Claims for compensation are subject to certain time limits and, where diplomatic settlement is not achieved, may be decided upon by a ‘Claims Commission’ established at the request of either party (Articles XIV–​X X). Underpinning the 1962 Declaration and the Outer Space Treaty was the concept that each State would maintain a register detailing the space objects for which the State claimed jurisdiction and control. Such registration procedures were formalized under the 1975 Convention on the Registration of Objects Launched into Outer Space.17 Under the Convention, the launching State accepted an obligation to maintain a register (Article II), although the contents and conditions of use could

13   Unless it can be shown that the damage is the result of ‘gross negligence or an act or omission done with intent to cause damage’ by the claimant State (Art VI). 14   Protocol on Settlement of Canada’s Claim for Damages Caused by Cosmos 954 (1981) 20 ILM 689. See also Brearly, A, ‘Reflections upon the notion of liability: The instances of Kosmos 954 and space debris’, (2008) 34 J Space L 291. 15   New Scientist, ‘Space junk: Hunting zombies in outer space’, 15 September 2010. 16   See . 17   New York, 14 January 1975; TS 70 (1978); Cmnd 7271. The Convention entered into force for the UK on 30 May 1978.

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be determined by the ‘State of registry’. In the UK, the Registry is maintained by the UK Space Agency.18 Certain information is required to be furnished to the Secretary-​General of the United Nations for general publication (Articles III, IV).19 This information should be distinguished from that maintained under the auspices of the ITU in respect of the allocation of frequency spectrum and orbital slots.20 Aspects of the treaties comprising international space law have been transposed into UK law by the Outer Space Act 1986 (OSA), which is administered by the UK Space Agency, an executive agency of the Department for Business, Innovation and Skills (BIS). The Act applies to the ‘launching or procuring the launch of a space object’, ‘operating a space object’ or ‘any activity in outer space’ (s 1), which are all licensable activities.21 However, a licence is not required for the leasing or use of space segment capacity, ie on a transponder, from an existing satellite operator.22 Under the terms of any such licence, a licensee is subject to a number of obligations, including supplying certain information for inclusion in a register to be maintained by the Secretary of State and to ‘avoid interference with the activities of others’ (s 5). As part of the licensing process, the UK Space Agency will also ensure that the applicant has made appropriate ITU filings for frequency and orbital slots through Ofcom.23 In terms of liability, a licensee is obliged to obtain third-​party liability insurance for any loss or damage arising from the authorized activities (s 5(2)(f )), as well as fully indemnifying the government against any claims (s 10). However, as part of the last Government’s attempts to boost the domestic satellite industry, it reduced the minimum value of compulsory insurance cover required from €110 to €60m.24 It has also promised to reform the OSA to both restrict the scope of the compulsory insurance, to only the launch phase and not the in-​orbit operational phase, as well as removing the unlimited indemnity.25 The current liability regime is seen as placing domestic industry at a comparative disadvantage with operators in other countries. In February 2017, the government published a Spaceflight Bill, which

  See n 11.   The information to be supplied is: the name of the launching State or States; an appropriate designator or registration number for the space object; the date, territory or location of launch; basic orbital parameters; and the general function of the space object (see generally ). 20   See Section 16.3.2. 21  An example of a typical licence can be obtained at . 22   UK Space Agency, ‘Revised Guidance for Applicants—​Outer Space Act 1986’. 23   See Ofcom, ‘Procedures for the Management of Satellite Findings’, 27 March 2007. 24   See ‘David Willetts secures agreement for cheaper access to space’, BIS, 4 July 2011. 25   HM Treasury and BIS, The Plan for Growth, March 2011, at 2.305. 18

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will provide the basis for such reforms,26 which was subsequently introduced and received Royal Assent in March 2018 as the Space Industry Act 2018.27 Under the Act, an amended OSA will only be applicable to activities carried out overseas (which has been the reality for UK licensed launches to date), while domestic launches will be licensed under a new regime. The Secretary of State has been given the power to indemnify licensed operators in respect of any liability that exceeds the limit provided for in the licence, to be specified in regulations (Section 35). In terms of jurisdiction, a satellite system can be distinguished into two components: the ‘earth segment’ and the ‘space segment’. The ‘earth segment’ comprises those stations that send (‘uplinks’) and receive (‘downlinks’) transmissions from the satellite and which are subject to the laws of the jurisdiction in which they are physically located.28 The ‘space segment’ has been defined in the following terms: . . . the telecommunications satellites, and the tracking, telemetry, command, control, monitoring and related facilities and equipment required to support the operation of these satellites. (INTELSAT Agreement, Article 1(h))

Jurisdictional responsibility for the ‘space segment’ can be sub-​d ivided between the State that launched the satellite and the State from where the satellite is controlled. If control is distributed between multiple sites, then it is the operator’s principal place of business. 16.2.1.2  International satellite conventions With the successful launch of Sputnik I in 1957, the operation of satellite systems was initially a highly charged political arena with important military and therefore ‘Cold War’ implications. However, the 1962 UN resolution represented an important acceptance by the international community that space should be treated as a common resource of ‘all mankind’. In addition, the industry then consisted of national, generally State-​owned, monopoly operators. With these factors in mind, it was therefore perhaps inevitable that the first satellite systems were the subject of international treaty, rather than private endeavour. The first international satellite organization (ISO) was established in 1964 under ‘Interim Arrangements for a Global Commercial Communications Satellite System’29 and, subsequently, the Agreement Relating to the International Telecommunications Satellite Organization (Intelsat).30 Intelsat had legal personality (Article IV) and 26   Department for Transport, Draft Spaceflight Bill (Cm 9421), February 2017, at . 27   See . 28   The geographical coverage of a satellite’s transmissions is known as its ‘footprint’. 29   Washington, 20 August 1964–​20 February 1965; TS 12 (1966); Cmnd 2940. 30   See the Agreement relating to the International Telecommunications Satellite Organization ‘INTELSAT’ (with Operating Agreement), (Washington, 20 August 1971; TS 80 (1973); Cmnd 5416).

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operated in accordance with the inter-​governmental Agreement and an ‘Operating Agreement’. Member countries were required to grant Intelsat, and certain of its officers and employees, legal and taxation privileges and immunities (Article XVII). Intelsat’s stated prime objective was: . . . the provision, on a commercial basis, of the space segment required for international public telecommunications services of high quality and reliability to be available on a non-​d iscriminatory basis to all areas of the World. (Article III)

Intelsat comprised 147 member countries and signatories, as well as over 200  ‘investing entities’, in 2001. In the UK, British Telecommunications was the designated signatory to Intelsat, reflecting the governmental origins of the organization; although prior to privatization, more than 20 other UK-​based operators were designated as ‘investing entities’. In July 2001, Intelsat became a private company and was acquired by private equity companies in 2005; it acquired the US satellite operator PanAmSat in 2007; was acquired by BC Partners in 2008 and became a public company in April 2013. The International Mobile Satellite Organization (Inmarsat) was established in 1979 as an intergovernmental organization providing satellite services for the maritime and aeronautical sectors, particularly communications in situations of distress and safety.31 In 1994, it established a separate private company, I-​CO Global Communications Ltd, to build and provide a non-​geostationary mobile satellite-​based telecommunications system.32 Until 1999, Inmarsat’s organizational structure was very similar to Intelsat. The vast majority of its operations were privatized in 1999 and it floated on the London Stock Exchange in 2005. A third international satellite organization to which the UK was a member signatory is the European Telecommunications Satellite Organization (Eutelsat), established in 1977 and comprised of 48 member countries.33 Whilst the Convention and Operating Agreement were modelled closely on the Intelsat texts, in contrast to Intelsat only one operator per member was a shareholder, which for the UK was British Telecommunications plc. The prime objective of Eutelsat was ‘the provision of the space segment required for international public telecommunication services in Europe’ (Article III(a)). As with Intelsat and Inmarsat, Eutelsat was privatized in 2001, providing services through a private company (Eutelsat SA), whilst

31  See the Convention on the International Maritime Satellite Organization (INMARSAT) (with the Operating Agreement), London, 3 September 1976; TS 94 (1979); Cmnd 7722. It changed its name in 1994. 32   See generally Case No IV/​35.296—​I nmarsat-​P, OJ C 304/​6, 15 November 1995. 33   See the Convention establishing the European Telecommunications Satellite Organization (EUTELSAT) (Paris, 15 July 1982; TS 15 (1990); Cmnd 956, as amended by a Protocol of 15 December 1983, Cmnd 9154). The UK instrument of ratification of the Convention was deposited on 21 February 1985 and the Convention, Operating Agreement and Protocol entered into force on 1 September 1985.

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the intergovernmental organization continues to operate in order to ‘ensure that basic principles of pan-​European coverage, universal service, non-​d iscrimination and fair competition are observed by the company’.34 With market liberalization, concerns arose that the treaty-​based satellite systems could be utilized by incumbent operators to restrict access to space segment capacity and satellite services. In particular, a service provider wanting to purchase satellite capacity was generally required to procure the capacity via their local signatory, ie the incumbent operator. Not only did this generate revenue for the signatory, but associated ‘coordination procedures’ required details of the proposed service to be widely disclosed: eg To the extent that any Party or Signatory or person within the jurisdiction of a Party intends individually or jointly to establish, acquire or utilize space segment facilities separate from the INTELSAT  . . .  such Party or Signatory, prior to the establishment, acquisition or utilization of such facilities, shall furnish all relevant information to and shall consult with the Assembly of Parties . . . to ensure technical compatibility . . . and to avoid significant economic harm to the global system of INTELSAT. (Article XIV(d))

Such procedures could obviously be abused to restrict competition either directly, by blocking the provision of a service, or indirectly, by the incumbent operator commencing a competing service. As part of the EU’s liberalization programme, Member States party to any of the international satellite organizations, ie Intelsat, Inmarsat, Eutelsat, and Intersputnik, were required to notify the Commission of any measures which could breach European competition law.35 In addition, a 1994 Council Resolution called for the rules of the international satellite organizations to be adjusted to ensure strict separation between regulatory and operational aspects; as well as separation or flexibility between ownership of investment shares and usage of the systems.36 To minimize the potentially anti-​competitive operation of the satellite organizations, the European Commission believed it was necessary to ensure that ‘users obtain direct access to space segment capacity, while providers of this space segment should obtain the right to market space capacity directly to users’.37 Such

  See : ‘Introduction to Eutelsat’.   Commission Directive 94/​4 6/​EC of 13 October 1994 amending Directive 88/​301/​E EC in particular with regard to satellite communications, OJ L 268/​15, 19 October 1994, at Art 3. 36   Council Resolution on further development of the Community’s satellite communications policy, especially with regard to the provision of, and access to, space segment capacity; OJ C379/​5, 31 December 1994. 37   ’Towards Europe-​w ide systems and services—​Green Paper on a common approach in the field of Satellite Communications in the European Community’, Communication from the Commission, COM(90)490 final, 20 November 1990. See also the 1991 Guidelines, at paras 122–​128. 34 35

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direct access has subsequently been implemented in most of the Member States, although through separate ancillary agreements rather than amendments to the provisions of the international agreements.38 However, the Commission did not consider such developments to be sufficient to ensure a fully liberalized market in the provision of satellite-​based services. Therefore, Member States now have an obligation to ‘take all appropriate steps to eliminate’ incompatibilities between the international conventions and the EC treaty.39 In the US, the government took a much more proactive stance towards the anti-​competitive position of the ISOs. In 2000, Congress adopted the Open-​ Market Reorganization for the Betterment of International Telecommunications Act,40 with the express purpose of ensuring that Intelsat and Inmarsat became independent commercial entities with a pro-​competitive ownership structure. The Federal Communications Commission was required to determine whether Intelsat, Inmarsat, or any of their successor entities ‘will harm competition in the telecommunications markets of the United States’ and condition or deny any applications or authorizations where such harm is found to be present or potential.41 Such a unilateral move was in breach of the US’s international treaty obligations under the Intelsat agreement,42 but acted as an effective spur to the privatization process. With the progressive moves towards full commercialization and privatization, the treaty-​based satellite systems are no longer relevant as a feature of international telecommunications law. From a competition law perspective, the process of privatization has raised a number of issues, including the need to ensure that the private operating entities do not retain any of the legal immunities granted to international organizations; and opening up the shareholding to non-​participant entities, preferably through a public offering.43 Such operators are now subject to the scrutiny of competition regulators in the same way as other multinational satellite ventures.44 However, the ISOs also had a public service remit, both in general

38  See Communication from the Commission, ‘Fifth Report on the Implementation of the Telecommunications Regulatory Package’, November 1999. 39   Commission Directive 2002/​77/​EC ‘on competition in the markets for electronic communications networks and services’, OJ L 249/​21, 17 September 2002 at Art 8(2). 40   The ‘ORBIT Act’, Pub L 106–​180, 114 Stat 48 (2000), codified at 47 USC §761 et seq. 41   47 USC § 761(b)(1). 42   Sagar, D, ‘Privatisation of the Intergovernmental Satellite Organisations’, paper presented at the ECSL Tenth Summer Course on Space Law and Policy, Nice, 27 August–​8 September 2001. 43  Ungerer, H, ‘The transformation of the International Satellite Organisations—​some aspects from a European perspective’, 11 April 1999:  published on the Competition Directorate-​G eneral website. See also Press Release, ‘Commission gives green light to Inmarsat restructuring’, IP/​98/​923, 22 October 1998. 44   eg Commission competition decisions:  Case IV/​3 4.768—​International Private Satellite Partners, OJ L 354/​75, 31 December 1994 and Case IV/​35.518—​I ridium, OJ L 16/​87, 18 January 1997.

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terms of offering services on a non-​d iscriminatory basis, as well as specific service offerings, such as Inmarsat’s maritime distress and safety services. Whether the privatized entities will continue to adequately fulfil such public service obligations in a commercial environment, only time will tell; but in 2018, the Inmarsat agency recognized other operators as providers of alternative maritime distress systems.45

16.2.2  Submarine cables Submarine cables have been a component of the international telecommunications infrastructure since 1851, when the first submarine cable for telegraphy was laid between England and France. The first commercially successful transatlantic telegraph cable was operational in 1866; the first transatlantic coaxial copper telephone cable (TAT-​1) in 1956, and the first transatlantic fibre optic cable (TAT-​8) in 1988.46 The emergence of satellite technology was widely viewed as signalling the demise of submarine cable as a transmission medium. However, submarine cable has continued to prosper and expand as the dominant medium for international traffic due to its superior transmission quality, reliability, and security, carrying over 95 per cent of international voice and data traffic.47 The expense of laying submarine cables has meant that, historically, consortia of operators from different jurisdictions have carried out such projects under private agreement, often referred to as ‘cable clubs’. Such ‘clubs’ usually comprised the monopoly operators from each jurisdiction connected to the cable. In contrast to the first satellite systems, such consortia were not the subject of international conventions. During the telecommunications boom of the late 1990s, the ‘club’ model was supplanted by single private ventures, such as Global Crossing and FLAG, who were able to raise sufficient investment from the capital markets without the need for consortia. However, with the subsequent downturn in the sector, a number of these companies experienced financial difficulties and numerous submarine cable systems have been taken out of service.48 As a consequence, we have seen a return of cable ‘clubs’ as a financing vehicle for submarine cable systems. Cable laying projects are driven by the perceived growth in demand for bandwidth to carry data traffic, which reflects in part general economic activity around the world.

  Sagar, n 42.   See Davenport, T, ‘Submarine Communication Cables and Law of the Sea: Problems in Law and Practice’, (2012) 43 Ocean Development & International Law, 201–​2 42. 47   ICPC Presentation, ‘About submarine telecommunication cables: Communicating via the ocean’, kindly made available to the author, July 2008. 48   See Burnett, R, ‘The legal status of out-​of-​service submarine cables’, Maritime Studies, No 137, July/​ August 2004. 45

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In terms of legal issues and regulatory regimes, submarine cabling can be divided into: • the process of laying (at sea) and landing (on land) of the cable and its subsequent maintenance;49 • the provisioning of capacity in the form of IRUs (Indefeasible Rights of Use) and, subsequently, as International Private Leased Circuits (IPLCs);50 • the operation of, and access to, the cable landing station; and • the facilities required to connect the operator’s domestic network to the cable landing station, commonly referred to as ‘backhaul’. The issue of cable laying concerns issues of public international law and national marine law, in respect of landing rights. The establishment of cable landing stations usually involves a complex array of national and (or) local planning, development and environmental laws. The provisioning of capacity and ‘backhaul’ facilities, as well as access to landing stations, has come to the attention of telecommunications regulatory authorities in terms of competition concerns. In similar fashion to satellites, the international law of the sea governs the laying of submarine cable and associated liabilities for damage, where such cable lies outside the territory of a state. The primary international treaty establishing a legal order for the seas is the United Nations Convention on the Law of the Sea 1982 (UNCLOS), which came into force in November 1994.51 There are 168 parties to the UNCLOS, which does not include the United States. The Convention divides the sea into five different zones, each subject to different legal regimes: • internal waters are ‘on the landward side of the baseline of the territorial sea’ and are part of a state’s sovereign territory (Article 8); • territorial waters extending 12 nautical miles in breadth and over which the coastal State has sovereignty (Article 3), subject to the right of ‘innocent passage’ (section 3); • continental shelf, comprising ‘the sea-​bed and subsoil of the submarine areas that extend beyond its territorial sea’ up to 200 nautical miles (Article 76), and over which the coastal state exercises ‘sovereign rights for the purpose of exploring it and exploiting its natural resources’ (Article 77);

49  See generally Burnett, D, Beckman, R, and Davenport, T,  Submarine Cables:  The Handbook of Law and Policy (Leiden:  Martin Nijhoff, 2014); see also Hogan & Hartson, Submarine Cable Landing Rights and Existing Practices for the Provision of Transmission Capacity on International Routes, Report to the European Commission, August 1999. 50   For a consideration of the commercial aspects of IRUs, see Chapter 11, at Section 11.2. 51   See UN General Assembly Resolution A/​4 8/​263 of 28 July 1994. The Convention came into force in the UK on 24 August 1997 (TS No 81 (1999), Cm 4524). The European Community has acceded in respect of those matters for which it has competence (Council Decision 98/​392/​EC, OJ L 179/​1, 23 June 1998).

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• exclusive economic zone extending over a 200 nautical mile zone, where the state has the right to declare exclusive economic interests in the resources (Part V); and • high seas which are open to all States, both coastal and land-​locked (Article 87). A coastal State is entitled to lay submarine cables in its territorial waters, provided that they do not obstruct the rights of use of others, such as innocent passage (Article 21(c)). Any State is entitled to lay cables on the continental shelf, subject to the rights of other users already present; as well as the right of the coastal State to take reasonable measures in respect of exploitation, controlling pollution, and the imposition of conditions on cables entering its territory or territorial waters (Article 79). States are also free to lay cables in the exclusive economic zone (Article 58) and the high seas (Article 87), subject to an obligation to respect existing cables and pipelines (Article 112). The need to protect submarine cables from damage caused by other uses of the sea, such as fishing, dredging, or anchoring, gave rise to the Convention for the Protection of Submarine Cables (CPSC) in 1884,52 which is applicable outside of territorial waters.53 The CPSC was implemented in English law by the Submarine Telegraph Act 1885, although any incompatible provisions within the UNCLOS now supersede its provisions (Article 311(2)). Under the Submarine Telegraph Act, it is an offence to unlawfully and wilfully, or by culpable negligence, break or injure a submarine cable under the high seas, attracting a maximum tariff of five years’ imprisonment (s 3). Conversely, where a ship owner can prove damage to his equipment in order to avoid damaging a submarine cable, then the ship owner may claim compensation from the cable owner, provided that ‘all reasonable precautionary measures’ were taken.54 In 1958, the International Cable Protection Committee was established as an industry body comprising owners and operators of submarine telecommunications cables, including government administrations, in order to promote the protection of submarine cables against man-​made and natural hazards.55 It has produced a number of recommendations on issues such as ‘Cable Routing and Reporting Criteria’, concerning the placing of new cables near existing systems, which members comply with on a self-​regulatory basis.56   Paris, 14 March 1884 (75 BFSP 356; C 5910). It has 40 state parties.   Art 1. Primarily in the continental shelf zone: Wagner, E, ‘Submarine Cables and Protections Provided by the Law of the Sea’, (1995) 19(2) Marine Policy 127, at 132. 54   UNCLOS, Art 115. See also CPSC, Art VII. Under UK law, see the Continental Shelf Act 1964, s 8(1), referring to CPSC. Section 8(1A) extends the protection to submarine cables under territorial waters and the exclusive economic zone. See Agincourt Steamship Co Ltd v Eastern Extension, Australasia and China Telegraph Co Ltd [1907] 2 KB 305, CA. 55  . There are also national committees, such as the UK Cable Protection Committee . 56  . 52

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Although recognition of the public interest need to protect submarine cables dates back to the CPSC, our increasing dependence on cable infrastructure, especially for internet traffic, has led to them being designated as ‘critical communications infrastructure’,57 with some countries implementing additional protective measures within territorial waters. In Australia, for example, the Australian Communications and Media Authority (ACMA) has declared a number of protection zones over submarine cables recognized as being of vital significance to the national interest, particularly in terms of the economy.58 If carriers want to lay new cables within the zone, they are required to obtain a permit from the ACMA; while certain types of activity are prohibited, such as trawling, or restricted, such as navigational aids.59 Conduct resulting in damage to a submarine cable constitutes an offence, attracting a maximum tariff of ten years, on the basis of strict liability if the cable is within a protection zone.60 Similar protection schemes have been adopted in New Zealand61 and Indonesia.62 In similar fashion to the international satellite organizations, the cooperative nature of the ‘cable clubs’ has raised competition concerns.63 In a liberalizing environment, competing operators will want to purchase capacity on the cable and may need access to the cable landing stations to physically connect their networks to the international circuits. Cable owners, historically incumbent operators, may delay the provisioning of capacity on the cable, levy excessive tariffs, or make landing station access difficult, in order to obstruct a competitor’s entry into the market. In some EU Member States, national regulators have imposed access and interconnection obligations upon incumbent operators to their submarine cables.64 While the Access and Interconnection Directive does not expressly refer to cable landing stations or ‘backhaul’ circuits, such facilities clearly fall within the concept of ‘access’, and operators could be required to provide access, either where the operator is designated as having SMP or as a general measure.65 In the UK, the Office of Fair Trading (OFT) has investigated accusations made against the UK

  See UN General Assembly Resolution No A/​Res/​65/​37, 7 December 2010, at para 121.   See, for example, ACMA media release 126/​2007: ‘Protection zone declared for submarine telecommunications cable off the coast of Perth’, 4 October 2007. 59   Telecommunications and Other Legislation Amendment (Protection of Submarine Cables and Other Measures) Act 2005, No 104. 60 61   Ibid, at Sch 1, Pt 1, ss 36–​37.   Submarine Cables and Pipeline Protection Act 1996. 62   Regulation of Ministry of Maritime and Fishery Number 33/​M EN/​2002, at article 5(f), 63   See also Chapter 10. 64   See Commission, ‘Implementation of the EU regulatory framework for electronic communication -​2015’, SWD(2015) 126 final, 19 June 2015. 65   Directive 2002/​19/​EC on access to, and interconnection of, electronic communications networks and associated facilities, OJ L 108/​7, 24 April 2002, under Art 12 and Art 5(1)(a) respectively. 57

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Cable Protection Committee that it engaged in a collective boycott of an operator, Cityhook plc, and the collective setting of ‘wayleave fees’ paid to UK landowners for landing cables. The OFT eventually decided not to proceed with the case; although the decision was made on the grounds of administrative priority rather than non-​i nfringement.66 At an international level, US operators have complained in the past about access to submarine cable systems in the Indian market, particularly access to cable landing stations owned by VSNL the dominant international carrier, which resulted in changes in national rules.67

16 .3  INTER N ATION A L TEL E COMMUNIC ATION UNION The International Telecommunication Union (ITU) was founded in 1932, through the merger of the International Telegraph Union and the International Radiotelegraph Union; although its origins can be said to date back to the establishment of the International Telegraph Union by 20 European States in 1865.68 As such, the ITU is one of the oldest of the intergovernmental organizations, which illustrates the inherently transnational nature of the telecommunications industry, both in terms of the scope of services being demanded and the nature of the physical resources involved, specifically radio spectrum. It became a specialized agency of the United Nations system in 1947.69 Based in Geneva, the ITU exists to further the development of telegraph, telephone, and radio services, to promote international cooperation for the use of telecommunications and the development of technical facilities, and to allocate radio frequencies. The basic principles for the conduct of international telecommunication services, the basis for membership of the ITU and its organization and permanent organs, are contained in the International Telecommunications Convention and Constitution, to which the UK is a party.70 The Constitution contains the fundamental principles of the ITU, while the Convention details the operational procedures, which may be subject to periodic review. The ‘supreme organ’ within the ITU structure is the Plenipotentiary Conference, which comprises every Member State and meets every four years   Cityhook Ltd v OFT and ors [2007] CAT 18.   See USTR, ‘Results of the 2007 Section 1377 Review of Telecommunications Trade Agreements’, at p 14–​ 15. Available from . 68   For a detailed history of the ITU, see Lyall, F and Larsen, PB, Space Law: A Treatise, (Farnham: Ashgate, 2009) pp 200–​206. 69   International Convention on Telecommunications, Atlantic City, 2 October 1947; 1950 UK Treaty Series No 76, Cm 8124. 70   See the Constitution and Convention of the ITU, Geneva, 22 December 1992 (Treaty Series No 24, 1996, Cm 3145). The following text is based on the Constitution and Convention as of March 2015. 66 67

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(Constitution, Article 8), the last being held in Busan, Republic of Korea, 2014 and the next being in Dubai in 2018. Between meetings, a Council, comprising no more than 25 per cent of the total membership, acts on behalf of the Plenipotentiary (Constitution, Article 10(3)). The work of the Union is sub-​d ivided into three sectors: • the Radiocommunications Sector (ITU-​R); • the Telecommunication Standardization Sector (ITU-​T); and • the Telecommunication Development Sector (ITU-​D) (Constitution, Article 7). The work of each sector is carried out by a series of organizational entities: world and regional conferences, boards, assemblies, and numerous study groups examining particular topics. An administrative ‘Bureau’, within the General Secretariat, supports each sector, and the General Secretariat is headed-​up by the Secretary-​ General, currently Houlin Zhao. The ITU comprises two categories of membership: • ‘Member States’, ie national governments, of which there are currently 193, although governments may designate national regulatory authorities as their representative;71 and • ‘Sector Members’, representing all the various categories of player within the telecommunications industry, including regional and international organizations, such as the GSMA, and the intergovernmental satellite organizations, such as ARABSAT.72 In total, these entities number over 700.73 Sector members have been involved in the work of the ITU since the Rome Telegraph Conference in 1871, with the sponsorship of a Member State (Convention, Article 19(1)(a), (b)). In 1998, the Convention was amended to enable Sector Members to apply directly to join the ITU; although the applicant’s Member State must approve such a procedure (Convention, Article 19(4bis)-​ (4ter)). However, despite being eligible for membership, it was not until the Plenipotentiary in 1994 that Sector Members were able to formally participate in the decision-​m aking processes of the ITU; and only in 1998 that Sector Members were recognized as having formal rights of participation under the Constitution:

71   eg Ofcom in the case of the UK, as directed by the Secretary of State under the Communications Act 2003, s 22. 72  Note that the international satellite organizations discussed in section 16.2.1.2, fall under Sector Members, according to where they are established: Intelsat (US), Inmarsat (UK), Eutelsat (France). 73   See .

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In respect of their participation in activities of the Union, Sector Members shall be entitled to participate fully in the activities of the Sector of which they are members, subject to relevant provisions of this Constitution and the Convention: they may provide chairmen and vice-​chairmen of Sector assemblies and meetings and world telecommunication development conferences; they shall be entitled, subject to the relevant provisions of the Convention and relevant decisions adopted in this regard by the Plenipotentiary Conference, to take part in the adoption of Questions and Recommendations and in decisions relating to the working methods and procedures of the Sector concerned. (Article 3(3)).

Under the Convention, the ITU Secretariat has obligations to ‘encourage the enhanced participation’ of Sector members (Article 19), while a Sector Member may also be authorized to act on behalf of a Member State (Convention, Article 19(9)), which may be the case where an operator continues to be part of the government, often under a specific ministry, or has been conferred with certain special or exclusive rights within the jurisdiction. Sector Members participate in those sectors of the ITU for which they apply, eg ITU-​R, so participation in one sector does not confer authorization to participate in another. Despite the enhanced status of the Sector Members, the fundamental legal instruments of the ITU, the Constitution, Convention, and Administrative Regulations,74 continue to be under the exclusive jurisdiction of the Member States. An industry player may also be invited by a Sector of the ITU to participate as an ‘Associate’ within a study group (Convention, Article 19(12)), with more limited rights of participation, although with an obligation to help defray the costs of the group in which they participate (Convention, Article 33(5)(4bis)). This category of participants was established within the ITU system in 1988, as a means of enabling participation by small entities in the work of the ITU. With the liberalization of the telecommunications industry and the proliferation of commercial operators, tension has grown within the ITU over the position of industry members within the ITU structure. On the one hand, governments are wary of relinquishing their historic rights to control the organization; whilst on the other hand, they recognize industry’s legitimate interests in the work of the Union, as well as wanting industry to contribute an ever greater proportion of the costs associated with its operations and activities.75 The issue of industry involvement dominated the 1998 Plenipotentiary Conference in Minneapolis, where a single category of industry membership was finally recognized:

  See Section 16.3.4.   See Resolution 110 (Marrakesh, 2002): ‘Review of the contribution of Sector Members towards defraying the expenses of the International Telecommunication Union’. 74

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Sector Member: An entity or organization authorized in accordance with Article 19 of the Convention to participate in the activities of a Sector. (Constitution, Annex)

In terms of financing the work of the ITU, the Constitution was amended to place Sector Member contributions on an equal footing to those of Member States (Article 28). In addition, new ‘Advisory Groups’ were established for each Sector, with a broad remit to review the ‘priorities, programmes, operations, financial matters and strategies’ of the various bodies within each Sector (Convention, Article 11A, 14A, 17A). These new bodies have increased the influence of Sector Members within the ITU as Member States and industry participate on an equal footing. As part of a broad review of the ITU’s role and strategy for the future, an ITU Reform Advisory Panel was established at the end of the last decade, comprising both governmental and private sector members,76 and made the following recommendation in 2000 with respect to the balance of influence between Member States and Sector Members within the ITU: The decision-​making functions of the ITU should reflect the modern, competitive telecommunications environment in which the private sector plays the lead role while the regulatory agencies act as an arbitrator for the wider public interest.77

Whilst such sentiment was welcomed by the telecommunications industry, the degree to which Member States continue to intervene in the sector in the ‘public interest’ may give cause for concern. Currently, there are no institutional procedures to enable Sector Members to appeal against a decision made by Member States or arbitrate in a dispute with a Member State. The work of the ITU can be distinguished into three major areas: standardization, spectrum management and orbital slots, and development issues.

16.3.1 Standards It was the issue of technical standards that gave rise to the establishment of the International Telegraph Union in 1865, when governments recognized the need for standards to extend the telegraph network throughout Europe. Standards represent the cornerstone of the global telecommunications industry, and the ITU is one of the leading international institutions for de jure standards-​making. Critically, the ITU’s standards remit extends not only to technical issues, but also operational and tariff structures for international telecommunication services,

76

  For a full list of members, see .   ITU Reform Advisory Panel (RAP), Observations and Recommendations for Reform, 10 March 2000.

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which has extended its potential to influence or interfere (depending on your perspective!) in sectoral developments.78 Over recent years, the ITU’s position in the standards-​setting field has diminished in the face of regulatory ‘competition’ from regional organizations,79 industry bodies,80 and, most significantly, de facto standards organizations such as the Internet Engineering Task Force (IETF) which are able to develop standards much more rapidly that formal bodies such as the ITU. Recognizing such developments, the ITU instituted an ‘alternative approval process’ (AAP) in 2001,81 to fast-​track the adoption of certain standards; although the process is not available for recommendations that have ‘policy or regulatory’ implications.82 Standards adopted under the AAP have the same status as those approved under the traditional process.83 In the standards arena, the ITU has also examined ways to reposition itself: ITU-​T could become a facilitator for collaboration, convening meetings among different standards bodies and industry forums, in particular on interworking between the Internet and telecommunications networks, both fixed and mobile.84

As such its standards-​development role would be focused on those areas where it currently leads: optical transmission, voice services, numbering, signalling, and network management. However, the sentiment expressed in this quote implies that the ITU is entirely neutral in its role as facilitator, which has not always been the case. First, the technical standards it has adopted have generally been created by commercial entities, which are submitted to the ITU process for endorsement. As such, there can be fierce commercial rivalry, sometimes with a clear national champion dimension (eg Huawei and China), between competing proposals for such international recognition. In the case of the development of the 3G Universal Mobile Telephone Service, for example, the ITU ended up adopting a standard that encompassed competing standards.85 Second, work in other standards-​m aking bodies may lead to open dispute between the ITU and the other entity. A leading example concerns the standard for Multiprotocol Label Switching (MPLS), a transport management protocol,

  ie ITU-​T D-​Series Recommendations: ‘General Tariff Principles’. See further Section 16.3.5.   eg the European Telecommunications Standards Institute (ETSI): . 80   eg the GSM Association:  comprises nearly 800 mobile operators. 81   Recommendation ITU-​T A.8 ‘Alternative approval process for new and revised ITU-​T recommendations’ (10/​2008)  . 82   Ibid, at 1.1. See the Convention, Art 20.5bis 4, for guidance as to what may have policy or regulatory implications. 83 84   Ibid, at 1.2.   RAP n 77, at 3. 85   See Ryan, P, ‘The ITU and the Internet’s Titanic Moment’, (2012) Stan Tech L Rev 8. 78

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which resulted in the IETF and the ITU adopting different incompatible standards.86

16.3.2 Radiocommunications The development of radiocommunications at the beginning of the twentieth century also gave rise to the need for international cooperation to avoid harmful interference. The International Radiotelegraph Union, established in 1906, adopted operating principles that have continued to form the basis of the ITU’s regulation of radiocommunications: Member States were required to notify each other of any new service utilizing the radio spectrum and were obliged to ensure that such services did not interfere with other uses of the frequency.87 The Radiocommunications Sector of the ITU, primarily operating through the Radio Regulations Board, exercises a regulatory function in respect of the use of two scarce international resources, radio-​frequency spectrum and orbital slots, both of which require management in order to maximize utilization, as well as prevent interference between services and space objects.88 The ITU is responsible for the ‘allocation’ of bands of radio-​f requency spectrum to particular services (eg broadcasting) and the ‘allotment’ of a given frequency or channel to a Member State administration or geographic region. The Member State administration then grants an ‘assignment’ of a frequency or channel to a specific operator, which is then registered in the ‘Master International Frequency Register’ (the ‘Master Register’). The ITU records all satellite filings, both geostationary and non-​geostationary, as well as the earth stations that communicate with those systems.89 Such procedures are designed ‘to eliminate harmful interference . . . and to improve use made of the radio-​frequency spectrum’.90 The overriding objective of the ITU regulatory regime is the efficient use of the spectrum, while ensuring that public safety and emergency communication services, the only other policy concerns directly addressed in the Radio Regulations, are not adversely affected: 86  See Bennett, R, ‘The gathering storm:  WCIT and the global regulation of the Internet’, Information Technology & Innovation Foundation, November 2012. 87   See Allison, A, ‘Meeting the Challenges of Change: The reform of the International Telecommunications Union’, (1993) 45(3) Federal Communications Law Journal 498. 88   Constitution, Art 1(2)(a), (b); Chapter II (Arts 12–​16) and Convention, Section 5 (Arts 7–​12). The ITU’s procedures cover both geostationary and non-​geostationary satellite systems. 89   See the ITU ‘Space Network Systems Online’, at . 90   Harmful interference is defined as ‘Interference which endangers the functioning of a radionavigation service or of other safety services or seriously degrades, obstructs or repeatedly interrupts a radiocommunication service operating in accordance with the Radio Regulations.’ Constitution, para 1003. See also the Radio Regulations, Section 16.3.4.2, at Art 1(1.169). ‘Harmful interference’ is distinguished from ‘permissible interference’ (ie interference which falls within certain parameters) and ‘accepted interference’ (ie interference greater than certain parameters, but accepted by two or more administrations).

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Any emission capable of causing harmful interference to distress, alarm, urgency or safety communications on the international distress and emergency frequencies established for these purposes by these Regulations is prohibited. Supplementary distress frequencies available on less than a worldwide basis should be afforded adequate protection.91

The ITU regime should not, therefore, be viewed as a comprehensive governing framework for the provision of radiocommunication services, since national and regional policies and laws on radiocommunications will generally encompass a much broader remit of issues, including environmental concerns. The ITU and Member States have the difficult task of reconciling, on the one hand, that these limited natural resources be used ‘rationally, efficiently and economically’ with, on the other hand, being expected to bear in mind that countries should have ‘equitable access to [the resources], taking into account the special needs of the developing countries and the geographical position of particular countries’.92 The latter phrase provision was introduced to reflect the interests of developing countries who were concerned to reserve a portion of the relevant resources until such time as they were in an economic position to exploit them. To address this tension, the ITU distinguishes between planned and non-​planned spectrum bands. The former are subject to a plan developed at ITU regional or world conferences, against which administrations then submit their requirements and the spectrum is shared out; while spectrum in the unplanned bands is distributed on a first-​come-​fi rst-​served basis. The planned bands enable equitable access, but at the expense of rigidity and tied spectrum that is potentially unused; against the flexibility of non-​planned bands that can exclude ‘latecomers’.93 An additional dimension of this issue concerns the period for which any frequency and orbital assignment lasts, since a grant in perpetuity would seem akin to a sovereignty or title claim, the former of which is prohibited under the Outer Space Treaty (Article II). The RRs make clear that assignments are not perpetual and should be discontinued, by default, once the period of operation shown on the assignment notice expires, although an administration may extend the period or substitute another satellite.94 Despite these coordination procedures, one of the dominant issues of concern in the Radiocommunications Sector over the past two decades has been the problem of overfiling of requests for orbital slots with associated frequencies for

  Article 4, at 4.22. See further Section 16.3.4.   Article 44(2). Introduced in the 1973 ITU Convention. 93   ITU, ‘Overview of the Radio Regulations’, available at . 94   RRs (2016), Resolution 4 (REV.WRC-​03), ‘Period of validity of frequency assignments to space stations using the geostationary-​satellite and other satellite orbits’. 91

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satellite systems. In particular, Member State administrations have been accused of filing for ‘paper satellites’ that have little or no real prospect of becoming operational. The filing is designed to pre-​empt competing claims to what is perceived as an ever-​d iminishing resource in the face of multinational private satellite consortia, such as Globalstar and Iridium. The administration may then be expected to realize the value of the allocation by re-​selling or leasing the slot to the highest bidder at some later date. In the early 1990s, for example, Tonga applied to the ITU for 31 orbital slots and was awarded 6. Tonga then leased one of the slots to Columbia and auctioned off the remaining slots for US$2 million each.95 Such warehousing practices not only subject orbital slots to financial speculation and give rise to disputes,96 they substantially lengthen the procedure for genuine satellite systems to obtain the necessary allocations.97 To address the problem of overfiling, proposals were put forward at the World Radiocommunications Conference (WRC), in 1997, that administrations be required to provide specific evidence of the proposed satellite system, through administrative and financial ‘due diligence’ procedures. Under administrative due diligence, Member States are required to make regular submissions on the implementation of the system, including the contractual date of delivery, the number of satellites procured, and the proposed launch date.98 In the event that a system does not get brought into operation, the Radiocommunications Board can decide to cancel the recorded assignment in the Master Register.99 An example of the process operating effectively is R (ICO Satellite Limited) and the Office of Communications100, 101 where the satellite operator unsuccessfully challenged a decision of Ofcom to request that the ITU cancel the operator’s assignment after it failed to bring its system into operation within the regulatory period, ie nine years. An alternative administrative possibility is that satellites may be launched without ITU co-​ordination. Such a scenario occurred in July 2008, when the Protostar 1 satellite was launched from French Guiana without a valid slot allotment from the ITU. The launch was late and its orbital slot permission (ST-​1B-​ CK), granted under the Administration of Singapore, had lapsed. Protostar was

95   Jasentuliyana, N, International Space Law and the United Nations (Leiden: Martinus Nijhoff, 1999), at p 309–​310. 96   Indonesia placed one of its satellites in a slot registered with Tonga on the basis that the ‘assignment’ was ‘wrong in law’. Ibid, at 310. 97   See ITU Press Release, ‘Scrambling for Space in Space’ (Geneva, 16 September 2002), where it is stated that the backlog of satellites awaiting coordination stood at 1200, with between 400–​500 new requests each year. 98 99   Radio Regulations, Resolution 49, at Annex 2.   Radio Regulations, Article 13.6(b). 100   [2010] EWHC 2010 (Admin). 101   See also ECJ Case T-​4 41/​0 8, ICO Services Limited v European Parliament and Council, 21 May 2010, in which the ICO sought unsuccessfully to annul Decision 626/​2008/​EC on the selection and authorization of systems providing mobile satellite services (MSS).

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designed for DTH and broadband internet access services across the Asia-​Pacific region. It was eventually granted a slot in September 2008 through Belarus, under the Intersputnik umbrella. Protostar required an alternative ‘launch’ state sponsor, which was the Republic of Belarus, the notifying administration for Intersputnik. Intersputnik ensured that Protostar was compliant with ITU rules, following complaints of harmful interference by China and orbital concerns expressed by the United Arab Emirates.102 In April 2009, however, Intersputnik terminated its concession agreement based on continuing allegations of interference, which required Protostar to shut down its transponder operations and look for a new sponsoring administration, which it failed to do and so went in to administration.103 Intelsat has since purchased the satellite asset. The proposed financial constraints would have included an annual coordination and registration charge, as well as a refundable deposit. The financial due diligence proposals were, however, rejected over concerns that this would effectively represent a spectrum usage charge. Instead, it was agreed that the ITU would be able to recover its full costs for processing such applications.104 Such procedures have helped reduce the filing backlog; although ongoing wrangles are taking place between the ITU and satellite operators about the true costs involved and the resulting high fees. This has led to substantial non-​payment and arguments over the consequences, ie the cancellation of the filing, and who bears the liability for the outstanding invoice, either the operators or the Member States with whom the ITU has a formal legal relationship.105 In terms of the spectrum bands, the ITU is also the forum for Member States to debate the allocation or reallocation of newly or prospectively available spectrum. In November 2007, for example, at the ITU’s WRC, it was agreed that spectrum within the UHF band, which has traditionally been the exclusive preserve of broadcasters, would be opened up for use by mobile broadband services.106 Such spectrum is becoming available worldwide as a consequence of terrestrial television shifting from analogue to broadband signals, which use considerably less bandwidth; commonly referred to as the ‘digital dividend’.107 Such spectrum is highly sought after because of the quality of signal available and their propagation characteristics, which means the signals travel further and are more capable

102   See ITU Circular Telegram of 21 July 2008 (CTITU A38 11S(SSD)O-​2008-​0 02171) and of 8 October 2008 (CTITU A45 11S(SSD)O-​2008-​0 03054). 103   Bloomberg, ‘ProtoStar Ltd., Satellite Operator, Files Bankruptcy’, 29 July 2009. 104   See ITU Resolution 91 ‘on cost recovery for some products and services of ITU’ (Minneapolis, 1998). 105   Sung, L, ‘ITU’s Cost Recovery: The Satellite Factor’, Satellite Today, 1 September 2004. 106  ITU Press Release, WRC-​ 07, ‘ITU World Radiocommunications Conference concludes after four weeks: International treaty sets future course for wireless’, 16 November 2007. 107   See further Chapter 6 and Chapter 14.

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of penetrating buildings. The signal range means the cost of rolling out wireless broadband networks is considerably reduced, which is obviously beneficial for developing countries.108 Further spectrum allocations for international mobile communications were agreed at WRC-​12, in February 2012, and have been placed on the agenda for WRC-​15.109

16.3.3  Telecommunications development From 1947, membership of the ITU expanded rapidly among developing nations. As their numbers grew, so did their share of the votes and ability to influence the direction and activities of the ITU. At the Nairobi Plenipotentiary Conference in 1982, such increasing influence resulted in development issues becoming one of the basic purposes of the ITU: to promote and to offer technical assistance to developing countries in the field of telecommunications, and also to promote the mobilization of the material, human and financial resources needed for its implementation, as well as access to information. (Constitution, Article 1(1)(b))110

Therefore, since 1982, the ITU has given equal priority to telecommunications development with standards-​ setting and radiocommunications. The Telecommunication Development Sector operates through a Telecommunication Development Bureau, Telecommunication Development Conferences and associated Study Groups. In particular, the ITU has worked with other development agencies, such as the World Bank and the International Bank of Reconstruction and Development, to improve the flow of technology, funds, and expertise into developing countries. The Reform Advisory Panel has proposed that the ITU’s development focus should be expanded ‘from technical assistance towards helping developing countries establish pro-​market regulatory frameworks’,111 which reflects the influence of the WTO’s work in the telecommunications sector.

16.3.4  Legal instruments of the ITU As an international treaty, the Constitution and Convention of the ITU are legal instruments to which Member States are bound in respect of all telecommunications activities that ‘engage in international services or which are capable of

  Financial Times, ‘Radio spectrum freed for mobiles’, 19 November 2007.  ITU Press Release WRC-​ 12, ‘World Radiocommunication Conference sets future course’, 17 February 2012. 110 111   This provision was further amended in 1998.   RAP, n 77. 108

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causing harmful interference to radio services of other countries’ (Constitution, Article 6(1)). Whilst primarily detailing the rules governing the establishment and operation of the ITU, the Constitution also embodies certain fundamental legal principles governing international telecommunications in Chapter VI. Members give recognition to certain rights of users, ie the ‘right of the public to correspond by means of the international service’ (Article 33). Member States also have an obligation for ‘ensuring the secrecy of international correspondence’, although subject to the right to ensure compliance with national laws (Article 37). The majority of the principles represent reservations that Members have the right to exercise, such as in respect of the ‘stoppage of telecommunications’ for reasons of national security, public order, or decency (Article 34)  and the ‘suspension of services’ (Article 35). Member States are also protected from any liability arising from the use of international telecommunication services (Article 36). There are three unique features of the ITU Constitution and Convention, which differ from traditional public international law. Firstly, the private sector has a specified role in decision-​making activities of the ITU, as noted above. Secondly, to ensure legal certainty, Administrative Regulations have a fixed date for implementation and have immediate provisional application unless the revision is formally refused by a Member State (Constitution, Article 54, 3penter). In addition, a Member State is deemed to have consented to be bound by the revision to the Administrative Regulations, after a period of three years, if it fails to notify the Secretary-​General otherwise (Constitution, Article 54, 5bis). Thirdly, any reservations by a Member State have to be notified prior to the signing of the final acts of a plenipotentiary, since subsequent reservations are not possible. These provisions are designed to ensure legal certainty, which impacts directly on technical implementation issues. Complementing the Constitution and Convention are Administrative Regula­ tions, sub-​d ivided into: • International Telecommunications Regulations; and • Radio Regulations. The Administrative Regulations comprise the general principles to be observed in the provision of international telecommunication services and networks and the assignment and use of frequencies and orbital slots. Such Regulations ‘shall be binding on all Member States’ (Constitution, Articles 4(3), 54). At the time of accession to the Constitution and Convention,112 a Member State may make reservations in respect of any of the existing Administrative Regulations (Article 54(2)).

112

  ie 27 June 1994 in the case of the UK.

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Any subsequent partial or complete revision of the Administrative Regulations requires a Member State to indicate their consent to be bound, by depositing an instrument of ratification, acceptance, or approval or by notifying the Secretary-​ General (Article 54(3)bis); although a Member State will be provisionally bound from the entry into force of the revision, if the Member State has signed the revision (Article 54(3)penter). Under the Constitution, Member States are also required to: take the necessary steps to impose the observance of the provisions of this Constitution, the Convention and the Administrative Regulations upon operating agencies authorized by them to establish and operate telecommunications and which engage in international services or which operate stations capable of causing harmful interference to the radio services of other countries. (Article 6(2))

However, this blanket provision is qualified by the concept of a ‘Recognized Operating Agency’ (ROA): Any operating agency  .  .  .  which operates a public correspondence or broadcasting service and upon which the obligations provided for in Article 6 of this Constitution are imposed by the Member State in whose territory the head office of the agency is situated, or by the Member State which has authorized this operating agency to establish and operate a telecommunication service on its territory. (Constitution, Annex)

Historically, ROAs were generally the State-​owned incumbent operator. However, in liberalized markets, the categories of ROAs could potentially extend to any provider of international services, including resale services. In the UK, for example, some ten operators are categorized as ROAs.113 16.3.4.1  International Telecommunications Regulations (ITRs) Since the last edition of the book, the situation concerning the International Telecommunications Regulations has become complex and controversial. Currently, there are two versions of the ITRs in force, those adopted at Melbourne in 1988 (1988 ITRs) and the version adopted in Dubai in 2012 (2012 ITRs). The latter was signed by eighty-​n ine Member States and provisionally entered into force on 1 January 2015,114 while the former remains applicable to the fifty-​t hree non-​signatories.115 The 1988 ITRs comprise some ten substantive articles and

 .   Final Acts, at Art 14.1. By virtue of Art 54.5bis of the Constitution, signatories are deemed to have consented and become bound to the text if they do not notify the Secretary-​G eneral by 1 January 2018. 115  There were 144 member states in Dubai, of which three countries have acceded subsequent to the signing:  Antigua and Barbuda, Belarus, and Kenya (but only the latter two were signatories to the Melbourne ITRs). 113 114

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three appendices,116 while the 2012 ITRs comprise fourteen articles and two appendices.117 In the event of conflict, where a party to the 2012 ITRs deals with a non-​signatory member state subject to the 1988 ITRs, the latter should be the applicable regime.118 Since 1988, there were inevitable calls for the ITRs to be revised, reinterpreted, or abrogated, with, in the latter case, the provisions of continuing relevance being transferred into other ITU instruments, such as the Constitution. These calls for reform were driven, in part, by the considerable changes that have occurred in the telecommunications sector since 1988, but also by developing country concerns that the ITRs are too favourable towards richer nations and the dominant global players they represent. At the 1998 ITU Plenipotentiary, a resolution was adopted instructing the Secretary-​General to establish an Expert Group to advise on the future of the ITRs.119 No consensus on the way forward was reached by the following Plenipotentiary in 2002, or again by the 2006 Plenipotentiary, although the 2006 Resolution finally put a prospective end date on the negotiations, by resolving that the ITU convene a conference in 2012 to decide on recommendations to amend the ITRs: The World Conference on International Telecommunications (WCIT) held in Dubai, UAE, in December 2012. In the lead up to the WCIT, Member States submitted their proposals for reform of the ITRs, representing a broad spectrum of opinion, from no change to radical expansion.120 It was not possible to reconcile such divergent views at the WCIT so consensus could not be achieved and a vote was required—​a very rare occurrence within ITU decision-​making procedures. The reasons behind this failure are themselves contested, with accusations of a media campaign based on misinformation.121 It is beyond the scope of this section to engage in a detailed analysis of the changes that were made and the differing interpretations of their significance, although the 2012 amendments can be broadly sub-​d ivided into updates to existing provisions to reflect the changing environment, and the insertion of new provisions. In addition, the Final Acts included five non-​binding Resolutions.

116   Available at . They entered into force on 1 July 1990. 117   Available at . 118   See . 119   Resolution 79 (Minneapolis, 1998): ‘International Telecommunication Regulations’. 120   See ITU CWG-​WCIT12/​T D-​43, ‘Draft compilation of options’, 24 November 2011. See also Bennett, R, ‘The Gathering Storm:  WCIT and the Global Regulation of the Internet’, ITIF, November 2012, at . 121   Hill, R, ‘WCIT:  Failure or Success, Impasse or Way Forward’, (2013) International Journal of Law and Information Technology 1–​16, 3.

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Criticisms primarily revolve around concerns that the ITRs may disturb current governance arrangements for the internet, facilitating greater (repressive) governmental input, and the threat that rules designed to regulate the provision of telecommunication services may be used to control content sent over such services. In terms of the latter, a sentence was specifically inserted into the scope of the 2012 ITRs expressly stating that they ‘do not address the content-​related aspects of telecommunications’ (Article 1.1(a)). Despite this, however, two new provisions addressing network security (Article 6) and controlling ‘unsolicited bulk electronic communications’ (Article 7) have been viewed as granting Member States a right to monitor traffic content for the purpose of ensuring compliance.122 One provision that has been of particular importance since 1988 has concerned ‘Special Arrangements’, which grants administrations the flexibility to enter into ‘special arrangements’ for the provision of international telecommunications networks and services, either on the basis that they ‘do not concern Members in general’ or based on ‘special mutual arrangements’ with other Members (1988 ITRs, Article 9, and retained in almost identical terms in the 2012 ITRs, at Article 13). Based on Article 42 of the ITU Constitution, this provision has been used by Member States to tailor national and regional laws to reflect the evolving policy of a liberalized market, such as the application of interconnection regulations to intra-​EU traffic, without reference to the other substantive provisions of the 1988 ITRs. The provision has also given ROAs considerable freedom to enter into private agreements that have effectively established an alternative regulatory environment, which has been particularly relevant to the explosive growth of the internet. While the majority of the text in the 1998 and 2012 versions of the ITRs address similar subject matter, the controversial additions (said to be contained in six of the seventy-​seven paragraphs of the main text123) meant that the ITRs, which had become increasingly irrelevant over the years, are now a symbolic illustration of a lack of consensus and lines of tension within the international community in the age of the internet. 16.3.4.2  Radio Regulations (‘RRs’) The RRs contrast sharply with the ITRs as an instrument of public international law. First, in terms of size and complexity, the RRs are extensive, contained in four volumes; comprising some fifty-​n ine articles, twenty-​five appendices, and numerous resolutions and recommendations. Second, although they contain no enforcement or dispute resolution mechanisms, compliance remains high primarily

122   eg Internet Society submission to the WCIT, October 2012. 123   Hill, n 121.

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due to the ‘law of physics’,124 since non-​compliance can result in harmful interference for all relevant parties. The current edition of the RRs was published in 2016.125 The RRs distinguish between three distinct acts in relation to frequency: ‘allocation’, ‘allotment’, and ‘assignment’ (RRs, Article 1, 1.16–​1.18). ‘Allocation’ consists of an entry in the ‘Table of Frequency Allocations’ for use in respect of one or more terrestrial or space radiocommunication service. Such services may be categorized as ‘primary’ or ‘secondary’ services, on a regional or global basis; with the latter being required to comply with the interference rules laid down for the former, as well as being unable to claim protection from interference from the former. ‘Allotment’ indicates the use of a designated frequency by administrations for a service in certain countries or geographical areas and under specified conditions. The ‘assignment’ of frequencies is carried out by Member States, under their sovereign authority, through an authorization or licensing procedure, such as under the UK’s Wireless Telegraphy Act 2006.126 Such assignment is then notified to the ITU for recording in the Master Register.127 When granting an assignment, Member States are free to derogate from the ITU allocation, but only to the extent that it does not cause harmful interference to others operating in accordance with the RRs (Article 4.4). To ensure compliance with the RRs, particularly the elimination of harmful interference, an international monitoring system has been established (RRs, Article 16). The scheme comprises the operation of a network of monitoring stations, operated by Member States, either alone or in conjunction with others, and international organizations, such as the ISOs. The system is voluntary in nature. 16.3.4.3  Recommendations, resolutions, and decisions In addition to the binding legal instruments, the various bodies of the ITU adopt recommendations, resolutions, and decisions. Whilst the Administrative Regulations comprise the general principles to be complied with, the manner in which they are to be implemented are detailed in ITU-​T and ITU-​R Recommendations, which represent the bulk of ITU rule-​making.128 Such recommendations do not have ‘the same legal status as the Regulations’ (ITR 88, Article 1.4), although ‘administrations’ ‘should comply with, to the greatest extent practicable, the relevant’ recommendations (Article 1.6).129 Draft recommendations are prepared within

  Lyall, F and Larsen, P, Space Law: A Treatise (Ashgate, 2009), at 230.   Available free of charge at . 126   See further Chapter 7. 127   eg Ofcom, Procedures for the Management of Satellite Filings, 27 March 2007. 128   eg over 2600 ITU-​T Recommendations are currently in force. 129   However, see also the opinion of the Advocate-​G eneral in Italy v Commission [1985] 2 CMLR 368, 373. 124 125

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the various sectoral ‘Study Groups’ and enter into force either through approval at the relevant assemblies or conferences, or through direct correspondence with Member State administrations (Convention, Articles 11(2), 14(1)). In the event of a dispute regarding the interpretation of any of the legal instruments, Constitution Convention or Administrative Regulations, settlement should either be achieved through mutually agreed bilateral or multilateral arrangements or, if not settled by such means, via an arbitration procedure (Constitution, Article 56). The decision of the arbitrator(s) shall be ‘final and binding upon the parties to the dispute’ (Convention, Article 41), although no enforcement mechanism is available in the event of non-​compliance. A compulsory arbitration procedure is also provided for under an Optional Protocol to the Convention, between Members that are party to the Protocol.130

16.3.5  International accounting rates As discussed above, the origins of the ITU in the International Telegraph Convention was the need to extend the operation of telecommunication networks beyond national borders. As well as the need for common standards for the transmission of messages between different networks, such international traffic also raised the issue of payments to be made between national operators for the carriage of each other’s traffic. The historic regime established for the making of such payments is known as the ‘International Accounting Rate system’ and the principles of its operation are contained in the ITU’s 1988 ITRs, at Article 6, and the 2012 ITRs, at Article 8. The International Accounting Rate system comprises a series of related rates that are intended to provide for an equitable payment to the terminating operator for the termination of an international call and, where relevant, to any transit operators that have handled the call.131 The ‘collection charge’ (ITRs, Article 2.9) is the retail price levied on the originating customer by the originating operator. The ‘accounting rate’ is essentially a wholesale rate representing the agreed cost of transmitting each unit of traffic between the networks (ITRs, Article 2.8).132 The ‘settlement rate’ is the payment made by the originating operator to the terminating operator and was traditionally 50 per cent of the accounting rate. Obviously, such payments are made on a net settlement basis between operators, since traffic generally flows in both directions and therefore it is the operator that

  Constitution, Art 56(3). The UK has ratified the Optional Protocol, 27 June 1994.   Either direct transit or switched transit. 132  Usually expressed in terms of Special Drawing Rights (SDR), under the International Monetary Fund: Convention, Art 38; 1988 ITRs, at Art 6.3.1 and 2012 ITRs, at Art 8.2.4. 130 131

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originates the most traffic that is required to make the periodic payments to the terminating operator. Although the system is embodied in the International Telecommunications Regulations and has been elaborated as a series of recommendations from the ITU, the system operates through a series of bilateral agreements between telecommunication operators in each jurisdiction. Historically, such agreements would be between public administrations in each country, ie the state incumbent, which meant the agreements could be considered State measures subject to consideration under public international law, such as the General Agreement on Trade in Services.133 With liberalization, the overwhelming majority of agreements are now negotiated privately between commercial entities, effectively taking them outside the international accounting rate system.134 Whilst the essential elements of the international accounting rate system have remained the same over many years, the system was in fact designed to operate under certain conditions, which are no longer present in most telecommunications markets: • • • •

jurisdictional symmetry with respect to both charges and traffic flows;135 collection charges higher than the accounting rate; relatively constant inflation and exchange rates; and monopoly operators in each jurisdiction providing the international service.

As these conditions either disappeared or altered significantly, the international accounting rate system gave rise to substantial payment flows between operators, representing invisible trade imbalances between countries. In 1996, for example, US operators were obliged to pay around US$6 billion to operators in other jurisdictions, of which it was estimated that 70 per cent constituted ‘an above-​cost subsidy from US consumers to foreign carriers’.136 Indeed, the co-​existence of liberalized telecommunications markets with traditional monopolistic environments can actually reward the latter at the expense of the former. A practice known as ‘whipsawing’ developed, where monopolistic operators in one country were able to negotiate with competing operators in other countries to achieve substantially lower accounting rates for the termination of traffic originating in the monopoly country. Alternatively, the monopoly operator could lease their own circuit in the liberalized terminating regime, therefore 134   See further Section 16.4.1.   This is expressly referenced in the 2012 ITRs, at Art 8.2.1.   The 1988 ITRS state that ‘administrations’ should try to avoid too great a dissymmetry between the charges applicable in each direction of the same relation’ (Art 6.1.1); which is reiterated in 2012 ITRs, at Art 8.2.5. 136   Federal Communications Commission, In the matter of International Settlement Rates, Report and Order, IB Docket No 96–​261, 7 August 1997 (‘Benchmark Order’): para 13. 133 135

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bypassing the accounting regime for outbound transmissions (commonly referred to as ‘one-​way bypass’). Payment imbalances were exacerbated by the fact that, historically, accounting rates were not been based on actual cost, but were often priced at a premium. As a consequence, for countries like the US, the accounting rate system came to be seen as unacceptable and positively disadvantageous to competitive markets. However, countries which are net creditors under the accounting rate system, often although not exclusively developing countries, often view the system as constituting an important source of foreign ‘hard currency’ revenue for investment into the domestic market, either in the form of network rollout or through subsidizing the cost of access (eg line rental). In effect such revenues have been seen as contributing to a universal service policy, at a global level as well as for individual countries.137 Indeed, the ITU specifically recommends that accounting rate apportionment in favour of a developing country should be used for telecommunications improvements.138 The ITU’s Secretary General has noted that developing countries received more revenue from the accounting rate system than they received from development banks, such as the World Bank, for telecommunications programmes during the first half of the 1990s.139 Over recent decades, there has been significant pressure for the international accounting rate system to be reformed140 to reduce trade deficits, as well as benefiting end-​users through a reduction in the cost of international telecommunications. In addition, market liberalization and technological developments have resulted in a proliferation of alternative calling procedures designed, either directly or indirectly, to avoid the normal operation of the international accounting regime. Such procedures can be broadly distinguished into two categories: • ‘re-​origination’ techniques, which take advantage of asymmetric rates on particular routes to minimize the cost of the accounting rates, eg call-​back,141 country-​d irect, calling cards, refile;142

137  See Tyler, M, Transforming economic relationships in international telecommunications, Chapter  8, Briefing Report for ITU Regulatory Colloquium No 7 (1997). Also, Stanley, K, ‘International settlements in a changing global telecom market’, in Telecom Reform Melody (ed) Technical University of Denmark, 1997. 138  Resolution 22:  ‘Apportionment of revenues in providing international telecommunication services’ (Kyoto, 1994). 139   Tarjanne, P, ‘Reforming the International Accounting Rate System’, (1998) 2 ITU News. 140  See ITU Report of the Informal Expert Group on International Telecommunications Settlements, March 1997. 141   Various forms of ‘call-​back’ exist but it essentially involves a reversal in the direction of the call, eg a call from a country with high originating international tariffs is manipulated to appear to come from the terminating country which has low originating international tariffs, using features of call signalling systems. 142   ’Refile’ involves routing a communication from country A to country B via a third country, C, where the sum of the tariff rates for calls between A–​C and C–​B are less than A–​B.

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• ‘by-​ pass’ techniques, which completely circumvent the international accounting regime, eg international simple resale services, VSATs,143 internet telephony. These practices inevitably lead to a reduction in revenues for any monopoly provider of international telecommunication services and, in some cases, are considered infringements of national law.144 The ITU is in an uneasy position in respect of such activities and has called upon Member States to take appropriate action against operators in their jurisdiction who are breaching the laws and regulations of other Member States.145 Reform of the accounting rate system has taken two main approaches. First, lowering accounting rates towards the actual cost of terminating international calls. Cost-​based tariffing reflects the regulatory position in liberalized markets, as well as existing obligations under the 1988 ITRs, where Member States are required to revise accounting rates ‘taking into account relevant [ITU-​T] Recommendations and relevant cost trends’ (Article 6.2.1).146 The current governing recommendation outlines a cost-​oriented approach, as well as containing indicative target rates and specified deadlines for each country.147 A second approach is through the adoption of alternative rate systems that reflect the different conditions present in many markets. Five alternative models have been suggested:148 • call termination charges, where a single rate is charged to terminate into a country from any other country; • facilities-​based interconnection charge, as required under European Union law149 and generally in operation for mobile roaming; • ‘sender keeps all’ or ‘bill and keep’, where no payments are made between national operators, based on a presumption of near equality in traffic flows, such as ‘peering’ arrangements;150 • international private leased circuits, where the charge reflects the cost of leasing such capacity; • volume-​based payments, fixed per traffic unit carried, as currently used in internet-​based transit arrangements.

  Very Small Aperture Terminals, used for satellite-​based telecommunications direct to home.   See ITU Resolution 21 of the Plenipotentiary Conference, Kyoto, 1994:  ‘Special Measures concerning Alternative Calling Procedures on International Telecommunication Networks’ (revised at the Minneapolis Plenipotentiary, 1998), noted that 86 Member States prohibit ‘call-​back’ (as of October 1998). 145 146   Resolution 21, n 144.   Similarly under the 2012 ITRs, at Art 8.2.2. 147   ITU Recommendation D.140, 6th edn, ‘Accounting rate principles for the international telephone service’ (06/​2002). 148   ITU-​T Recommendation D.150, ‘New system for accounting in international telephony’ (06/​99). 149 150   See further Chapter 8.  Ibid. 143

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Reform of the system has also been driven, in part, by decisions made by national regulatory authorities. In particular, the Federal Communications Commission (FCC) created considerable consternation in certain countries when it issued its International Settlement Rates ‘Benchmark’ Order in 1997.151 The FCC recognized that the WTO ‘basic agreement’ had the potential to sharply worsen the US’s balance of payments deficit on international services, since incumbent operators in non-​l iberalized markets would be free to establish US-​based operations subsidized from their monopolistic international revenues. With the slow pace of reform within the ITU, the FCC decided to take unilateral steps to drive the pace of change towards cost-​based settlement rates. The Benchmark Order laid down benchmark ‘settlement rates that carriers subject to our [FCC] jurisdiction may pay for termination of US-​originated traffic’ (paragraph 312). Countries were categorized into three tiers, representing different stages of economic development. The rates were to be implemented over a transition period, over one to four years, and operators were able to appeal against a rate determination (paragraph 74). The regime came into effect on 1 January 1998 and the first targets were to be achieved by 1 January 1999. All US-​licensed carriers were subject to the order, while for foreign-​a ffiliated operators compliance was a condition of obtaining approval for the provision of long-​d istance services to the home jurisdiction (paragraph 207). The Benchmark Order generated opposition in certain countries, especially in the Caribbean region, over the potential impact the order would have on domestic operator revenues. The European Commission and Japan also raised concerns about the compatibility of the Benchmark Order with the US’s commitments under the General Agreement on Trade in Services, specifically the principle of ‘most-​ favoured-​nation’.152 In 1998, Cable & Wireless brought an action before the US courts challenging the legality of the Benchmark Order. Over 100 other petitioners and intervenors, comprising national governments, regulators, and operators, soon joined the case on both sides. The main thrust of the complaint was that the FCC had exceeded its authority through the extraterritorial nature of the Order’s provisions.153 The court found overwhelmingly in favour of the FCC, holding that it had the requisite powers to make decisions regulating the actions of US-​l icensed operators, including the contractual arrangements entered into for international settlement rates:154 the Commission does not exceed its authority simply because a regulatory action has extraterritorial consequences. Objections to the FCC’s methodology were dismissed on the grounds that the FCC had acted reasonably, whilst

  Benchmark Order, n 136. It was reformed in 2004 (FCC 04-​53) and 2012 (FCC 12-​145).   Ibid, at para 109. See also Section 16.4. 153   Cable & Wireless et al v FCC, No 97–​1612, DC Cir, 12 January 1999. 154   See 47 USC §205(a), 211(a). 151

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the petitioners were criticized for withholding actual cost data which could have been used as well as failing to propose alternative methodologies. During the course of the proceedings, the Australian operator Telstra entered a petition against the Benchmark Order on the grounds that it did not address the issue of international internet connections. Telstra complained that the Order was based on a circuit-​switched environment, where traditionally each correspondent operator is responsible for the provision of half of the international circuit. Telstra argued, however, that in an internet environment non-​US operators were effectively forced to purchase a full-​circuit in order to connect to the internet exchange points based primarily in the US.155 As a consequence, US carriers were obtaining significant financial benefits from the current arrangements for international internet connections. The court denied Telstra’s petition as constituting insufficient grounds for overturning the FCC Order, but the issue was subsequently pursued through the ITU. In April 2000, ITU-​T Study Group  3 approved a draft Recommendation on ‘International Internet Connection’ proposed by Australia. It was presented to the World Telecommunication Standardization Assembly (WTSA) for adoption in October 2000, but generated considerable opposition from the US and Europe over concerns that the asymmetric nature of Web traffic flows would generate new payment imbalances and outflows. An amended version was eventually adopted at WTSA, which recommended: the possible need for compensation between them for the value of elements such as traffic flow, number of routes, geographical coverage and cost of international transmission  . . .  (Recommendation D.50 (10/​00) International Internet Connection)156

This represented a shift from the mandatory wording of the draft, ie ‘will be compensated’, to the possibility of compensation; although the US and Greece still submitted reservations and stated that the Recommendation would not be applied in their jurisdictions. The international accounting rate system is gradually disappearing in its current form to be replaced by a multitude of different arrangements reflecting the state of liberalization in Member States, technological developments, and the commercial positions of the respective parties. In the US, for example, by 2008 only around 6 per cent of international traffic billed in the US was settled in accordance with the accounting rate regime detailed in the ITRs, compared to 86 per cent in 1998.157 Political pressure to accelerate such change has shifted somewhat

156   See further Chapter 8, at Section 8.7.1.2.   The latest version, 3rd edition, is dated April 2011.   Quoted in FCC Public Notice, IB Docket No. 10-​67, 16 March 2010.

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in recent years from the ITU to the WTO. A moratorium was agreed between certain Member States not to pursue a legal action before the WTO on accounting rates,158 although that has not prevented accounting rate-​related issues being argued before the Dispute Settlement Body.159

16.3.6  ITU as a regulatory institution The status and future of the ITU in the international regulatory framework for telecommunications tends to divide opinions sharply. On the one hand, as a forum for managing orbital slots and spectrum, and as a resource for assisting developing countries, it continues to play an important role. However, as an initiator or facilitator of market developments, it is increasingly irrelevant, especially in the age of the internet. As a bureaucratic institution it has struggled to adapt to the rapidly changing environment in which it operates, coupled with a substantial reduction in its funding from some Member States, such as the US, while also trying to retain and bolster its status through attempts to extend its remit. The debates over internet governance have been one arena in which the ITU has campaigned hard to claim a role. In 2003, at the World Summit on the Information Society (WSIS), the ITU was given responsibility to facilitate an action line on ‘Building confidence and security in the use of ICTs’,160 upon which it has duly established a ‘Global Cybersecurity Agenda’.161 However, as evident from the WCIT process, the issue of cybersecurity can be fraught, with one nation’s cybersecurity measures being seen as another’s manifestation of a repressive regime.

16 .4  WOR L D TR A DE ORG A NIZ ATION The WTO was established in 1994 as part of the final act embodying the results of the ‘Uruguay Round’ of multilateral trade negotiations.162 The function of the World Trade Organization is to facilitate the implementation, administration, and operation of certain multilateral trade agreements (Article III(1)). One unique feature of the WTO is the establishment of a dispute settlement body to enforce the

  See WTO Report of the Group on Basic Telecommunications (S/​GBT/​4), 15 February 1997.   See the Telmex case discussed at Section 16.4.5.1. 160   See, Annex to ITU (2005), World Summit on the Information Society Outcome Documents: Geneva 2003–​ Tunis 2005, December 2005, Geneva. 161   ITU, ‘ITU Global Cybersecurity Agenda:  Framework for International Cooperation in Cybersecurity’,  2007. 162  See the Agreement, Establishing the World Trade Organization with Understanding on Rules and Procedures Governing the Settlement of Disputes and Trade Policy Review Mechanism (Marrakesh, 15 April 1994; TS 57 (1996) Cm 3277; 33 ILM (1994); OJ L 336/​1, 23 December 1994). The Treaties entered into force on 1 January 1995. 158 159

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obligations accepted by member states within the context of the agreements.163 The existence of an enforcement mechanism has been a key factor in pushing the WTO to the forefront of intergovernmental organizations. For the telecommunications industry, the accelerating process of market liberalization coincided with the Uruguay Round, which commenced in 1986. A key feature of the Uruguay Round was that for the first time trade in services was included within the scope of the multilateral negotiations. With the increasing importance of trade in services, particularly for developed nations, telecommunications was recognized as a critical element both as a facilitator of trade in services, as well as an increasingly tradable service in its own right. Such recognition ensured that telecommunications issues moved towards the top of the agenda for countries such as the US and the UK. At the conclusion of the Uruguay Round at Marrakesh in 1994, a series of trade agreements were adopted, of which only some are of direct relevance to the telecommunications sector. The General Agreement on Tariffs and Trade (GATT)164 is concerned with trade in goods and, as such, impacts on trade in telecommunications equipment. In 1996, twenty-​n ine developed nation members adopted an agreement under GATT on ‘Information Technology Products’ (ITA), which eliminates customs duties on all specified products, including many forms of telecommunications equipment.165 The concessions appear in members’ schedules of commitment, thereby subject to the Most-​Favoured Nation (MFN) non-​ discrimination principle, which benefits all WTO members, not just signatories to the ITA. The scope of the ITA has subsequently expanded to include eighty-​ two members, while the list of covered products was extended by 201 products in December 2015, and committed to by fifty-​four of the members.166 In respect to telecommunications equipment, there is an ongoing issue between India and the EU, Japan and the US over whether certain products, such as VoIP equipment, is within the scope of the ITA and therefore should not be subject to a 10 per cent duty.167 The Agreement on Trade-​Related Aspects of Intellectual Property (TRIPS)168 is also of obvious importance to an industry so heavily dependent on its investments in research and development. Other agreements that can and have impacted

164   See Section 16.4.5.   TS 56 (1996) Cm 3282; 33 ILM 28 (1994).   Ministerial Declaration on Trade in Information Technology Products (Singapore, 13 December 1996), at . 166   Ministerial Declaration on the expansion of trade in information technology products (WT/​M IN/​(15)/​ 25), Nairobi, 16 December 2015. 167   Questions from the European Union, Japan and the United States to India regarding Indian Customs Notification No 11/​2014 (G/​I T/​W/​42), 4 April 2016. 168   TS 10 (1996) Cm 3046; 33 ILM 81 (1994). 163 165

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on the telecommunications sector include the Agreement on Subsidies and the Agreement on Government Procurement.169 However, this section will examine the General Agreement on Trade in Services (GATS)170 as the primary WTO-​ agreement establishing a framework for international telecommunications law.

16.4.1  General Agreement on Trade in Services In terms of the scope of GATS, a ‘Services Sectoral Classification List’171 places ‘Communications Services’ as the second category, which is then sub-​divided into five sub-​ sectors:  postal services, courier services, telecommunication services, audio-​visual services, and other. Category C, ‘Telecommunication services’, is then further sub-​divided into fifteen further sub-​categories, including ‘packet-​switched data transmission services’ and ‘electronic data interchange (EDI)’. However, those fifteen services are further distinguished into ‘basic’ and ‘value-​added’ services; the latter comprising: all telecommunication services, both public and private that involve end-​to-​end transmission of customer supplier information for which suppliers ‘add value’ to the customer’s information by enhancing its form or content or by providing for its storage and retrieval.172

Such a binary distinction and the accompanying definitions seems distinctly archaic given the nature of modern communications technologies, although they have not seemingly created problems of interpretation within the WTO system. Telecommunication services can also be distinguished into a number of categories on the basis of geographical scope (ie local, long-​d istance, and international); mode of transmission (ie wire and wireless or radio-​based); the use and ownership of infrastructure (ie facilities-​based or resale); and to whom the services are provided (ie public or non-​public).173 Some 108 Member States have made commitments to liberalize trade in telecommunication services. The GATS is concerned with four modes of supplying services: 1. from one territory to another, ie cross-​border supplies;174 2. the provision to foreign consumers in the service provider’s territory, ie consumption abroad; 3. the establishment of a commercial presence in another State; and 4. through the presence of a natural person in another State.175 169   The Agreement on Government Procurement is a plurilateral agreement under the WTO system, therefore only involving some members; currently 47. 170 171   TS 58 (1996) Cm 3276; 33 ILM 44 (1994).   MTN.GNS/​W/​120, 10 July 1991. 172  . 173 174  Ibid.   This concept was examined in the Telmex case at para 7.25 et seq. 175   GATS, Art I(2).

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In terms of the telecommunications sector, modes (1) and (3) are most relevant in terms of business practice. The GATS contains an annex on telecommunications and, subsequently, a protocol establishing commitments in basic telecommunications. Taken together, these agreements have required Member signatories to substantially open up their telecommunication markets to international competition. The GATS comprises a number of fundamental ‘General Obligations and Disciplines’ to which all Members are required to comply from the moment the agreement entered into force (Part II). These general obligations are then supplemented by specific commitments accepted by a Member in a Schedule of commitments appended to the GATS (Part III and IV). Each Schedule specifies: (a) terms, limitations and conditions on market access; (b) conditions and qualifications on national treatment; (c) undertakings relating to additional commitments; (d) where appropriate the time frame for implementation of such commitments; and (e) the date of entry into force of such commitments. (Article XX) These Schedules represent a baseline or codification of conditions in a specific national market upon which a foreign service provider can rely. In addition, they constitute the starting-​point for future negotiations to further liberalize the sector. A commitment may only be modified or withdrawn by a Member after three years from the date it entered into force (Article XXI). The GATS contains two non-​d iscrimination standards, MFN and National Treatment. The former is best known and is a general obligation applicable across all measures adopted under the GATS, while the latter is a specific commitment made in respect of specific sectors. The MFN obligation states: . . .  each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than that it accords to like service and service suppliers of any other country. (Article II(1))

However, a Member may specify that this principle shall not be applicable to certain measures listed in an Annex on Article II Exemptions.176 Such MFN exemptions are subject to review after a five-​year period and should not exceed a period of ten years.177 There has been some debate whether the MFN principle should operate in respect of the international accounting rate regime (see Section 16.3.5), since in non-​ competitive markets the amount an incumbent operator charges for   GATS, Art II(2).   

176

  GATS, Annex on Art II Exemptions, paras 5–​7.

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the termination of international calls will vary significantly between different originating jurisdictions. Member States have an obligation to ensure that any ‘monopoly supplier of a service’ does not act in a manner inconsistent with either the MFN principle or any of the specific commitments made by the Member (Article VIII(1)). However, settlement rates are the subject of bilateral contractual agreements between operators, therefore, it is questionable whether such agreements fall within the jurisdiction of the GATS. The MFN principle would seem to be applicable only if accounting rate agreements were considered to be a ‘measure by Members’, ie taken by governments and authorities or by ‘non-​governmental bodies in the exercise of powers delegated by central, regional or local government or authorities’ (Article I(3)(a)). Where an operator falls into the latter definition, it may then be unclear whether a bilateral agreement constitutes the exercise of a delegated power, even if in compliance with an ITU recommendation to which the Member State administration has accepted. In contrast to the GATT, the principle of ‘national treatment’ constitutes a specific commitment applicable to particular service sectors and detailed in a Members’ Schedule to the GATS: . . . each Member shall accord to services and service suppliers of any other Member, in respect of all measures affecting the supply of service, treatment no less favourable than that it accords to its own like services and service suppliers. (Article XVII)178

Article VI of the GATS addresses ‘domestic regulation’. It requires Members to ensure that any authorization procedures are handled ‘within a reasonable period of time’ (Article VI(3)) and are capable of ‘objective and impartial review’ by a judicial or administrative body (Article VI(2)). Such commitments are obviously applicable to licensing procedures for the provision of telecommunication services. In addition, there is an ongoing commitment to develop disciplines to ensure that ‘qualification requirements and procedures, technical standards and licensing requirements do not constitute unnecessary barriers to trade’ (Article VI(4)). Competition law issues are addressed under Part II, ‘General Obligations and Disciplines’, in Articles VIII ‘Monopolies and Exclusive Service Suppliers’ and IX ‘Business Practices’. Such rules may be used to prevent an abuse of dominant position or restrictive trade practices. These provisions can be seen as being of potential value to telecommunication operators trying to provide services into countries whose legal systems have historically had no legal rules addressing general competition issues.179

  See GATT (1947), Art III, ‘National Treatment on Internal Taxation and Regulation’.   eg Asian countries.

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The other key specific commitment under the GATS concerns ‘market access’ (Article XVI), under which Members detail those service sectors into which service suppliers from other Members may enter. The GATS permits members to derogate from these obligations, particularly the non-​d iscrimination provisions, on certain grounds, provided they are ‘necessary’ and are not applied in a manner that would constitute an arbitrary or unjustifiable discrimination or disguised restriction (Article XIV). The grounds include the protection of public morals and public order, which could be used to justify the imposition of network blocking, as well as the protection of personal data, which could be relevant to data localization requirements or restrictions on transborder data flows.180 As an instrument of public international law, the obligations and disciplines contained within the GATS are strong, substantial, and impactful. However, they are only triggered in respect of those service sectors that members choose to commit to in their schedules, which remain relatively shallow, except in a few key areas, such as telecommunications.

16.4.2  Telecommunications Annex At the time of the GATS, Members also adopted a supplementary Annex on Telecommunications. Its objective was to clarify the position of Members ‘with respect to measures affecting access to and use of public telecommunications transport networks and services’ (paragraph 1). The Annex is concerned with the supply of any service over such public networks and services, including the basic telecommunication services of another Member State,181 rather than any right to provide the networks and services. These obligations are incurred, therefore, whether or not the Member has liberalized the provision of basic networks and services. The Annex imposes obligations of transparency of conditions of access and use, including tariffs, terms and conditions, and specifications of technical interfaces with the public networks and services (paragraph 4). The first draft of the Annex stated that access and use should be on cost-​orientated terms, but this was removed in the face of opposition.182 Access should be ‘non-​d iscriminatory’, a term which embraces both the MFN and national treatment principles. Service providers should be permitted to attach terminal equipment to the public network; interconnect private circuits and utilize any operating protocols that do not

181   See further Chapter 13.  See Telmex (WT/​DS/​204/​R) at paras 7.274–​7.288.   Stated in Zutshi, B, ‘GATS: Impact on developing countries and telecom services’, Transnational Data and Communications Report, July–​August 1994, p 24. 180 182

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interfere with the availability of the public network (paragraph 5(b)). In terms of restrictions, Members may only impose conditions that are necessary: • to safeguard the public service responsibilities of the suppliers of public networks, ie the universal service obligation; • to protect the integrity of the network; or • to comply with a Member’s commitments in its Schedule (paragraph 5(e)). Such conditions may include restrictions on the resale of such services, compliance with any ‘type-​approval’ regime,183 or licensing and notification obligations. In addition, developing countries may impose conditions ‘necessary to strengthen its domestic telecommunications infrastructure and service capacity and to increase its participation in international trade in telecommunications services’ (paragraph 5(g)). To assist the growth of telecommunications in developing countries, developed Members are encouraged to make available information and opportunities concerning the transfer of telecommunications technology and training to the least-​ developed countries.

16.4.3  Fourth Protocol At the conclusion of the ‘Uruguay Round’, ministers adopted a decision to enter into further voluntary negotiations on the liberalization of trade in the provision of basic telecommunication networks and services.184 Pending the conclusion of these negotiations, Members were granted a MFN exemption for measures affecting the provision of such basic telecommunications.185 These negotiations, carried out under the auspices of the ‘Group on Basic Telecommunications’, were scheduled to conclude no later than 30 April 1996. However, by the deadline there had been insufficient offers from Members to enable a conclusion to be reached; therefore negotiations were continued until an agreement was finally reached on 15 February 1997.186 This agreement is commonly referred to as the ‘Basic Agreement on Telecommunications’, although the term is somewhat misleading since the agreement consists primarily of a series of ‘Schedules of Specific Commitments and a List of Exemptions from Article II concerning basic telecommunications’ submitted by some 69 Members.187 These commitments supplement or modify any

184   See Chapter 4, at Section 4.4.3.   33 ILM 144 (1994).   GATS, Annex on Negotiations on Basic Telecommunications. 186   For a detailed history of the negotiations, see Sherman, L, ‘ “Wildly Enthusiastic” about the first multilateral agreement on trade in telecommunications services’, (1999) 5(1)1 Federal Communications Law Journal, pp 61–​110. 187   As of 15 May 2017, this number had risen to 99 members, see . The then 15 EU Member States submitted one 183 185

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existing submissions made by Members and are annexed to the existing schedules through a device referred to as a Protocol, which becomes an integral part of the GATS (Article XX). As such, these submissions constitute the fourth Protocol to have been entered into by certain Members of the WTO. The Fourth Protocol was intended to enter into force on 1 January 1998; however, further delays meant that it became effective on 5 February 1998. Supplementary to the Schedules, the Chairman of the Group on Basic Telecommunications issued two explanatory notes clarifying certain issues applicable to the scheduling of commitments. First, a ‘basic telecom service’ was defined in the following terms: (a) encompasses local, long-​d istance and international services for public and non-​public  use; (b) may be provided on a facilities-​basis or by resale; and (c) may be provided through any means of technology (eg, cable, wireless, satellites).188

Second, any qualifications referring to market access being limited due to the availability of spectrum/​frequency were compatible with the GATS and did not need to be specifically noted.189 The ‘Basic Agreement’ has been seen as the most significant development in the global liberalization of the telecommunications market. It has been estimated that the Member countries represent over 90 per cent of global revenues in telecommunications.190 The commitments made by Members encompassed market access, foreign direct investment and, for the majority of Members, adherence to a set of pro-​competitive regulatory principles. The Protocol addressed the introduction of competition into the four biggest bottleneck markets within telecommunications:  satellite services, international public voice telephony, domestic long-​d istance, and the provision of the local loop. In respect of the MFN exemptions, a number of countries specified accounting rates as outside the scope the ‘Basic Agreement’, including India, Pakistan, Sri Lanka, and Turkey. The US maintained a MFN exemption for DTH and DBS satellite services to enable the continuation of existing ‘reciprocity’ regulations.

Schedule: see Annex to Council Decision (97/​8 38/​EC) of 28 November 1997 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the results of the WTO negotiations on basic telecommunications services; OJ L 347/​45, 18 December 1997.   Note by Chairman, S/​GBT/​W/​2/​Rev.1, 16 January 1997.   Note by Chairman, S/​GBT/​W/​3, 3 February 1997. 190  See Spector, PL, ‘The World Trade Organization Agreement on Telecommunications’, (1988) 32(2) Summer The International Lawyer, pp 217–​222. 188 189

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16.4.3.1  Reference paper One unique feature of the Fourth Protocol was the adoption of a ‘Reference Paper’ by 57 of the 69 Member signatories as an ‘additional commitment’ under GATS (Article XVIII) and incorporated into the Schedules.191 The Reference Paper comprises a set of definitions and principles on the regulatory framework governing the provision of basic telecommunications.192 The principles address particular objectives for the establishment of a pro-​competitive regulatory regime, rather than the mechanisms or processes for their achievement. As such, the Reference Paper represents an important body of international legal principles for the telecommunications sector, of considerably greater significance than the ITU constitutional principles.193 In addition, where a Member State has incorporated the Reference Paper into its Schedule of Commitments, the principles are enforceable before the WTO Dispute Settlement Body. In terms of competition law, the Reference Paper firstly defines two key concepts, ‘essential facilities’ and ‘major supplier’: Essential facilities mean facilities of a public telecommunications transport network or service that (a) a re exclusively or predominantly provided by a single or limited number of suppliers; and (b) cannot feasibly be economically or technically substituted in order to provide a service. A major supplier is a supplier which has the ability to materially affect the terms of participation (having regard to price and supply) in the relevant market for basic telecommunications services as a result of: (a)  control over essential facilities; or (b)  use of its position in the market.

The concept of ‘essential facilities’ originates in US anti-​trust law, although it has also been embraced within European Union competition law.194 The concept of ‘major supplier’ is similar to the traditional competition concept of dominance, and is similar to the current EU concept of an ‘organization with significant market power’.195 The perspective of the Reference Paper is the supplier’s ability to affect access to the market by others, which reflects its international trade origins.

192   This has since risen to 82 Member States.   Council Decision, see n 187, at p 52.   See Section 16.3.4. 194   For US law, see MCI Communications v AT&T, 708 F 2d 1081 (7th Cir 1983), 464 US 891 (1983); for EU law, see Case C-​7/​97 Oscar Bronner GmbH & Co KG v Mediaprint Zeitungs-​und Zeitschriftenverlag GmbH & Co KG and Others [1998] ECR I-​7791. See further Chapter 10. 195   See further Chapter 5. 191

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The first two substantive issues addressed in the Reference Paper concern controls to be placed upon the ability of a ‘major supplier’ to be able to restrict competition. First, a supplier who, alone or with others, constitutes a ‘major supplier’ must be subject to ‘appropriate measures’ to prevent anti-​competitive practices, whether current or future. Three specific anti-​competitive practices are then listed: • cross-​subsidization; • the use of ‘information obtained from competitors with anti-​competitive results’, such as the forecast traffic volumes in interconnection arrangements; and • ‘not making available to other services suppliers on a timely basis technical information about essential facilities and commercially relevant information which are necessary for them to provide services’ (paragraph 1.2). Second, interconnection with a major supplier should be ‘ensured at any technically feasible point in the network’. Such interconnection should be on non-​ discriminatory terms and conditions, on the basis that such terms and conditions should be no less favourable than that provided for its own ‘like services’, echoing the ‘national treatment’ principle under the GATS. The interconnection must be achieved in a timely fashion and on ‘cost-​oriented rates that are transparent, reasonable, having regard to economic feasibility, and sufficiently unbundled so that the supplier need not pay for network components or facilities that it does not require for the service to be provided’. Interpretation of this critical concept of ‘cost-​ oriented’ is already the subject of international dispute. Finally, the request for interconnection may be in respect of points which are not offered to the majority of users. Building on the Annex on Telecommunications, the procedures and arrangements for interconnection with a major supplier must be transparent, including publication of ‘either its interconnection agreements or a reference interconnection offer’. A service supplier must have recourse to an independent domestic body to resolve any disputes that may arise in respect of interconnection. The other four issues covered in the Reference Paper address broader aspects of a pro-​competitive telecommunications market: • defining a ‘universal service obligation’ will ‘not be regarded as anti-​competitive per se’, provided they are addressed in a transparent and non-​d iscriminatory manner and are necessary to achieve the universal service defined by the Member State (paragraph 3); • reflecting Article VI of the GATS, any licensing criteria must be publicly available, as well as ‘the terms and conditions of individual licences’; and the reasons for any licence denial must be made known to the applicant (paragraph 4);

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• although the need for, and form, of any regulator is not addressed, the Reference Paper imposes an obligation upon a Member State to ensure that any such regulator(s) are ‘separate from, and not accountable to, any supplier of basic telecommunications services’ (paragraph 5); • the allocation and use of scarce resources, ‘including frequencies, numbers and rights of way’, should be carried out in an objective, timely, transparent, and non-​d iscriminatory way (paragraph 6). Whilst the Reference Paper addresses ‘ends’ rather than ‘means’, its influence is likely to be considerable at both a national and international level. First, as part of the Schedules of Commitments, the Reference Paper represents a Member State commitment to which foreign service providers may refer. Second, over time national legislators are likely to reflect and incorporate such principles into domestic law. Third, the Reference Paper represents a baseline from which future multilateral negotiations depart.

16.4.4  Status of WTO law The Reference Paper, as a unique set of international legal principles for the telecommunications sector, is not only pro-​competitive, but would also seem sufficiently detailed to constitute possible grounds upon which to instigate legal proceedings in the event that a Member State failed to comply. However, this begs the question of the status of the WTO agreements in the legal order of those some eighty nations that have incorporated it into their Schedule of Commitments. This issue can be further distinguished into two questions: • whether the WTO agreements, and in particular the Reference Paper, may be used in the interpretation and application of national or regional (eg EU) telecommunications regulations; and • whether the Reference Paper could be used as the basis for initiating proceedings before a court in the event of a conflict with existing regulations, ie have direct effect? Within the European legal order, the Court of Justice has addressed the first issue, that of interpretation, on a number of occasions. In Commission v Germany (International Dairy Agreement)196, it was held that where the Community has entered into an international agreement, the provisions of secondary Community legislation ‘must, as far as possible, be interpreted in a manner that is consistent with those agreements’ (paragraph 52). Further, in Hermès International v FHT   [1996] ECR I-​3989.

196

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Marketing,197 the Court held that national courts, when interpreting a Community measure that falls within the scope of a WTO agreement, must apply national legislation ‘as far as possible, in the light of the wording and purpose’ of the agreement (paragraph 28). Therefore, a court should consider the principles contained in the Reference Paper when interpreting the application of European telecommunications laws implemented in national law. With regard to the second issue, that of WTO law having direct effect, all the major trading nations have denied such an outcome,198 of which the EU is one example, the final recital in the Community Decision adopting the WTO agreements stating: . . .  by its nature, the Agreement establishing the World Trade Organization, including the Annexes thereto, is not susceptible to being directly invoked in Community or Member State courts.199

Despite this, the European Court of Justice has been required to consider the issue of the status of WTO agreements on a number of occasions, most significantly in Portugal v Council.200 First, the Court addressed the status of the WTO agreements in the legal order of the Member States, concluding that: . . .  the WTO agreements, interpreted in the light of their subject-​m atter and purpose, do not determine the appropriate legal means of ensuring that they are applied in good faith in the legal order of the contracting parties. (paragraph 41)

Second, their status within the Community legal order was examined. The Court considered that the WTO agreements were based on the ‘principle of negotiation’ which distinguished them from other international agreements that were recognized as having direct effect (paragraph 42). The Court also noted that the EC’s major trading partners did not give direct effect to the agreements, which would effectively disadvantage the Community in future negotiations. Therefore, the Court concluded that:

  [1998] ECR I-​3603.   Ruiz-​Fabri, H, ‘Is there a Case—​L egally and Politically—​for Direct Effect of WTO Obligations’, (2014) 25(1) Eur J Int Law 151–​173. 199   Final Recital in Council Decision 94/​8 00/​EC, of 22 December 1994, concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986–​1994) OJ L 336/​1, 23 December 1994. 200   [1999] ECR I-​8 395. See also Case C-​93/​02 Biret International v Council [2006] 1 CMLR 17, where the court confirmed the existing position, but did leave open the possibility of private claims against EU institutions based on EU measures that are found to violate WTO law by the Dispute Settlement Body, a position which had been suggested by Advocate General Alber [2003] ECR 10, at para 24. 197

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the WTO agreements are not in principle among the rules in the light of which the Court is to review the legality of measures adopted by the Community institutions. (paragraph 47)

The Court’s reasoning in this case has been heavily criticized for undermining the status of the WTO agreements.201 However, the Court did confirm its previous jurisprudence that the GATT rules could have direct effect where either the adoption of the measures implementing obligations assumed within the context of the GATT is at issue; or a Community measure refers expressly to specific provisions of the general agreement (paragraph 111).202 In this regard, it is interesting to note that the European Commission’s 2002 package of measures in the telecommunications sector, make explicit reference to the commitments made by the Community and its Member States in the context of the Fourth Protocol to the GATS.203 In terms of UK law, the general applicability of the WTO agreements has been somewhat uncertain due to a lack of clarity as to which aspects of the ’mixed agreements’ fall within the competence of the Community, as opposed to the individual Member States.204 The problems raised by such joint competence were examined inconclusively in a dispute brought by the US against the Community, the UK, and Ireland, in 1997, in respect of the tariff classification of Local Area Network equipment.205 Post-​L isbon, the EU’s competence in the area of trade in services (TFEU, Article 207(1)), seems sufficiently extensive to address all GATS-​related matter, including the provision of telecommunications services and networks.206 In the absence of direct effect, either under European or national law, the only mechanism under which a party could seek enforcement against a Member State for failure to comply with their obligations in respect of the telecommunications sector is through the WTO Dispute Settlement Body. The UK’s intended departure from the EU places the status of the WTO agreements back into the limelight, as the UK will be required to submit its own ‘schedules’ once it is no longer part of the EU’s. The UK government has announced its

201   See generally Zonnekeyn, G, ‘The status of WTO Law in the EC Legal Order’, (2000) 34(3) Journal of World Trade Law pp 111–​125; and Griller, S, ‘Judicial Enforceability of WTO law in the European Union: Annotation to Case C-​149/​96, Portugal v Council’, (2000) 3(3) Journal of International Economic Law pp 441–​472. 202   See Case C-​2 80/​93 Germany v Council [1994] ECR I-​4973, paras 103–​112. 203   eg Directive 02/​21/​EC on a common regulatory framework for electronic communications networks and services, OJ L 108/​33, 24 April 2002 at Recital 29. 204   See Opinion 1/​94 of the Court of Justice [1994] ECR I-​5267. 205  Customs Classification of Certain Computer Equipment, WTO doc. series WT/​DS62, WT/​DS67 and WT/​DS68. See also Heliskoski, J, ‘Joint Competence of the European Community and its Member States and the Dispute Settlement Practice of the World Trade Organization’ in (1999) 2 The Cambridge Yearbook of European Legal Studies, pp 61–​85. 206  See Opinion 2/​15 (C-​376), 16 May 2017 re: Singapore FTA. See also Klamert, K, Services Liberalisation in the EU and the WTO (Cambridge University Press, 2015).

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intention ‘to replicate our existing trade regime as far as possible’,207 although this is dependent on ‘certification’ by the other 163 members. While objections are unlikely to arise in respect of the telecommunications sector per se, disagreements in other areas may cause substantial delay in the whole process.

16.4.5  Dispute resolution One unique feature of the multinational trade negotiations concluded in 1994 was the establishment of a dispute settlement mechanism applicable to the trade agreements.208 For the first time, disputes between Member governments about compliance with an international treaty can be submitted to an independent body, the Dispute Settlement Body (DSB), and a defaulting party may be made subject to enforcement procedures.209 The ‘Understanding’ encompasses the GATS and therefore is applicable to disputes concerning commitments made in respect of national telecommunications markets.210 Under the agreed procedures, a Member government may request the establishment of a Panel by the Dispute Settlement Body with the following terms of reference: To examine, in the light of the relevant provisions in (name of the covered agreement/​s) cited by the parties to the dispute, the matter referred to the DSB by (name of party) in document . . . and to make such findings as will assist the DSB in making recommendations or in giving the rulings provided for in that/​t hose agreement/​s. (Article 7.1)

However, it would not seem appropriate to characterize the DSB as a judicial body. The Panel shall comprise three individuals chosen by the DSB secretariat with the consent of the parties. In the absence of agreement, the Director-​General may appoint the panellists. After an investigation, the Panel submits a report to the DSB for consideration, detailing the Panel’s findings and conclusions. The DSB will usually adopt the panel report unless one of the parties notifies the DSB of its intention to lodge an appeal to the Appellate Body (Article 17). The Panel or Appellate Body will decide whether a particular Member State measure is inconsistent with the terms of the relevant agreement and may recommend ways of overcoming the

207   Statement by Julian Braithwaite, FCO, ‘Ensuring a smooth transition in the WTO as we leave the EU’, 23 January 2017, . 208  Understanding, n 162. See generally, Merrills, JG, International Dispute Settlement (3rd edn) (Cambridge: Cambridge University Press, 1998). 209   The dispute settlement system under GATT 1947 was essentially a conciliation procedure. 210   Ibid, at Appendix 1.

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issue. A Member, against whom a decision has been reached, is obliged to implement the recommendations and rulings of the DSB within a reasonable period of time (Article 21). In the event that a Member fails to comply, the Understanding allows for the payment of compensation or the suspension of concessions (Article 22). The ability to suspend trade concessions granted to an infringing Member is the real stick within the dispute settlement procedure under the WTO. A  complaining party may be able to suspend concessions or obligations not only in the sector of dispute (eg telecommunications), but also, where appropriate, in other sectors under the same agreement (eg GATS), or even under another covered agreement. Any such concession must be authorized by the DSB and should be ‘equivalent to the level of the nullification or impairment’ (Article 22.4). Whilst the WTO dispute procedures are between governments, industry obviously plays an important role in bringing such matters to the attention of governments. Under European law, complaints may be submitted in writing to the Commission and a formal examination procedure may be invoked prior to the decision to pursue a dispute.211 In the US, the Office of the United States Trade Representative (USTR) is required to solicit comments from industry when conducting its annual analysis of the operation and effectiveness of any trade agreement regarding telecommunications products or services and determining any action.212 The dispute settlement procedures have so far been invoked in respect of very few disputes in the telecommunications sector. Formal proceedings before the DSB have been pursued by the European Commission against Korea213 and Japan in respect of preferential trade practices in favour of US suppliers of telecommunications equipment, both of which were resolved by agreement.214 Proceedings have also been brought by the US against Belgium, regarding telephone directory services,215 which was settled. The only case to reach a Dispute Panel and a formal decision was a claim made by the US against Mexico, the so-​called ‘Telmex case’, discussed at Section 16.4.5.1.

211   See Council Regulation (EC) No 3286/​94 of 22 December 1994 laying down Community procedures in the field of the common commercial policy in order to ensure the exercise of the Community’s rights under international trade rules, in particular those established under the auspices of the World Trade Organization; OJ L 349/​71, 31 December 1994 (as amended by Regulation (EU) No 654/​2014). To date, some 24 ‘trade barrier regulation’ complaint procedures have been initiated. 212   19 USC § 3106 and 3108. 213   WT/​DS40 ‘Korea—​L aws, regulations and practices in the telecommunications procurement sector’, 5 May 1996. See also Agreement on telecommunications procurement between the European Community and the Republic of Korea; OJ L 321/​32, 22 November 1997. 214   WT/​DS15 ‘Japan—​Measures affecting the purchase of telecommunications equipment’, 18 August 1995. 215   WT/​DS80 ‘Belgium—​Measure affecting commercial telephone directory services’, 13 May 1997.

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In the vast majority of situations, however, it is the threat of WTO proceedings that is used as a stick to encourage resolution through negotiations. The US has been particularly willing to issue such threats, such as against Canada, regarding discriminations against US-​based carriers transmitting international traffic,216 and Germany, regarding Deutsche Telekom’s failure to meet interconnection obligations and discrimination against foreign carriers for call completion.217 Both the European Commission and the US have threatened to take action against Japan over the introduction of the Long-​Run Incremental Cost methodology for interconnection rates, as current rates are not considered to meet the ‘cost-​orientated’ principle required under the Reference Paper.218 Such threats underpinned ongoing bilateral negotiations, which reached a successful conclusion in July 2000.219 16.4.5.1  Telmex The Telmex case concerned a preferential arrangement between Telmex, the Mexican incumbent, and the US operator Sprint. Other US operators, such as AT&T and MCI, complained to the US Government that this arrangement was discriminatory, and therefore in breach of Mexico’s commitments under the GATS, the Telecommunications Annex, and the Reference Paper. Following the lodging of a formal complaint before the WTO, the Mexican regulator, Cofetel, issued new regulations requiring Telmex to terminate the preferential arrangement and provide non-​d iscriminatory treatment to all foreign long-​d istance operators. Despite this, the US decided to proceed with its request to the DSB for the establishment of a panel, which was duly formed in August 2002. The Panel was required to make determinations on a number of issues, both of fact and law, interpreting the various WTO agreements, as well as broader issues of international telecommunications law.220 In terms of findings of fact, the ‘relevant market’ was disputed, with Mexico arguing that the operation of a traditional accounting rate regime for international calls meant that the ‘relevant market’ had to be two-​way traffic, not just the termination of communications into Mexico, as argued by the US.221 The Panel accepted US evidence that demand substitution was essential to the market definition

  See 1998 Annual Report of the President of the United States on the Trade Agreements Program, at 257.   See ‘US warns on German telecoms’, Financial Times, 12 August 1999. See also 1999 Annual Report, at 293. 218   eg ‘US uses WTO threat to challenge Japanese pricing’ (20 September 1999): . 219   See USTR Press Release: ‘United States and Japan agree on interconnection rates’, 18 July 2000. 220   See ‘Mexico—​Measures affecting Telecommunication Services’, Report of the Panel, WT/​DS204/​R, 2 April 2004. 221   Ibid, at paras 4.151–​4.158. 216 217

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process and that an outgoing call was not a substitute for an incoming call.222 In terms of market power, the Panel concluded that Telmex was a ‘major supplier’ on the basis of its position under applicable domestic rules, which granted Telmex the right ‘to negotiate settlement rates’ for the entire Mexican market.223 On matters of law, one fundamental issue to be determined was whether conduct of a major supplier could be considered ‘anti-​competitive’ if such conduct was required by law. Surprisingly, the European Commission, as a third party to the proceedings, supported Mexico’s position that State rules could not be considered an anti-​competitive practice. However, the Panel held that ‘a requirement imposed by a Member State under its internal law on a major supplier cannot unilaterally erode its international commitments’ made under GATS and related measures.224 The Panel concluded that Mexico had failed to meet its commitments under both the Annex on Telecommunications and the Reference Paper. Under the Annex, Mexico had failed to comply with Articles 5(a) and (b) in respect of access to and use of the ‘public telecommunications transport networks’, on a facilities basis, on reasonable and non-​discriminatory terms. Under the Reference Paper, Mexico’s obligations to maintain ‘appropriate measures’ preventing anti-​competitive practices (at 1.1) were held to have not been met, as well as its obligations to ensure that Telmex provided interconnection at ‘cost-​orientated rates’ (at 2.2(b)). However, since Mexico had not made commitments for non-​facilities based services, it was found not to have violated any of its obligations in respect of such services. Both sides in the dispute had reason to be unhappy with aspects of the Panel’s conclusions, but neither party chose to appeal and, in June 2004, the parties reached an agreement resolving the dispute;225 with Mexico subsequently amending its resale regulations in August 2005 in full compliance with the DSB’s recommendations.

16.4.6  The impact of the WTO and ongoing liberalization In terms of bare numbers, the GATS and related agreements have seemingly had a huge impact on the telecommunications sector, facilitating market liberalization and regulatory harmonization across nearly all continents. The reality, however, is inevitably more complex. First, for the major industrialized nations, the liberalization process was already well underway, so the commitments made under the WTO simply represented policy decisions already made. Second, as a result of the former, the constraints and obligations accepted by signatories have had

222

223   Ibid, at paras 7.149–​7.152.   Ibid, at paras 7.153–​7.155.   WT/​DS204/​7, S/​L/​162, 2 June  2004.

225

224

  Ibid, at para 7.244.

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greater significance for the legal and regulatory frameworks of developed countries.226 Third, while developing nations have adopted GATS-​compliant regulatory frameworks ‘on the books’, often with expert input from developed nations funded by development organizations, regulatory performance ‘on the ground’ remains poor.227 As already noted, the process of trade liberalization under the WTO regime is an ongoing one, with multinational negotiations attempting to broaden and deepen the commitment of Member States to free trade. The current round of negotiations formally commenced at Doha, Qatar, in November 2001.228 In parallel with these multilateral negotiations, Member States are negotiating and entering into regional and bilateral trade agreements with trading partners, at a level that generally goes beyond that which States are prepared to commit at a multinational level. Telecommunications forms a component of the current round, with the major industrialized countries calling upon other countries to make commitments to fully liberalize and the ‘elimination of MFN exemptions for telecommunication services’.229 Currently, proposals either comprise offers to improve existing commitments or to make an initial commitment to telecommunications liberalization.230 In the current international political climate, further progress on trade liberalization has largely stalled, while the ‘Doha Round’ has effectively come to an end. However, the telecommunications sector has already made substantial progress towards full liberalization and the current agreements have fundamentally altered national and international telecommunications law.

16 .5  CONC LUDING R EM A R K S The international regulatory regime for the telecommunications industry can be seen to comprise a substantial body of principles, rules, and regulations. At the highest level, the international trade agreements address issues of market access,

226  Henderson, A, Gentle, I, and Ball, E, ‘WTO Principles and Telecommunications in Developing Nations: Challenges and Consequences of Accession’, (2009) 29 Telecommunications Policy 205. 227  Djiofack-​ Z ebaze, C and Keck, A, ‘Telecommunications Services in Africa:  The Impact of WTO Commitments and Unilateral Reform on Sector Performance and Economic Growth’, (2009) 37(5) World Development 919. 228   WTO Ministerial Declaration, 14 November 2001 (WT/​M IN(01)/​DEC/​1). See also Chapter 17, at Section 17.4.1 for a discussion of competition policy within the Doha Round. 229   TN/​S/​W/​50, ‘Communications from Australia, Canada, the European Communities, Japan, Hong Kong China, Korea, Norway, Singapore, the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu and the United States’, 1 July 2005. 230   As of July 2008, some thirty-​n ine governments had made such offers; see .

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promoting competition throughout the telecommunications sector. The treaties governing the use of space and the sea determine the obligations of operators, through their respective governments, when utilizing common resources in the provision of telecommunications services. At the next level down, the ITU continues to represent a key source of rules and regulations detailing the manner and means by which operators in different jurisdictions cooperate to achieve international telecommunications services. Industry consolidation through global mergers and joint ventures are likely to have minimal impact on the need for such rule making. As such, the ITU is likely to continue to be one of the main international forums for the telecommunications industry. The process of liberalization has resulted in the demise in importance of the international satellite conventions, which may eventually disappear as instruments of international telecommunications law, though not as operating entities. The rise of the WTO as the forum for telecommunications law over recent years has been very significant. However, over recent years its role has diminished somewhat, as open competitive markets have become the international norm and enthusiasm for trade liberalization has waned.

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17 TELECOMMUNIC ATIONS R EF OR M IN EMERGING MAR KE T S Ann Buckingham, Camilla Bustani, David Satola,1 and Cameron Whittfield1a

17.1 17.2 17.3 17.4 17.5 17.6

Introduction  First-​Generation Reforms  Foundational Regulatory Components  Broadband—​Redefining the Role of the State  Second-​Generation Reforms  Concluding Remarks 

847 848 857 882 887 892

17.1 INTRODUC TION For much of the latter half of the twentieth century, the provision of telecommunications services in developing countries was the responsibility of the state. Penetration rates were low, service quality was poor, and the incumbent operator was often unprofitable. Government attempts at improvement focused on securing investment, technical assistance, and financial support. Commencing in the late 1990s, the telecommunications sector in much of the developing world underwent a profound and lasting transformation: governments established new regulatory regimes and institutions, corporatized and privatized their state-​owned telecommunications operations, and liberalized markets as part of wide-​ranging sector reforms. As a result of this initial wave of sector reform, global teledensity and penetration materially increased. Global mobile subscriptions alone are now estimated to number in excess of seven billion (with mobile broadband subscriptions 1   The author is Lead Counsel, the World Bank. The views expressed are those of the author and not necessarily those of the World Bank, its Board of Directors, or the countries they represent. 1a   The authors wish to acknowledge Keong Min Yoon, World Bank Legal Department, for his assistance in preparing this chapter.

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continuing to grow at double digit rates), and penetration rates are at 99.7 per cent globally and 94.1 per cent in the developing world.2 With the primary objectives of these initial reforms largely met, the attention of regulators has increasingly turned to second-​generation reforms that address twenty-​fi rst century issues of connectivity, broadband access, and convergence. Moreover, convergence, compounded by the increasing reliance on broadband capacity, has focused regulatory attention on issues such as digital authentication, cloud services and storage, data security, privacy, access to (and freedom of) information and cybercrime, which were previously viewed as ancillary to, rather than part of, the core telecommunications legal and regulatory framework. In developing countries, the International Telecommunication Union (ITU) estimates that more than 50 per cent of households worldwide have internet access (including 41 per cent of households in the developing world).3 The pre-​eminence of the internet as a central feature of commerce, education, and social interaction is increasingly changing the drivers of regulatory reform. Additionally, the rise of the ‘smart phone’, and associated bandwidth heavy applications, is also impacting regulatory design. This chapter will address the various factors providing the impetus for reform, the foundational components of reform, the impact on regulation and market reforms—​i ncluding an evolving role of the state—​i n the transition to broadband-​ enabled networks and services and, finally, the evolving second-​generation reforms being undertaken in the developing world to address the increasing role and importance of internet access and broadband communications to economic development and growth.

17. 2  FIR S T- ​G ENER ATION R EF OR MS The initial wave of reform of the telecommunications sector in developing countries focused on the transition from state-​owned monopoly telecommunications providers to a regulatory regime that opens telecommunications markets to competition and strives to level the playing field for new entrants to the market.

2  ITU World Telecommunication/​ICT Indicators Database, at . In contrast, in 1995 the number of global mobile subscriptions was 90.7  million and the penetration rate was 1.585%. . 3  ITU World Telecommunication/​ICT Indicators Database, at .

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17.2.1  Impetus for undertaking initial reforms Prior to undertaking sector reform, the incumbent telecommunications provider, commonly referred to as the ‘PTT’ (posts, telegraph, and telecommunications provider), typically operated under a government department or ministry,4 enjoyed monopoly rights of varying scope and special property rights, and lacked accounting or structural separation between its different activities. Regulatory and policy-​making functions were often exercised on a de facto basis by the PTT itself or its line ministry, with the PTT often operating pursuant to a government plan rather than a licence.5 Employees generally had civil servant status, making internal restructuring difficult. The typical outcome in developing countries was an over-​staffed incumbent PTT with low fixed-​line penetration, a limited range of services, little network investment, poor quality of service, long waiting times for telephone lines, inaccurate and late billing and an unbalanced, politically motivated tariff structure where high-​priced international and long-​d istance tariffs subsidized below-​cost installation, line rental, and local call rates. Widespread reform of state-​owned PTTs and telecommunications markets began in the late 1990s, as policymakers increasingly recognized that politically captured and inefficiently run incumbents were hindering both sector and general economic development. Three factors in particular caused the sector agenda in many developing countries to shift to liberalization, private sector investment, and regulatory reform. The first was the comprehensive reform of telecommunications markets in Europe, driven by a series of EU directives requiring liberalization and regulatory harmonization in all EU Member States. The experience of regulatory reform in some southern European markets was particularly relevant, as it demonstrated that competition could be successfully introduced into markets with less-​developed networks, a legacy of state ownership and structural imbalances—​ characteristics often shared by developing countries. The success of reforms in Europe and elsewhere in the developed world led to a general acceptance that telecommunications was no longer considered a ‘natural monopoly’ and that an efficient and competitive telecommunications sector could be key to enhancing productivity and driving economic growth and development. The second factor was the licensing of mobile operators in developing countries and the ensuing explosion in the number of mobile subscribers. This dramatically increased teledensity, illustrating the extent of unmet demand for 4   Exceptions include the Caribbean, where in most of the English-​speaking islands, Cable & Wireless (until the early part of the twenty-​fi rst century) enjoyed a private monopoly. 5   See eg Smith, W, ‘Utility Regulators—​Roles and Responsibilities’, Viewpoint Note No 128, the World Bank (October 1997).

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telecommunications services, and forced governments to establish regulatory frameworks to manage new multi-​operator environments. Thirdly, the requirements of membership of the World Trade Organization (WTO) prompted many developing countries to commit to liberalizing the telecommunications sector and to adopt a set of best-​practice regulatory principles. In 1998, the Agreement on Basic Telecommunications was annexed to the Fourth Protocol of the General Agreement on Trade in Services (GATS) to extend previous sector liberalization commitments to ‘basic’6 telecommunications. Countries wishing to join the WTO are typically required, as a condition to accession, to open up basic telecommunications services to competition, sometimes after a short grace period.7 Recognizing the importance of regulatory reforms to manage the transition from monopoly to competition and provide the certainty to foster investment, the WTO also adopted a statement of international regulatory best practice in the form of the so-​called ‘Reference Paper’ which, despite being brief and somewhat abstract, remains a highly durable source of international good practice in telecommunications regulation.8 Most WTO Members who have made liberalization commitments have also undertaken to implement the Reference Paper, usually by incorporating it in their schedule of commitments. Since its inception, more than 100 WTO Members have committed to open some or all of their telecommunications markets and the Agreement on Basic Telecommunications continues to form an important foundation of many regulatory regimes. Other multilateral development institutions9 have also played a role in shaping the evolution of developing countries’ telecommunications sectors often by providing financing for investment, technical assistance (such as advice on policy or regulatory reform, privatization assistance and capacity building for sector regulators) or so-​called ‘policy-​based’ lending, where the disbursement of a non-​telecommunications loan or a credit is made conditional upon the recipient government introducing

  Defined as including fixed voice telephony and other core telecommunications services.   eg the schedule of commitments of Lao People’s Democratic Republic and Kazakhstan (which became WTO members in 2013 and 2015, respectively) required the liberalization of certain segments of their telecommunications sector within 5 years and 2.5 years, respectively. Cape Verde (2008), Tonga (2007), Ukraine (2008), and Viet Nam (2007) also submitted specific commitments in telecommunications. These vary in terms of scope of market opening, and two (Ukraine and Viet Nam) have incorporated the Reference Paper in their commitments. 8  The Reference Paper is available at:  . 9   In this section, we use the term ‘multilateral development institution’ to cover both international financial institutions (IFIs) and national bilateral aid agencies or programmes providing grant funding for technical assistance and other forms of support. IFIs include members of the World Bank Group (eg International Bank for Reconstruction and Development (IBRD)), the International Development Association (IDA), and the African Development Bank (AfDB). When referred to in this chapter, the World Bank means the IBRD and the IDA. 6 7

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market-​liberalizing legislation, privatizing the incumbent or undertaking other sector reforms. Sector reforms may also be driven by other country-​specific factors. For example, in post-​conflict countries (such as Iraq, Afghanistan, Timor-​Leste, Sierra Leone, and Liberia) the interim occupying or governing authority post-​conflict is likely to place development and reform of the telecommunications sector high on the post-​conflict reconstruction agenda due to the importance of telecommunications in enabling other rebuilding efforts, restoring order, supporting humanitarian initiatives, and attracting foreign investment. The reform experience in such countries typically differs widely, reflecting the nature and cause of the underlying conflict, the role of the external agency exercising interim authority, the need to support reconstruction and stabilization efforts, and the ability of the affected country to finance its own reform programme. Where reforms are driven by a transitional authority, one of the challenges is to ensure that decisions taken by that authority will be honoured following the transfer of power to a sovereign government.

17.2.2  Design of first-​generation reforms The reform agenda in developing countries making the transition from state-​owned monopolies to liberalized markets comprised both the opening of telecommunications markets to competition (including the corporatization, commercialization,10 and privatization of the state-​owned incumbent) and accompanying reform of sector regulation. At a local level, the reform process usually begins with a statement of government objectives in the form of a sector policy statement. Publishing a formal sector policy statement can increase the transparency and consistency of policymaking, reflect government commitment, encourage stakeholder ‘buy-​in’ to reforms, and provide a roadmap for the reform process. In developing countries, a coherent and comprehensive policy framework can provide confidence in a sector undergoing reform at a time when significant investment is required and little else exists to instil that confidence. It can also help ensure that reforms are designed, sequenced, coordinated, and implemented effectively. To develop a policy framework, however, one must first have a clear understanding of the social, economic,

10   Corporatization and commercialization of the state-​owned incumbent (involving the transformation of the legal structure and operations of the incumbent from a government department to a corporate enterprise) are usually critical steps to ensure the incumbent is able to compete in a liberalized environment and to enable its subsequent privatization.

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and political objectives of the reform process, as well as the specific characteristics of the subject country. In most countries, reform objectives have broadly fallen into three categories:  generating the social benefits inherent in telecommunications services, encouraging economic growth and financial investment, and developing industry-​specific expertise. Improving access to, and the quality of, telecommunications services is at the heart of the first objective, reflecting the nature of telecommunications services as a public good. If a country’s telecommunications infrastructure is inadequate to secure that access, or where services are inefficient, low-​quality or costly, sector policy will often require private investors to make commitments regarding network roll-​out, service coverage, increases in subscriber lines, and quality of service. Secondly, governments also see a robust and competitive telecommunications sector as a driver of economic growth. A healthy telecommunications sector also stimulates technology investment in other industries that rely on telecommunications, including banking, outsourced services, and call centres. Governments usually also wish to encourage foreign investment, typically as investors in (or managers of) both the incumbent PTT and new entrants. Governments often benefit significantly from privatizations and liberalization (with both licence and radio spectrum fees generating substantial revenues).11 Governments may seek to strengthen local investment institutions by requiring local initial public offerings (IPOs) or domestic shareholdings as conditions to market entry. Finally, in addition to capital, local capacity building is often a key government objective. Foreign investors generally bring know-​how and technology, and their presence can be pivotal in management and service improvements. Bids for licences can be won or lost on an investor’s ability or willingness to make these intangible contributions. In addition to the market reform objectives above, the design of regulatory interventions must be tailored to the circumstances of the country undertaking reform. In particular, common ‘prioritization’ or functional differences between developed and developing countries often mean that the regulatory approach undertaken in developed countries needs significant modification to reflect local realities. A key difference is the relative importance of mobile networks. In many developing countries, the lack of capacity, low penetration, and poor quality of fixed networks mean that mobile networks are the primary means of access to

11   The total investment from telecommunication with private participation in IDA countries from 2000 to 2014 was $55,967,485,000. See, World Development Indicators 2017, World Bank, 2017 .

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telecommunications. This dominance of the mobile sector has implications for many aspects of the regulatory framework. Regulatory features in developed countries relating to the opening up of fixed networks or controlling the ‘national champion’ incumbent fixed operator might be wholly or partially inapplicable. Moreover, there is now renewed focus on fixed network capacity (especially fibre) to support increasingly ‘bandwidth heavy’ mobile services. A second important difference relates to the concept of universal service, discussed in more detail in Section 17.3.12. In Europe and North America, ‘universal service’ has traditionally meant ensuring that all citizens can receive affordable, high quality telecommunications services, typically through the incumbent fixed operator. Teledensity in developing countries, however, has typically been significantly lower than that in developed countries12 and therefore sector policy has tended to focus first on improving access to basic services rather than ensuring universality of quality of service.13 A third difference lies in the degree of market liberalization. In many developing countries, elements of the fixed network, such as core backbone infrastructure or international gateways, are often still a de facto or de jure monopoly. Policy and regulatory reforms in developing countries have increasingly encouraged infrastructure sharing (of facilities such as towers and fibre), IPOs, and BOT-​t ype concession schemes as alternatives to promoting competition in and privatizing the core fixed network. The wider legal, political, and institutional environment of the subject country will also have an impact on the form and effectiveness of any regulatory reform. In developing countries, the basic framework of a functioning legal and judicial system might be lacking or dysfunctional, and consequently there might be no effective check on arbitrary decision-​making by a regulator. Where legal systems do not support a concept of binding judicial precedent, reliance on courts to appeal regulatory decision-​making can create inconsistencies in regulatory approach. Institutional separation between government and the incumbent operator might also be lacking, and political involvement in decision-​making might be more pervasive than in developing countries. While the privatization story is today mainly completed (with more than 160 states and territories having fully

12   In 2016, the average worldwide total number of mobile subscriptions per 100 inhabitants was 99.7 and fixed telephone subscriptions was 14.3, whereas for developing countries these figures were 93 and 9.3 respectively. See ITU World Telecommunication/​ ICT Indicators database:  . 13   Some developing countries, such as Timor-​L este, emphasize ‘access’ in a technology-​neutral way, recognizing that access is more important than the type of network providing service. See, eg, Timor-​L este, Decree Law No. 15/​2012 of 28 March 2012, On the Regulation of the Telecommunications Sector, §57.4.

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or partially privatized their incumbent fixed operators14), many governments in developing countries still retain stakes in the incumbent fixed operator, and sometimes in one or more mobile operators.15 Furthermore, if the regulatory authority is not appropriately independent from government, there is the risk of political interference and privately owned operators might find themselves at a disadvantage vis-​à-​v is operators that are politically well connected or have legacy state ownership. Corruption might also be a fact of life, which can affect both the substance of regulatory decisions and how they are perceived. Where these factors are present, best practice may suggest a more prescriptive and transparent regulatory regime to minimize the risk of arbitrary, corrupt, or politically influenced decision-​making. The form and effectiveness of regulatory reforms will also be impacted by the resources and expertise of the regulatory authority. For example, if reliable market and cost data are unavailable (or the regulator lacks the resources to analyse such data), sophisticated regulatory techniques commonly used in the developed world might not be inappropriate. Simple regulatory controls or procedures might increase the likelihood that they will be implemented and enforced. The legacy of sector regulation will also have an impact. Often sector reforms in developing countries have been undertaken on an ad hoc basis, resulting in conflicting regulatory approaches. The pace of technology and market changes is often well ahead of developing country regulatory structures (which are typically reactionary). A legacy of partial or incomplete reform initiatives can significantly hinder future sector development and constrain the regulator’s freedom to act. As a result, regulatory compromises might need to be brokered with existing operators in order to overcome legal or structural barriers to reform.16 The wider legal and regulatory framework of a country might also influence the form and effectiveness of regulatory reforms. For example, foreign exchange controls might make it difficult for operators to invest in network expansion or upgrades. Regulators must take such constraints into account when calculating costs, reviewing market behaviour, and monitoring quality of service. The subject country might lack an underlay of generic competition law (which is today

14   ITU, ‘Trends in Telecommunication Reform 2010–​11:  Enabling Tomorrow’s Digital World Summary’, Geneva, 2011. 15   See eg country level data in The Little Data Book on Information and Communication Technology 2017, World Bank, 2017. . While this is also true in some developed countries, usually institutional separation is less clear and political involvement in operational decision-​making more pervasive in the developing world. 16   In Lebanon, for example, a ‘new’ sector law (Law 431/​2002 of July 2002) was adopted but only partially implemented. Provisions regarding corporatizing the telecommunications arm of the Ministry and transfer of full regulatory powers to the regulatory agency created under the law are not fully in place.

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assumed in developed country regulation), and therefore the regulatory framework might need to compensate for this absence.

17.2.3  The EU model Of the various regulatory models used in developed countries, the EU regulatory framework has emerged as the de facto global standard, and has successfully provided the basis for regulatory reforms around the world.17 The EU regulatory framework generally provides a sound reference of good international practice on which to build a comprehensive package of sector reforms. That said, there is no EU ‘regulatory text’ which can simply be reproduced in a given country. The EU model includes a series of directives,18 which direct individual EU Member States to enact compliant national legislation by a specified implementation date. Individual Member States and national regulatory authorities are sometimes given considerable latitude as to how these are implemented under the rubric of ‘subsidiarity’, and Member States have sometimes interpreted and applied provisions of these EU directives in divergent ways. Still, developing countries frequently draw from EU regulatory principles to design their regulatory frameworks. The evolution of the EU approach to regulation of the telecommunications sector can usefully be divided into three discrete phases, elements of which will be relevant to different developing countries at different times, depending on their stage of market and regulatory maturity. The first phase was one of transitional market regulation (1997–​2001), during which a series of directives and regulations (the ‘1998 package’) were adopted to regulate the shift from monopoly to full competition. The second phase began with a new package of directives in 2002 designed to regulate now fully liberalized and increasingly mature telecommunications markets (the ‘2002 package’). This second phase was aimed at creating the conditions for sustainable competition, with a view to enabling national regulatory authorities to roll back many of the detailed ex ante regulatory controls of the 1998 package once a market achieved effective competition. The third phase, marked by a package of reforms adopted in December 2009 (the ‘2009

17   The US model has been emulated in some countries, particularly in Latin America. However, the complexities of the interplay of federal and state regulation, the impact of US constitutional principles, and the lack of legacy state ownership in the sector mean that US regulatory structures are generally less relevant to the design of regulatory frameworks in developing countries. 18   The directives which together form the EU regulatory telecommunications framework are currently being reviewed and recast into a single directive, the European Electronic Communications Code, currently expected to be adopted in mid-​2018 and transposed into the national law of EU Member States over the subsequent 18 months.

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package’), was designed, among other things, to respond to the challenges posed by the growth in broadband internet usage, next-​generation networks, and network security, including strengthening provisions on infrastructure sharing and consumer protection. The EU framework is now once again under review, the guiding principles of which are the promotion of ‘very high-​capacity’ broadband connectivity, attempts at centralizing spectrum management at EU level and potentially bringing into the scope of consumer regulation certain ‘over the top’ or online communications services that are currently outside the scope of telecommunications regulation. Central to the 1998 package were the requirements to establish a national regulatory authority, to adopt a new regulatory framework designed to control anti-​ competitive conduct by the incumbent, and to manage the transition from monopoly to full competition. The reforms introduced by the 1998 package were based on the principle of ‘open network provision’, which emphasized that access to and use of public telecommunications networks and services should be unrestricted, except where limited by non-​economic reasons in the general interest such as network integrity and security. The principles of objectivity, proportionality, transparency, non-​ discrimination, and regulatory independence were required to underpin Member States’ regulatory frameworks. The 1998 package is most germane to developing countries designing first-​generation reforms. The 2002 and 2009 packages are often less relevant, as many of the ‘lighter touch’ regulatory principles or regulatory exit strategies assume a backdrop of robust competition law to control anti-​competitive market behaviour. However, elements of both the 2002 and 2009 packages might be relevant to address specific second-​generation issues, such as convergence, broadband access, network security, and consumer protection, as discussed more fully in Section 17.5 below. In addition, certain aspects of the current EU framework review might also be relevant, particularly with respect to ensuring appropriate consumer protections in relation to online communications services and promoting broadband access (even though the scope and level of broadband access sought might be lower in developing countries).

17.2.4  Regional influences Regional bodies and initiatives have also played and are continuing to play a major role in influencing sector reforms, especially in the developing world. A number of regional organizations have also promulgated tools to promote harmonization of telecommunication legislation. In Africa, for example, these include the Economic Community of West African States (ECOWAS), which has promulgated its series of Supplemental Acts to be adopted by its members, and the Southern African

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Development Community (SADC), which has adopted regulatory guidelines.19 While there are many regional initiatives, their aims and purposes are diverse.20 Some, like ECOWAS, the Organisation of Eastern Caribbean States and of course the EU are aimed at both regional integration and the promotion of harmonization (or at least inter-​operability) of legislative instruments. The success of any regional regulatory initiatives will depend in part on the collective political will to formulate regional policy and the existence of underlying regional institutional structures to implement that policy.

17.3  F OUNDATION A L R E GUL ATORY COMP ONENT S An effective legal and regulatory framework is essential to regulate the sector once state control (through ownership of a monopolist incumbent) is relinquished, and to attract private investment into the telecommunications sector. However, there is no ‘one-​size-​fits-​a ll’ approach. Rather, as described above in Section 17.2, each individual country must carefully analyse its specific market characteristics, legal foundations, regulatory and institutional capacity, and any political realities or tensions that might influence or shape a particular regulatory approach. The key to successful implementation of a new regulatory framework in developing countries is to combine the lessons learned from international experience with a deep understanding of local circumstances and priorities. Yet, despite the best of intentions and well-​structured regulatory parameters, true regulator independence remains a challenge in many developing countries.

17.3.1  Regulatory architecture Typically a new regulatory framework is introduced through the enactment of new telecommunications legislation, which creates a new regulatory authority, requires market liberalization, and specifies core regulatory principles. In addition, changes to non-​telecommunications legislation might be required to provide the necessary legal and regulatory security for market participants.21 Laws on foreign

19   ECOWAS Supplementary Acts of Telecommunications, Information and Communication Technology (ICT) Sector are available at ; SADC Protocol on Transport, Communications and Meteorology is available at . 20   For a thorough review of regional telecommunications initiatives in Africa, see Report on ICT Initiatives and Research Capacity in IST-​A frica Partner Countries, IST-​A frica (2016). 21  See, Schwarz, T and Satola, D, ‘Telecommunications Legislation in Transitional and Developing Economies’ World Bank Technical Paper No 489 (Washington DC, the World Bank, 2000), at 13–​17 (Schwarz and Satola).

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investment, foreign exchange controls, taxation, company formation, corporate governance, competition, intellectual property, broadcasting, data protection and privacy, among others—​or the lack thereof—​can significantly impact the attractiveness, development, and growth of the sector or conflict with the proposed approach for sectoral reform. The respective roles and importance of primary legislation, regulations, orders, guidelines, and licences will also need to be considered as part of the regulatory design. Ideally, core principles and the basic framework of the regime should be enshrined in primary legislation, leaving the detail to secondary legislation, which can then be more easily adapted and evolve as markets develop. Investors in developing countries with an uncertain regulatory environment have sometimes attempted to protect their interests by seeking detailed and self-​ contained licences that purport to cover all key regulatory controls, together with limitations on the regulatory authority’s ability to amend those licence terms. This approach had been adopted in some privatizations and licence auctions in the developing world and was thought to provide investors and lenders with the regulatory comfort needed to undertake major investments in the sector. This approach, however, has two main problems. Firstly, the protection granted is not watertight: a licence in most countries is simply an administrative instrument that can be amended by any legislative or regulatory instrument having primacy under local law.22 Secondly, this approach hampers the development of a modern regulatory framework, as bespoke, often conflicting, arrangements are negotiated with each licence holder individually, instead of rules and regulations being established that apply to all market participants. Instead, it is preferable to limit licence terms to fundamental, investor-​specific requirements (eg the scope and duration of the authorization, any individual commitments (eg for network roll-​out or quality of service), and rights to radio frequencies), and to house generally applicable regulatory controls in primary legislation and regulations. Comprehensive, detailed licences should instead be limited to those countries where licences are issued in advance of regulatory reform, and where no reasonable sector-​specific regulatory framework is in place; provided that such licenses provide a mechanism, as was the case in Tonga, to ensure that when the legal and regulatory reforms are completed, the licences will be ‘regularised’ with the new law, and not vice versa.

22   See eg the experience of Niger, where Telecel’s ‘unchangeable’ comprehensive licence was repeatedly revoked for political reasons in the late 1990s.

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17.3.2  Role of competition law The role of competition law will need to be considered in addition to the sector-​ specific regulatory regime.23 In the developed world, competition rules covering anti-​competitive market concentrations and behaviour generally both supplement and complement sector-​specific regulatory frameworks. The EU ex ante framework is designed to allow for the gradual rolling back of sector-​specific regulatory controls as sustainable competition is established, because ex post competition law provides the relevant national and European authorities with the power to intervene ‘after the fact’ where necessary. Competition law also enables the US Federal Communications Commission (the FCC) to exercise regulatory forbearance.24 In developing countries that lack a robust body of competition law or competition regulator, different strategies have evolved for addressing anti-​ competitive conduct as part of sectoral reforms. One relatively common strategy is to include provisions on sector-​specific competition regulation in the new telecommunications legislation, sometimes in the form of an additional chapter on competition law.25 However, this can often be of limited utility in practice, as the telecommunications regulator might lack the expertise or resources to monitor and enforce competition laws. A second common strategy, drawn from the EU model, is for regulatory frameworks in developing countries to incorporate a ‘two-​tier’ structure, whereby greater regulatory controls are placed on operators who have market dominance or significant market power. This structure requires the definition of the relevant economic markets, onto which the concept of ‘dominance’ or ‘significant market power’ is applied, but can be difficult to translate into a developing country context.26 The concepts of dominance and significant market power are derived from competition law principles, and generally refer to the ability of an operator to act independently of competitors, suppliers, and customers. The task of defining specific economic markets can be complex and labour-​ intensive, requiring the collection of a significant amount of data and a substantial

23   See Ungerer, H, ‘Access Issues under EU Regulation and Anti-​t rust Law: The Case of Telecommunications and internet Markets’, Incidental Paper, The Program on Information Resources Policy, Harvard University and the Center for Information Policy Research (2000) (available at ) for a comprehensive discussion of the increasingly important interplay between sector-​specific legislation and general competition legislation. 24   The principle of ‘regulatory forbearance’ directs the FCC to forbear from applying any provision of the Telecommunications Act of 1996 where analysis of the relevant market leads the FCC to conclude that forbearance would not harm consumers and is generally in the public interest. 25   See eg the Nigerian Communications Act 2003, Chapter VI, Part I. 26   See the telecommunications law of the Solomon Islands (Telecommunications Act 2009 (No 20 of 2009)), which adapts the principles familiar in the EU framework to local circumstances (see Section 60 et seq).

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amount of economic analysis. For a developing country, therefore, it might be preferable to develop market definitions and tests that, while providing a recognizable framework for managing competition, at the same time reflect local economic and sector realities. In some cases these frameworks can be updated as markets evolve or benchmark ‘dominance’ to a specified minimum market share.27 The Solomon Islands adopted an alternative qualitative approach to managing competition that did not make use of quantitative targets.28 Another approach is to regulate all operators in the same manner, regardless of their market position. For example, such a regulatory regime might require approval of all tariffs or interconnection agreements before they can take effect (although this can be costly and create an unnecessary administrative burden) or identify specific essential services and regulate access to these services (rather than attempt to identify specific markets and then assess dominance in those markets). A third strategy is to include specific provisions in individual licences designed to control anti-​competitive behaviour of licensees. These could include prohibitions on unfair cross-​subsidies or undue discrimination, or requirements that incumbents split service divisions into two or more separate and independent companies or business streams and maintain transparency and non-​d iscrimination in dealings between the two businesses (often described as ‘functional separation’). In some countries, the government has also limited the lines of business into which the incumbent may enter (eg by precluding the incumbent from holding a mobile licence for a period of time). Again, in the absence of a backdrop of a competition law regime that defines ‘unfair’, ‘undue’, and ‘anti-​competitive’ on which the regulatory authority could rely to enforce the licence, this strategy is unlikely to be effective in constraining anti-​competitive conduct. The effectiveness of any of these solutions depends on a number of factors, including the resources and capacity of regulators to handle complex competition analysis and complaints, and the competency of the courts to manage telecommunications disputes. In countries that have horizontal competition laws and a competition regulator in addition to a sector regulator, the regulatory framework will need to address any overlap in jurisdiction and ensure, where possible, that regulatory approaches to anti-​competitive conduct are consistent across both regimes.

27   Benchmarking, while imperfect, can enable a nascent regulatory authority to provide some guidance to market participants, and is similar to the rebuttable presumption of dominance for operators with greater than 25% market share that was adopted in the EU 1997 Interconnection Directive. 28   See n 26, at Section 70, et seq.

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17.3.3  Independent regulatory authority Central to almost all sector reform efforts is the creation of an independent regulatory authority, which has day-​to-​day regulatory responsibility for the telecommunications sector. There are now more than 190 regulatory authorities for the communications sector worldwide.29 Regulatory authorities differ widely in form, jurisdiction, powers, resources, and degree of autonomy,30 and their composition, powers, scope of authority, and institutional form will reflect the legal, political, and institutional backdrop of the country concerned. The form of the regulatory authority and its position in relation to the executive branch of government must be determined. Models in the developed world vary widely. In the United States, for instance, the FCC is an independent rule-​making body. In Denmark, the Danish Business Authority is located within the relevant ministry, separated only by ‘Chinese walls’, although all EU Member States are required by law to ensure that their regulatory authorities perform their principal regulatory functions independently from government. In the developing world, international regulatory best practice is to create a regulatory authority that is as independent as possible from the influence of, or capture by, political interests to ensure that regulators are able to perform their functions without interference.31 The more independent the regulator is from political processes and possible industry capture, the more a prospective new entrant is likely to be attracted to making an investment in the domestic telecommunications market. The decision as to which functions should remain the responsibility of government and which should be the responsibility of the new regulator will generally be a political one. Ideally, the role of the ministry following the transfer of regulatory powers would be limited to the formulation of sector policy, oversight of liberalization and privatization initiatives, and responsibility for any inter-​governmental matters. Separating policy from regulatory functions should enable sector regulation to be implemented in a neutral and impartial manner. Where an incumbent is wholly or partly state-​owned, it is preferable to transfer responsibility for the state-​held shares to a different ministry other than

 .   The concept of ‘independence’ is mutable, being affected by heterogenous factors apart from formal institutional and legal considerations, including type of underlying political system, maturity of institutions in developing countries, the history of institutions acting autonomously from ‘government’, etc. For example, the UK’s Ofcom reports to the Secretary of State for Industry, but in reality is fully independent. See, also, Northfield, D, ‘Global Trends in Communications Regulatory Structures’, (2001) 1 Global Regulatory Strategies No 5–​6, the Yankee Group (September–​October). 31   In this chapter, independence refers to the collection of attributes about a regulator that allow it to function independently. 29

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the telecommunications line ministry, such as the ministry responsible for the economy or finance. By separating the policy function from ownership of the incumbent, sector policy is more likely to be formulated in the wider national interest, even where this might conflict with the interests of the state-​owned incumbent. The remit of the new regulatory authority must also be clearly defined. Most commonly, the regulatory authority is given responsibility solely for the telecommunications sector.32 However, a number of countries have established multi-​sectoral regulators. An assessment of the advantages and disadvantages of a sector-​specific versus multi-​sectoral regulator must be made on a case-​by-​case basis, taking into account which model best protects against industry and political capture, which is most advantageous for leveraging economies of scale, as well as which sectors are to be covered.33 Multi-​sectoral models are more common in smaller countries, particularly where human and financial resources are scarce. Economies of scale and scope can be achieved through sharing a common pool of legal, regulatory, financial, and economic expertise, and administrative overhead. Multi-​sectoral models can also be useful where industries are dominated by a single player, as the incumbent’s influence might be diminished where the regulatory authority has jurisdiction over multiple industries. Moreover, where the regulated sectors fall within the responsibility of different line ministries, the use of a multi-​sectoral model can reduce the risk of political capture. A multi-​s ectoral regulator might be responsible for a range of unrelated utility sectors that share significant commonalities, such as the Public Utilities Commission of Latvia, which has jurisdiction over the telecommunications, postal, energy, water management, and waste disposal sectors. 34 Conversely, creating a regulator of related ‘converged’ sectors can facilitate the implementation of a technology-​neutral regulatory framework, avoid disputes over the delineation of regulatory authority in related sectors, and better position the regulator to adapt to technological change. A  good example is the Malaysian Communications Multimedia Commission (MCMC), which is responsible for regulating the telecommunications, broadcasting, multimedia, e-​c ommerce, and postal sectors, and is also the certification authority for digital signatures. The legislation creating a regulatory authority should specify the scope of its authority and powers. Sector-​specific powers should cover licensing, interconnection

  ICT Regulation Toolkit, (Toolkit).   See eg Schwarz and Satola, n 21. 34   ‘Driving Performance at Latvia’s Public Utilities Commission’ (Paris: OECD Publishing, 2016). 32

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and network access, retail tariff controls, numbering, spectrum management, implementation of universal and rural access strategies, and general market monitoring. Clear lines should be drawn between the spheres of authority of the regulator and other regulatory authorities with jurisdiction over aspects of the telecommunications sector (eg a competition authority may regulate access to wholesale telecommunications services, with a sector specific regulator responsible for all other aspects of the sector) in order to avoid regulatory ambiguity, for example over issues such as mobile money transfers. General powers should include the rights to acquire and dispose of property and to borrow funds (sometimes subject to governmental approval), and general powers of enforcement. The regulator should have robust information-​gathering powers, which, together with available sanctions, will give it teeth as a regulatory body. The type of information-​ gathering powers granted will depend on the institutional and legal framework of the individual country. A key benchmark against which regulatory authorities in developing countries are assessed is their actual and perceived independence from both government and industry. This notion of ‘independence’, while subjective, is generally used to describe the degree to which a regulator can exercise its functions free from political or industry influence and control. An independent regulator increases confidence in the regulatory framework by providing comfort that its decisions will be impartial and based on objective criteria rather than on political imperatives, and that all market players (whether state-​owned, dominant, or new entrants) will be treated fairly. One key way of promoting independence is for regulatory decisions to be made through a regulatory board or commission rather than a single individual. Use of a commission structure reduces the risk of arbitrary and subjective regulatory decisions, but can slow down the decision-​making process.35 Prior to 1998, 70 per cent of telecommunications regulatory agencies were headed by a single individual.36 Today this has declined to approximately 50 per cent.37 In principle, individual commissioners or board members should be selected on objective criteria based on their professional qualifications by a body other than the line ministry (such as by the country’s top executive or by a cross-​party Parliamentary committee), and by reference to certain predetermined appointment criteria. Political appointees or ministerial representatives are likely to reduce the independence (actual and perceived) and credibility of the regulatory

35   Conversely, in the Pacific Islands, recently formed regulators (eg Samoa, Solomon Islands, and Vanuatu) have relied on the single regulator model, in part due to human and economic resource constraints. 36   ICTEYE Database, . 37   Telecommunications Regulation Handbook, 21 (The World Bank, infoDev and the ITU, 2011).

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authority. Commissioners’ terms should preferably be fixed and end dates staggered so as to reduce the influence of any one government over their appointment, to encourage policy continuity, and to preserve institutional memory. Generally, full-​t ime members are preferable to part-​t ime members, to ensure that individual commissioners are able to give sufficient time and focus to their regulatory duties. However, staffing difficulties or poor remuneration may might make a part-​t ime structure more practicable. Individual commissioners or board members should have no actual or perceived conflict of interest. The telecommunications law should include controls on conflicts of interest (applicable to both commissioners and their direct families), and bar the appointment and authorize the removal of commissioners with a clear conflict of interest (eg due to political involvement or material investments or involvement in market participants). Often commissioners are required to file a statement on conflicts of interest on an annual basis, so that compliance can be monitored. However, conflict of interest provisions should not be so broad as to prevent skilled and experienced individuals from being selected. This can sometimes be a difficult balance to achieve in a country lacking a pool of experts in the field of telecommunications, where the initial staff of the regulator might come directly from the incumbent and/​or the line ministry. Conflicts might also arise on a day-​to-​day basis, where individual matters before the regulatory authority raise a potential conflict of interest. In these circumstances, the procedures of the regulatory authority should require affected commissioners and staff members to disclose this conflict and to abstain from any related decision-​m aking. Independence is also enhanced if the regulator is financially autonomous from the telecommunications ministry and from government budget  allocations. Therefore, regulatory authorities are most commonly financed through an industry-​w ide levy, typically imposed on sector participants through an annual licence fee (see Section 17.3.5). At the same time, efficiency and transparency are fostered by requiring the regulator to prepare formal budgets and audited accounts, which should be filed before Parliament or another overseeing authority, and by requiring the regulator to limit industry levies and licence fees to no more than the level needed to finance its budgeted running costs. Transparency, predictability, and impartiality of regulatory decision-​making are further enhanced where the regulatory authority conducts broad public consultation prior to making regulatory decisions or publishes guidelines in advance setting out the regulatory authority’s proposed approach, preferably based on objective criteria, and where regulatory decisions are subject to a clear right of appeal.

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17.3.4  Regulatory capacity-​building The process of establishing a credible and effective regulatory authority does not end with the enactment of enabling legislation. Regulatory decision-​making often requires sophisticated multi-​d isciplinary skills, and the regulatory authority will need to draw heavily on legal, economic, financial, and technical expertise. In addition, leadership skills might need enhancement. Consequently, regulatory authorities often need considerable investment in capacity building after formation. To help minimize reliance on outsourced expertise from external consultants, a programme of training and workshops should be put in place immediately following the regulatory authority’s creation to enable the transfer of any necessary skills and to ensure staff have a full understanding of the issues and techniques involved. Areas where training is often needed include: institutional development, regulatory procedures, analysing financial and market data, and the use of economic models. Preparation of detailed practice manuals and internal guidelines can also assist new or inexperienced regulators in applying regulatory techniques and rules. Workshops run by former regulators from countries that have previously undergone reform can be particularly helpful or insightful. In some cases, foreign nationals who have worked as regulators in their home country have been appointed as commissioners to provide the necessary sector expertise. While it is impossible to guarantee the prevention of arbitrary regulatory behaviour or inconsistent decision-​making, a number of tools and approaches are available to help new regulators build capacity. For example, the ITU and the World Bank jointly produce the ICT Regulation Toolkit, as well as a multilingual, searchable database of decisions by regulators from around the world. This database, amongst other things, provides regulators and other decision makers with access to sector ‘precedent’ from other jurisdictions, thereby facilitating better informed decision-​ making in resolving disputes and regulatory questions.38 Regional treaty organizations such as ECOWAS and regional networks of national regulators (eg REGULATEL in Latin America, or ECTEL in the Eastern Caribbean39) can also facilitate the sharing of know-​how and experience, and in some cases facilitate regional regulatory harmonization. Additionally, regional organizations can form resource centres, such as the Pacific Islands Regulatory Resource Centre,40 which is a resource available to regulators from the Pacific

38   The Toolkit is available at . The Regulators’ decisions database can be accessed at: . 39   ECTEL has actual regional (ie supranational) regulatory powers (). 40   Pacific ICT Regulatory Resource Center .

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Islands, or the Pacific Islands Legal Information Institute,41 a searchable online database of laws and regulations of Pacific Island countries.

17.3.5 Licensing Regulatory frameworks typically require operators of telecommunications networks and/​or providers of telecommunications services to obtain some form of licence or authorization, or alternatively to register with or notify the regulatory authority, prior to commercial service launch (which, for simplicity, we collectively refer to as ‘licences’ in this section). As licences control market entry, good regulatory practice dictates that both the licensing procedures and licence documents be straightforward, clear, and streamlined and be issued on the basis of objective licensing criteria. Licensing mechanisms that lack these features can deter new entrants, hamper sector development, encourage corruption, or increase the risk premium attached to investment in a country’s telecommunications sector. The regulatory regime must specify the issuing authority for licences. In some jurisdictions, the constitution might require licences to be issued by a minister, or some form of ministerial control might be sought for constitutional or political reasons. Ministerial (ie ‘political’) discretion over licensing is undesirable and creates another layer in the licensing process which is likely to delay or complicate licence grant. Where this additional layer is unavoidable, the scope of the ministerial power to veto a licence grant should be specified explicitly and be limited to matters of genuine governmental concern (eg national security), with time limits for ministerial intervention. Regulatory discretion in licence allocation should also be kept to a minimum, both to help protect the licensing system from corruption, and also to minimize licensing delay. Licence availability should reflect government liberalization policy. As a general principle, licence numbers should be unlimited and available upon request, except where there are real constraints, such as the availability of radio frequency spectrum. To the extent possible, temporary bottlenecks due to numbering or spectrum issues should be resolved by a revision of numbering or spectrum plans, rather than by curtailing market entry. Regulatory bottlenecks can be reduced by limiting formal licences to those required to operate key public networks (eg fixed and mobile network infrastructure licences, international gateways, and frequency usage). Entities wishing to provide value-​added, internet, or data services or to operate private networks could be under an obligation simply to register their activities with the regulatory authority,

41

  Pacific Islands Legal Information Institute .

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or even be exempted from licensing requirements altogether. Different licence categories, if used, should be kept to a minimum to avoid unnecessary licence duplication and to avoid the need for carriers to hold multiple licences (such as separate data or value-​added service licences, or separate fixed licences to operate the (fixed) backbone infrastructure of a wireless network). Licence categories should be clearly defined, and licence restrictions should not undermine sector liberalization and technological advancement and convergence (eg by prohibiting the establishment and operation of backbone networks, or prescribing narrowly the types of service that may be provided (eg prohibiting VoIP) or network that may be operated). Ideally, licences should be kept technology-​neutral to the extent possible. An encouraging trend is the emergence of ‘unified licensing’ regimes in India, Nigeria,42 and in a number of other African countries. The theory behind a unified licensing regime is that licences authorize the provision of services and/​or the operation of network infrastructure, but do not constrain the types of services or infrastructure that may be provided or operated.43 As adoption of IP-​based next-​ generation networks increases, a unified licensing regime is arguably the best way to overcome the difficulty of delineating and categorizing types of networks and services and to allow operators and customers to benefit from greater choice in the means of service delivery and use. Most licences attract some form of licence fee, which is a source of revenue for the regulatory authority. Licence fees are typically imposed for the initial licence grant and annually thereafter. The fees for most categories of licence should be kept to a minimum in order to avoid creating unnecessary barriers to market entry. Ideally, the initial fees for the grant of such licences should simply reflect the administrative cost of processing the application. However, licences that give an operator the right to use a scarce resource (such as radio spectrum) are often very valuable and governments typically charge substantial fees for their award (either upfront or over several years). These licences to use radio spectrum have sometimes proved to be so valuable that governments have attempted to raise licence fees retrospectively. Annual licence fees typically form the main source of funding for the regulatory authority and help to reduce its reliance on government funding, thereby reinforcing its independence. Fees are usually calculated as a percentage of a licensee’s 42  See NCC, ‘Unified Access Service’, . 43   In practice, some countries which purport to have adopted a ‘unified’ licensing regime still restrict the types of networks or services operated and provided, as the actual licence may itself place limitations on the licensee’s field of use, commonly in the form of licence annexes which define the types of service that may be provided or networks or technology that may be deployed.

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total revenue, though ideally this should be specified as a cap with the regulatory authority adjusting the annual fee according to the costs of regulating the sector.44 In countries with a multi-​sectoral regulatory authority, regulatory costs might need to be allocated across regulated industries. One option is to allocate the regulatory budget between participants in all regulated industries on the basis of their respective revenues. This approach has the advantage of simplicity and transparency. However, it can also create imbalances, since both profit margins and the cost of regulation might vary significantly between industries. An alternative approach is to separate the regulatory cost attributable to each industry, and set licence fees for each industry accordingly. This process can become unnecessarily complex where the majority of regulatory costs are common across industries. Where a multi-​sectoral regulator is responsible for information services, data protection, and e-​commerce, these areas of regulation might in practice be financed by the licence fees generated in the telecommunications sector because of the difficulties in identifying and taxing the other regulated activities separately.

17.3.6  Retail tariffs In the absence of effective competition, a dominant operator has little commercial incentive to keep tariffs low, and therefore regulatory controls are often required to protect consumers. Tariff controls directly affect revenue streams, and consequently an operator’s ability to finance new infrastructure investment. In addition, where the incumbent operator is owned by the state, controls on tariffs might also affect public sector revenue. Control of retail tariffs has therefore traditionally been seen as one of the most important, and politically charged, functions of the regulatory authority. Traditionally, retail tariff regulation has applied to the incumbent monopolist fixed operator (eg in the form of monitoring prices, ex ante price approval, or direct mandating of tariffs). Mobile operators and ISPs, on the other hand, because of the competitive nature of their market segments, have typically faced little or no regulatory controls on their retail tariffs. Continued retail regulation of the incumbent fixed operator’s tariffs looks increasingly anachronistic:  as the market share of the incumbent fixed operator falls in the face of growing competition, consumers are able to switch between providers, and no longer need to rely on the protection of retail tariff controls on the incumbent. Furthermore, where the incumbent fixed operator has been privatized and is in genuine competition with other operators and ISPs, retail tariff controls limit its ability to compete effectively. For this

44   The level of and method for calculating annual fees should in this case be set out in a regulation or order of general application.

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reason, as competition in the telecommunications markets of developing countries evolves, a system of regulation based on the concept of market dominance becomes more appropriate, providing a more systematic way for regulators to decide which licensees will be subject to retail tariff controls.45 Although retail tariffs of mobile operators have in practice fallen over time, regulators in developing countries might nonetheless in future scrutinize mobile retail tariffs more closely as mobile operators become dominant players. Various forms of retail tariff control have been adopted in the developing world. Often all regulated tariffs are required to be pre-​approved, an approach which made sense at a time when the sector was dominated by a monopoly provider which offered only a limited number of different services. However, the introduction of new technologies, new operators and a proliferation of new tariffs, including through service bundling, has made this form of tariff control increasingly unworkable. It both imposes an impossible burden on the regulatory authority and creates unnecessary delays for operators seeking to modify tariff plans and respond to competitive threats. In order to counter these administrative and economic problems, regulators in Europe introduced price-​cap formulae as an alternative retail tariff control system. This method sets price trends over a period of three to five years and allows regulated companies to retain the benefits of any efficiency improvements that they might make, which in turn gives them an incentive to invest in cost-​saving technologies and more efficient working practices. The simplicity and transparency of a formula-​based system makes the process of price regulation much clearer and more predictable for market participants. Most forms of tariff control require some form of cost-​orientation. Regulatory frameworks in developing countries vary in the degree to which they specify exactly which tariffs are to be based on costs and which cost concepts should be used. However, whether the system being used is a tariff approval system or a price-​c ap, an estimate of costs must be performed, whether by the regulatory authority or by the operator. Either way, regulators in developing countries are likely to face a number of difficult issues given the lack of relevant data or expertise to implement sophisticated cost models. For example, cost calculations must factor in the ability of operators to earn a ‘reasonable’ rate of return, but the estimate of what constitutes a ‘reasonable’ return is difficult and will be affected by local interest rates, lack of cost data, country risk, operator efficiencies, and the commercial risk associated with the business. Any one of

45   This approach was adopted in Bahrain, where licensed operators with significant power are subject to tariff controls in relation to any telecommunications service for which the regulatory authority determines that insufficient competition exists.

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these factors can materially distort retail tariff regimes. This is one reason why many developing countries resort to international benchmarks to set some retail price parameters. The incumbent’s tariffs are typically highly unbalanced prior to undertaking sector reforms: that is, charges for line rental and local calls are often historically set well below cost, with charges for national and international calls set well above cost. Incumbents have often retained monopolies over international gateway services, which has allowed them to use international services to cross-​subsidize losses made in other services. Yet rises in rental or local call charges disproportionately affect low-​income or low-​volume users, and therefore unsurprisingly tariff control is usually very politically sensitive. In practice, regulators have often found it difficult to raise and rebalance the incumbent’s tariffs, even where they have the statutory power to do so. At the same time, innovations such as VoIP have (lawfully or otherwise) reduced incumbents’ market shares in their more profitable markets and undermined the benefits of cross-​subsidization. Accordingly, governments and regulators have been forced to reconsider their policies on mandatory tariff rebalancing.

17.3.7 Interconnection New operators will not be able to enter the market unless their subscribers are able to call subscribers on other existing networks. Interconnection is also required for the provision of indirect access, which allows customers to receive telecommunications services, most commonly long-​d istance and international calls, from a provider other than the operator that provides the access line. The terms and conditions of interconnection (technical, commercial, and legal) have an important role in promoting competition in the sector. The mechanisms for regulating interconnection are established through four key regulatory elements—​the law governing the sector, subsidiary regulations, operator licences, and interconnection agreements. The law typically sets out the basic obligations to interconnect, the ‘two-​t ier’ regulatory structure (if used) that distinguishes dominant from non-​dominant operators, the powers of the regulator with regard to interconnection, and the basic principles for setting interconnection charges. Licences might contain similar provisions but often include greater detail. The regulator might also issue detailed interconnection regulations that apply to all operators, typically with more onerous provisions attaching to those that are dominant. Regulations tend to be a better tool than licences for this purpose because of the need to ensure that all operators are subject to the same regulatory controls, and to allow regulatory structures to be updated as markets evolve.

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Most of the detailed implementation of interconnection arrangements is done through interconnection agreements, which contain the specific commercial, technical, and operational terms between two interconnecting operators. Dominant operators might be required to publish a reference interconnection offer (RIO), which is usually subject to the approval of the regulatory authority and forms the basis of interconnection arrangements with other operators. Historically these RIOs were required only of dominant fixed operators, but in the developing world, the market dominance of mobile operators might require them to be subject to the same obligation. For example, in Oman (which has 165 per cent mobile penetration),46 the incumbent mobile operator, Oman Mobile, has had a RIO in place since 2009.47 In 2011, a similar approach was put forward for public consultation in Papua New Guinea.48 An alternative approach adopted in some jurisdictions is for the regulatory authority to encourage the use of a single model interconnection agreement by all operators, which assists in standardizing a country’s interconnection environment and in ensuring that interconnection is undertaken in accordance with international norms. In small countries in particular, the use of model agreements or a shorter, streamlined form of RIO, with greater emphasis on interconnection regulations and guidelines for detailed regulation, might be more appropriate. Interconnection payment arrangements vary greatly around the world, depending primarily on two factors: the retail tariff structure in the relevant country and the pattern of inter-​network traffic flows. If a country has a Receiving Party Pays retail tariff system (where customers pay to receive calls), then there is no need for an interconnection payment to be made for an inter-​network call since the cost of terminating a call is covered by the subscriber receiving the call. The alternative system, known as Calling Party Pays (CPP), requires the subscriber who initiates the call to pay the full cost of the call, whereas the person receiving the call pays nothing. Under this system, the network that terminates the call incurs a cost but receives no revenue from its customer. Therefore, the terminating network would generally expect to receive an interconnection payment from the originating network to cover the cost of carrying the call from the point of interconnection to the receiving party. However, if the traffic flows between networks

46  ITU World Telecommunication/​ ICT Indicators Database, . 47  Oman Mobile, Reference Interconnection Offer,  . 48   National Information and Communication Technology Authority of Papua New Guinea, ‘A public consultation document on a draft rule specifying the acceptable form for reference interconnection offers’, 15 November 2011.

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are approximately symmetrical (and where the applicable termination rates are at broadly comparable levels), the network operators might decide to waive the charges on the theory that net payments would be too insignificant to justify the administrative cost of an interconnection payment system.49 Where no interconnection payments are paid, this is known as a ‘bill and keep’ system. Although the EU framework is still based on the CPP model,50 ‘bill and keep’ systems are increasingly popular elsewhere. For example, the FCC adopted bill and keep as the national interconnection framework 51 arguing that this model imposes fewer regulatory burdens and eliminates a carrier’s ability to shift network costs to competitors and their customers.52 However, bill and keep might not always be the optimal approach to pricing IP interconnection given, eg, higher network costs particularly where quality of service is guaranteed.53 Developing countries have largely adopted the European CPP model. In these countries, where markets are developing rapidly, it is rare for traffic flows to be sufficiently stable and symmetrical to justify a bill and keep system, and therefore, in practice, systems of interconnection payment are generally in operation. As noted above, where networks charge for the provision of interconnection services, it is generally accepted that the applicable tariffs should be based on cost. This ensures that the provider of interconnection receives some compensation for the costs that it incurs and is given an incentive to invest in interconnection capacity. A number of different ways of calculating the cost of interconnection have emerged, the two most common methods being fully allocated costs and Long-​ Run Incremental Cost (LRIC). While LRIC has emerged as the global regulatory standard, its calculation can be very complex (often requiring significant network engineering, financial, and management accounting information) and, consequently, regulators in developing countries may instead rely on international

49   It is also worth bearing in mind the different termination rates applicable on fixed and mobile networks (largely the result of different cost bases). Symmetrical traffic between fixed and mobile networks might still result in net payments (likely to the mobile operators) and ‘bill and keep’ would therefore be unlikely to be suitable. 50   This is not the result of an explicit policy preference, but because European termination rates (which are required to be cost-​based) still exceed the transaction costs of the payment system. While operators are free to enter into ‘bill and keep’ agreements commercially, ‘bill and keep’ cannot be imposed by regulation because the regulatory framework requires regulators to ensure cost recovery when setting regulated prices. 51   FCC Press Release, ‘FCC Releases Connect America Fund Order’, 18 November 2011, . 52   FCC, ‘Order and Further Notice of Proposed Rulemaking’, 27 October 2011 [738], . 53   See GSMA publication:  Economic Study on IP Interworking:  White Paper Prepared for GSMA by CRA International and Gilbert + Tobin, February 2007, .

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benchmarking as a proxy for price data. The experience of regulating interconnection in the EU has provided a substantial body of evidence on the cost of interconnection, and this has been used to set interconnection rates in developing countries for both mobile and fixed operators.54 The decentralization of IP networks presents further challenges for interconnection regulation as networks are decoupled from services. It is clear that many countries are in a transitional phase from traditional PSTN network technology to IP networks. The continued co-​existence of legacy networks with IP-​based networks poses unique problems, both technically and in terms of commercial requirements. For example, interconnection pricing models based on traffic measured in minutes rather than on capacity measured in megabits can quickly become unworkable in an IP environment.

17.3.8  Facility-​sharing and co-​location Tower and mast sharing are often actively encouraged in developing country regulatory regimes. Not only does this lower the cost of, and time taken for, network roll-​out, but it also alleviates environmental concerns where a country lacks adequate environmental laws. Increasingly, new enterprises are being formed to own ‘passive’ infrastructure, such as towers and masts. A key emerging issue in developing countries is the need to regulate facility sharing and co-​location at submarine cable landing points and for domestic fibre networks. As telecommunications markets develop and broadband services become more widespread, the demand for international bandwidth rapidly increases. Traditionally, international bandwidth in developing countries had been provided primarily through satellite links. While historically satellite capacity has been expensive and insufficient to support growing demand, prices have fallen and capacity has increased. At the same time appetite for capacity provided over international submarine cable infrastructure continues to grow. Ensuring that competing operators can obtain equal and open access to these facilities on reasonable terms can be a key to stimulating competition at the retail level. Regulators in developing countries have historically found it very difficult to enforce effective cost-​based wholesale access to these facilities given the paucity of reliable information on costs.

54   eg in Botswana, the regulator (the BTA) issued two determinations on interconnection disputes in 2003 that covered the setting of termination charges. Although the BTA expressly recognized LRIC as the best methodology for setting interconnection charges, benchmarking was used due to the lack of available cost data. See ‘Ruling on Interconnection Charges Dispute between Botswana Telecommunications Corporation and Mascom Wireless (Pty) Limited’, BTA Ruling No 1 of 2003, 26 February 2003.

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Similarly, sharing of passive infrastructure (such as ducts and towers) and active infrastructure (backbone networks) is also essential for the development of competitive broadband services. In South East Asia in particular, network sharing is increasing in popularity as a means to drive down core infrastructure costs. In deciding on whether to take steps to encourage infrastructure sharing, regulators will have to consider the impact on facilities-​ based competition.

17.3.9  National roaming Where mobile operators are licensed on a sequential or regional basis, the incumbent mobile operator might be required to provide roaming services to the new entrant on its existing mobile network, often for a transitional period. National roaming appears to be most effective in large or sparsely populated countries where nationwide network roll-​out would be particularly expensive or onerous, or take a long time, or in countries (such as Iraq) where the new entrant is not licensed to install its own network infrastructure in all regions. In the early stages of commercial launch, new entrants are typically keen to build a strong brand and market reputation as quickly as possible. While national roaming might be seen as a relatively easy method of introducing competition or attaining rapid network coverage, it is not without its risks. For example, without effective regulation, the incumbent ‘host’ network might adversely affect the new entrant’s quality of service. In a country with two mobile operators, duopolistic practices could also arise where the operators collude (directly or indirectly) in a way that might impact on competition in certain areas or within certain market segments.

17.3.10  Radio spectrum allocation The regulatory framework will need to contain the principles and procedures governing the allocation of radio spectrum to ensure that resources are allocated between operators in a fair, non-​discriminatory, and efficient manner. Usually, a regulatory authority (often the telecommunications regulatory authority, but sometimes a separate spectrum agency) is given the power to maintain a national frequency plan and to assign frequency ranges to operators of telecommunications networks. Radio spectrum is a scarce resource and needs to be managed carefully to ensure its most efficient possible use. Radio spectrum is used by multiple government agencies and industries, including telecommunications, broadcasting, civil aviation, shipping, emergency services, national security and law enforcement agencies, and the military. The allocation of spectrum between different uses is, at

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a high level, carried out according to standards set by the ITU.55 In practice, spectrum grants have tended to be ad hoc, with first-​comers often granted large blocks of spectrum in an attempt to maximize interest and licence value. Today, many developing countries are looking to deploy broadband access, typically using wireless technologies. If prior spectrum grants were inefficient or over-​extensive, regulators might find that new broadband wireless technologies require the relocation of existing spectrum users to other bands. Additionally, balancing the use of licensed and unlicensed spectrum remains a challenge everywhere, increasing the importance of monitoring the use of spectrum. Typically, spectrum plans will need regular updating, and in some cases a (often politically contentious) spectrum re-​farming exercise will be essential to efficiently manage allocations and use of spectrum. There are three main models of spectrum regulation: (1) a ‘command and control’ model, where the government or licensing agency determines the strict operating parameters and rules defining spectrum rights; (2) a ‘market/​usage rights’ model, where the licensee is given more flexible rights to use specified spectrum within a defined area during a fixed period of time (with spectrum use rules largely limited to technical parameters in order to manage interference issues), and often the ability to transfer those rights to other spectrum users (through trades or leases, for instance); and (3) a ‘commons’ model, where spectrum is unlicensed and users share a frequency block subject only to limited technical requirements, eg with respect to power emissions (a well-​k nown example of the latter being the use of WiFi technologies in WLANs).56 The ‘command and control’ model is the model most commonly used for spectrum blocks around the world, particularly given its usefulness to meet military, emergency services, radio astronomy, and other public needs. However, it creates an administrative burden as operators need to acquire specific radio frequency licences for specific uses governed by bureaucratically defined spectrum allocations, thereby discouraging innovation and technological evolution. A ‘market/​usage rights’ model provides more flexibility, but can encourage spectrum ‘hoarding’ as operators might seek to acquire large blocks of spectrum for unspecified uses in order to deny spectrum opportunities to competitors, or profit from a subsequent trade. A ‘commons’ model has the benefit of fostering innovation, but is not appropriate for most spectrum uses as it does not enable sufficient management of over-​crowding and interference, particularly

55   However, specific allocations between different uses and spectrum coordination with neighbouring countries will need to be undertaken at both a regional coordination level and at a national level. In practice, spectrum usage allocation might be negotiated informally between the relevant responsible ministries; alternatively, a formal inter-​m inisterial body might be established for this purpose. 56   ITU, ‘Trends in Telecommunication Reform 2006: Regulating in the Broadband World’, 2006.

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where the spectrum use is not highly localized. In practice, spectrum management is a hybrid of these three approaches, providing flexibility to allow the rapid deployment of new radio technologies, while safeguarding the interests of other spectrum users and minimizing the regulatory burden on spectrum regulators. Licences to use frequencies might be separate from or incorporated in network operating licences and authorizations. Rights to use frequencies that are an essential adjunct to the operating licence (such as the uplink and downlink frequencies for satellite and mobile networks) should ideally be incorporated in the operational licence. Frequency fees should encourage efficient frequency use, to reflect the fact that radio spectrum is a valuable, limited public resource. Thus, fees should be high enough to prevent operators from ‘hoarding’ unused spectrum, but low enough so as not to discourage smaller operators from entering the market or using wireless transmission media. There are various market-​based mechanisms, including spectrum auctions, for ensuring that spectrum fees are appropriately set, and the approach taken should reflect the availability and characteristics of the particular frequency range, current and likely future demand, and the need to promote efficient use. Given the scarcity of the resource and increased spectrum demands (particularly to support mobile applications) there are recent trends towards allocation initiatives that seek to maximize the use of unlicensed spectrum for spectrum reserved for specific use, eg, in the case of ITU allocated ISM (Industrial, Scientific, Medical) bands. Use of these bands differs internationally, but, regardless of the legacy model of spectrum allocation, many countries have recognized the benefits of permitting unregulated use (or class licensed use) of low-​powered devices, including wireless LANs, Bluetooth, and cordless phones in the 2.4 GHz bands. The idea is to allow many services to coexist (increasing the efficient use of the scarce resource) and increasing opportunities for experimentation and innovation (by reducing financial and administrative barriers to entry). One current spectrum management issue that is not confined to developing countries is the realization of the ‘digital dividend’, ie the spectrum freed up upon the conversion from analogue to digital (largely broadcasting) transmission. In developing countries, the digital dividend might be used for mobile broadband, a cost-​effective means of improving broadband availability particularly where fixed infrastructure might be lacking. In markets which already have high mobile penetration, allocating the digital dividend spectrum for the deployment of 4G networks has the potential to lower the cost of provisioning additional capacity on existing mobile networks. The growth in demand for mobile broadband services and associated spectrum requirements mean that governments can potentially receive significant financial gains, especially if done through spectrum

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auctions (as was recently the case in India), from repurposing broadcast transmission spectrum.

17.3.11  Numbering and number portability In a post-​l iberalization environment, responsibility for numbering plans is generally transferred from the former incumbent to the new regulatory authority. The regulation of numbers is similar to the regulation of spectrum—​a transparent plan is put in place for numbers and all operators are afforded non-​d iscriminatory and timely access to numbering blocks. Numbers are sometimes classified in telecommunications legislation as a scarce resource. Technically they are not, and rather than limiting the number of available licences, regulatory authorities should instead make managed changes to the existing numbering plan to free up sufficient numbering ranges to meet demand. Mere transfer of management of the numbering plan to the regulatory authority is unlikely to be sufficient to level the playing field between the historic incumbent operator and new entrants. Frequently, the incumbent will have secured large numbering blocks for its own use prior to the transfer. Not only would this have encouraged the inefficient use of numbers, but it would also have put the incumbent at a competitive advantage compared to new entrants, as the incumbent would have access to many more so-​called ‘golden’ or premium numbers than the new entrants. Ideally, limited numbering blocks should be allocated to each operator on the basis of forecast need, with the rest reclaimed by the regulatory authority. This approach helps ensure that numbering resources remain sufficient without the need for repeated and frequent changes to the numbering plan (which are disruptive and costly to implement), and ensures that new operators requiring numbering capacity are treated fairly and equitably. Efficient use of numbering resources is also fostered by charging for number use. These charges can be levied on operators per number block. The power to impose such charges should be expressly conferred on the regulatory authority in its enabling legislation. Number portability refers to the ability of subscribers to retain their number when they change service provider, and contributes to a well-​functioning competitive market (as the inability to keep one’s number can often act as a disincentive to switching between providers). Together with carrier pre-​selection, it is intended to reduce the cost to customers of switching between providers and therefore promote competition by facilitating new entry and stimulating improvements in quality of service. However, both require software and hardware upgrades and therefore involve costs to operators. Accordingly, before mandating number portability or carrier pre-​selection, regulators in developing countries should consider whether the benefits of such measures are likely to outweigh the

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cost of implementation. In particular, it may be better for regulators in developing countries to prioritize reducing barriers to entry, encouraging the establishment of viable alternative providers.

17.3.12  Universal service Universal access and service policies in most developing countries remain focused on providing communities with access to basic telecommunications facilities and services (‘universal access’), rather than providing service at an individual household level (‘universal service’). In rural areas, this might take the form of telecentres or community phones, or special subsidized ‘rural access’ network licensing schemes. In peri-​u rban areas, the focus might be more on ensuring affordability of basic services or some form of communications access for households falling below the poverty line. Typically, the government will be responsible for sector policy and the regulatory authority for its implementation. As access to telecommunications services in rural areas is often a politically sensitive issue, governments usually want to be in charge of defining universal access and service objectives. Once objectives have been determined, a strategy or programme for their attainment must be developed. Funding of universal access and service programmes is a very significant issue for regulators, and the traditional approach is to create a ‘Universal Service’ or ‘Rural Access’ fund, to which licensed operators contribute on a regular basis. These funds require careful design, efficient and transparent management, auditing, and rational fund allocations. The fund operates as a tax on the sector, and in some countries can have an adverse impact on operators and investment in the sector. Furthermore, despite the substantial international experience of designing such programmes in both developed and developing countries, in practice, the track record of Universal Service or Rural Access funds in developing countries remains poor. In most cases, funds have not been fully disbursed or, where they have, they have not been effective at meeting their objectives (whether universal access or service). Universal service obligations are not, however, a suitable tool for achieving large scale network deployment objectives. These are better pursued through mobile licences, and in particular through network roll-​out and coverage obligations in those licences. Generally, the more onerous the roll-​out and coverage obligations, the less a bidder for a mobile licence will be willing to pay. Governments will therefore have to balance their need for national connectivity, on the one hand, and their desire to maximize licence revenues, on the other. Mobile operators might also seek to fund their network roll-​out through retail revenues, which (in

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the absence of retail price regulation) could result in high prices and be politically contentious. In recent times, universal access and service initiatives that were originally conceived for fixed telecommunications, have had to become increasingly sophisticated, firstly, to accommodate multiple and regionally based universal service providers (often selected via auction-​based systems to select providers) and secondly to accommodate a changing technology landscape that involves convergence and broadband access.

17.3.13  Property rights New entrants in developing countries will require property rights to both public and private land in order to construct, maintain, and operate their networks, such as rights of way, compulsory purchase powers, and rights to cut trees, fly lines, or erect network infrastructure. Fast-​track zoning procedures might also be desirable to allow rapid network roll-​out. The extent to which an operator will need such property rights will depend on its existing rights, its network roll-​out plans and the technology deployed. In addition, the ease with which an operator can access public and private land and install infrastructure will have a material impact on whether it decides to roll out duplicating network infrastructure (which might be both economically inefficient and environmentally disruptive) or simply to lease the necessary infrastructure from existing market players. In some cases it might also be necessary to coordinate the property rights exercised by different utilities, particularly in respect of network construction, so as to minimize disruption. The design of appropriate property rights will depend heavily on the property law system and land ownership structures in the relevant country. Often, regulatory objectives will dictate the nature of property rights, in particular whether the regime is intended to foster facilities-​ based competition or facility sharing among operators.

17.3.14  Managing disputes in a broadband-​dominated world Like any other part of the regulatory process, the manner in which, and speed with which, disputes in the sector are resolved, and the finality of, or ability to appeal, those decisions, are key issues that need to be taken into account in regulatory design.57 Regulatory policy, including dispute resolution and enforcement, can shape 57   For a more thorough discussion of innovations in telecommunication dispute resolution, on which this section is based, see eg Dispute Resolution in the Telecommunications Sector:  Current Practices and Future Directions, World Bank/​I TU, 2005, currently available at: .

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markets through the incentive structures it creates. Where the incentives are for operators and service providers to seek resolution of disputes, rather than seeking to create disputes or prolong them, stakeholders in the sector should benefit from resulting efficiencies. In particular, sector development will benefit from a regulatory environment that encourages the prevention, early identification, and resolution of disputes. Earlier editions of this chapter went into greater detail on the causes of and responses to disputes in the sector. Those basic dispute resolution policy principles continue to apply, even in a broadband-​dominated world. The years immediately following the first wave of post-​liberalization privatizations and new entrant mobile licensing saw corresponding waves of disputes involving the nature and duration of exclusive rights granted to incumbents, the licensing of new entrants, tariff arrangements, interconnection arrangements, and spectrum matters.58 As a response, telecommunications laws increasingly included sector-​ specific mechanisms (so-​called ‘alternative dispute resolution’ techniques such as arbitration) to deal with those disputes. The attempt to ensure some degree of certainty about the resolution of those disputes finds new purchase in the increasing complexity of the market, as both the number of service providers and the range of services (and technologies used to provide them) grow and diversify. For instance, we are seeing growing tensions in the market between infrastructure and service providers on the one hand and so-​called ‘over-​the-​top’ providers on the other, which are playing out in regulatory debates over customer access to OTT content (in the context of ‘net-​neutrality’). Investing and operating in the developing world typically carry a higher degree of political, economic, and security risk, which might not be adequately addressed (and indeed might be exacerbated) by local avenues for dispute resolution. For example, if there is a change in government policy, such as the abolition of existing rights or a nationalization of core telecommunications infrastructure, the affected foreign investors might find local courts or regulatory bodies unsympathetic. Accordingly foreign investors might seek to protect their investments in high-​r isk markets by requiring disputes relating to their investments to be resolved through international arbitration in a neutral venue (eg through the World Bank’s International Centre for Settlement of Investment Disputes (ICSID),59 the International Chamber of Commerce,60 or according to the United Nations Commission on International Trade Law).61 These solutions can have an adverse effect on the local regulatory framework, by hampering the development of local jurisprudence or creating inconsistent regulatory outcomes that do not reflect

59  Ibid.   For further information cf .   For further information cf . 61   For further information re cf . 58

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local norms. Launching an international arbitration can also be extremely costly, and be of limited effect if the relevant government refuses to recognize the arbitration and the plaintiff investor is unable to enforce an arbitral award. For example, when France Télécom brought an international arbitration claim against the Lebanese government following the government’s termination of its BOT contract in 2001, the Lebanese government secured a judgment from a sympathetic local court that the arbitration provisions in the BOT contract were unlawful and of no legal effect, and used this as a basis to initially ignore the arbitration proceedings. If the host country is party to a Bilateral Investment Treaty (BIT)62 with the country in which a foreign investor is domiciled, the BIT will typically provide the foreign investor with protection against certain forms of state interference (including expropriation) in the host country, as well as a right to compensation under international law if the host country breaches its treaty obligations. Again, however, the protections offered by a BIT are not watertight. Most BITs provide for arbitration under ICSID as the primary dispute resolution mechanism, and so provide little protection once a host country has officially withdrawn from ICSID—​or has denounced the BIT concerned (often to avoid international dispute proceedings). Bolivia provides a salutary example: the Bolivian government re-​nationalized the incumbent fixed line operator and pre-​emptively withdrew from ICSID in an attempt to block its jurisdiction over an international arbitration brought by the aggrieved strategic investor. In January 2012, Venezuela similarly gave notice that it would withdraw from ICSID in the face of nearly a dozen pending ICSID cases (although aggrieved parties were able to validly bring claims against Venezuela prior to July 2012, when its withdrawal would become effective). The WTO has also introduced a dispute resolution framework for the telecommunications sector.63 USA v Mexico, a dispute over the interconnection rates between Mexico and the United States charged by Telmex, is the first (and so far only) case of WTO dispute resolution regarding telecommunications services under the GATS. This case established that the international interconnection services in question were cross-​border services covered by the GATS. While the WTO dispute resolution process can be complex, this case showed that the dispute resolution mechanisms provided in the GATS can be effective. The panel’s decision confirmed the principles set out in the Reference Paper as relevant in international telecommunications, particularly the pro-​competition protections. It also made

62   Currently there are more than 1480 Bilateral Investment Treaties between developing and developed countries. See . 63   See Bronckers, M and Larouche, P, ‘A Review of the WTO Regime for Telecommunications Services’, in The World Trade Organization and Trade in Services (Leiden: Martinus Nijhoff, 2008).

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clear that a country that had submitted its schedule of commitments was not excused from performance of those commitments merely because it had not yet adopted the necessary implementing regulations. Following the decision, Mexico agreed to promulgate the necessary regulations to give effect to its commitments.

17.4  BROA DB A ND — ​R EDEFINING THE ROL E OF THE S TATE In previous editions, this chapter had discussed issues relating to corporatizing and privatizing state-​owned incumbents. Indeed, from the 1990s, it was the policy of many governments to liberalize their telecommunications markets and introduce private sector participation (reflecting many of those governments’ WTO commitments), and modernizing the incumbent was a key component of these reforms, especially in developing countries. While privatization continues to be an outstanding issue in some countries, it no longer occupies a central place on the reform agenda of most countries. Instead, in this section we consider the growing role of government (in developed and developing countries alike) in the business of deploying, owning, and operating networks and providing services, through rolling out broadband (fibre) networks.

17.4.1  New dynamics of broadband network investment While the first wave of reforms emphasised core liberalization and private sector infrastructure investment, an interesting counter-​t rend is occurring internationally. Governments are once again and increasingly becoming investors, operators, and managers of telecommunications networks through the deployment of broadband enabled submarine and terrestrial fibre networks. This phenomenon exists in both developed and developing countries. For example, in the Asia-​Pacific region, the governments of Australia, New Zealand, and Singapore adopted bold government-​backed initiatives to deploy national fibre networks. More recently, in markets as diverse as Morocco and Montenegro, governments are considering how, whether, and to what extent state subsidies will be required to build out ubiquitous broadband coverage. In the EU, of course, ‘state-​a id’ has featured in broadband projects in Croatia, Finland, Lithuania, the Netherlands, Sweden, and elsewhere.64

64  See, World Bank, Montenegro—​ Policy note on broadband:  achieving universality of high-​ speed broadband—​review and application experience of the EU State aid framework. (Washington, DC: World Bank Group, 2017), .

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A number of factors could be contributing to these trends, beyond the explosive growth in the demand for data and bandwidth-​intensive services which makes such network deployments necessary. First, and perhaps most obvious, is the shift from circuit-​switched telephony to digital, IP-​based, packet-​switched technology. Indeed, the regulatory framework that emerged during the first wave of reforms initially provided technical and economic regulation of analogue, circuit-​ switched technology. In addition, in a global economic environment that was hit hard by the financial crisis of 2008, broadband investment (like many forms of infrastructure investment) was seen as a potential counter-​c yclical tool to promote economic activity. In the short term, as networks are deployed, significant capital investment and labour is required. In the long term, productivity and efficiency gains across the general economy are anticipated. Governments around the world, including in developing countries, are increasingly focused on securing widespread end user access to high-​speed broadband access technologies, as these are increasingly seen as necessary inputs for economic and civic engagement and growth in the wider economy. In practice, given the scale and cost of the capital investments needed, improving national broadband access requires full market liberalization (with new entrant operators being licensed as needed to roll out broadband access technologies, backbone infrastructure, and international gateways), robust access regulation (enabling new entrant operators to access and share domestic, cross-​border, and undersea backbone infrastructure on fair and reasonable terms), access to spectrum to support wireless access technologies, and any minimal barriers to entry (such as administrative approvals or rights of way, etc.). In addition to these regulatory measures, governments seeking better broadband network access and coverage have also begun to intervene directly in the provision of core network infrastructure. This is in contrast to the privatization trend of the late 1990s and early 2000s. Governments are now becoming involved in network development through investing in fibre-​optic cable infrastructure, either directly, through state-​owned incumbent operators, or through public-​ private partnerships (PPPs). These investments are aimed at providing widespread access to wholesale capacity at reasonable prices which, it is intended, will reduce the price and increase the coverage of broadband services. In Africa, for example, contracts totalling over US$1 billion for more than 30,000 kilometres of fibre-​ optic transmission networks were awarded in the eighteen months leading up to January 2008.65 By 2014, more than 585,000 kilometres of operational fibre-​optic 65  ‘Sub-​ Saharan Africa:  Broadband, Regulation and International Bandwidth Pricing Drive National Backbone Roll-​Out’, Global Insight, 29 January 2008.

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networks were in place.66 Contracts for such networks have been commissioned by numerous governments in sub-​Saharan Africa. Another approach is the one taken by the government of South Africa, which in 2006 combined the telecommunications assets of electricity provider Eskom and transport parastatal Transnet to create a new broadband infrastructure company, Infraco, to provide national backbone transmission capacity on a cost-​plus basis.67 These government-​backed networks pose interesting policy questions in privatized and liberalized markets. In some ways, they turn the clock back ten years, with governments again investing in network deployment where previously they had divested their interests in the telecommunications sector. One question that arises is whether governments will be able to utilize these networks effectively and fairly without distorting the market. Operators could, for example, find themselves under increasing political pressure to purchase backbone transmission capacity from the new government-​owned backbone networks in order to provide financial support to the state-​owned entity. On the other hand, where government-​owned backbone networks exist and are offering adequate quality of service at the right price, operators could be willing to use these networks to increase the capacity of their own networks. Access to such backbone services could significantly increase operators’ ability to roll out 4G (or even 5G) and other high-​speed technologies more quickly and more widely. However, to secure real benefits from the substantial government investments in fibre-​optic backbone infrastructure, these initiatives should be accompanied by complementary steps ensuring ‘open access’, including liberalizing the market for services (if not already liberalized), ensuring access to networks (through, for example, making available spectrum and licences to provide broadband wireless access), and ensuring access to international connectivity. Such interventions might come at a cost to the public purse given the cost of financing network construction. Government involvement in rolling out these networks might also have implications on public procurement rules. Increasing government involvement and the potential for new national monopolies also have implications for regulatory reform and design. In addition, growing penetration and reliance on broadband networks raise new regulatory challenges (including around cybercrime, data security, privacy, access to information, freedom of information, and online content regulation), which were not generally included in the wave of first-​generation reforms.

 .   ‘South Africa: Infraco Plans New Submarine Cable’, Global Insight, 3 August 2007.

66 67

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17.4.2  Broadband and the emergence of PPP models PPPs can be characterized as legal arrangements that allocate risk between one or more public sector entities and one or more private sector entities in relation to the governance, ownership, operation, and/​or financing of a project. A PPP arrangement can take a variety of legal forms, including joint ventures, management contracts (outsourcing), special purpose vehicles (private or public corporations), leases, and concessions, but the common element is the transfer or sharing of risk among the parties. Public-​sector financing, whether at the national level or in some combination with international donor financing, is now considered an essential catalyst for broadband infrastructure investment. This financing can take the form of direct investment in infrastructure, or of a capex subsidy (in order to make ongoing provision of service economical), or even an indirect subsidy through the financing of long-​term IRU (indefeasible right of use) contracts. PPPs are gaining favour in developing countries where the participation of the public sector results in a significant shift in investment modelling (and in the focus of the associated regulatory reforms). Today, as PPPs become increasingly used for the deployment and operation of broadband networks, management contracts might become more popular, enabling the incumbent to reap the benefits of foreign management expertise and international facilities. As managers under a management contract do not take any investment risk, management contracts need to be carefully designed in order to ensure that public policy objectives are respected and realized and that the manager is given incentives for good performance and is subject to penalties for sub-​standard performance. Moreover, the balance of decision-​making power between the government/​operator and the manager, and the power of the government to terminate the management arrangements, need to be carefully worked out. Many PPPs have characteristics of concessions, of which there are several kinds. A  ‘build-​operate-​transfer’ (BOT) contract is a form of concession or commercial agreement between private investors and a state, under which the investor (or a consortium of investors) will be granted the rights to build a telecommunications network and to operate it, usually sharing a portion of the revenues with the state. At the end of the concession term, network assets are transferred back to the state. This arrangement allows private sector participation where a state wishes or is required by law to regain infrastructure ownership. BOT-​t ype arrangements have been used in India, Syria, Lebanon and, in a slightly different form, in Indonesia, though their use is increasingly less frequent. The BOT-​t ype concession arrangement granted to Timor Telecom (owned

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at the time by Portugal Telecom) in East Timor, was renegotiated and converted to a licence in 2012.68 BOT-​t ype arrangements were previously thought to encourage investment by reducing investor risk: the investor’s ‘exit strategy’ being guaranteed at the date of expiry or termination of the BOT. However, in practice, BOTs in the communications sector can be much more problematic than BOTs in other infrastructure projects (such as toll roads and power plants), and the investor’s exit can be exceedingly complex, acrimonious, and protracted. This is in part because, at the end of the BOT contract, it is not just the physical network infrastructure that needs to vest in the state. Without the complex back-​office systems and software to manage and monitor the network, significant service disruptions can occur, and therefore comprehensive transitional arrangements might need to be put in place with the exiting operator (which might not have been adequately provided for in the original BOT contract). Less common are ‘build-​t ransfer-​operate’ (BTO) and ‘build-​operate-​own’ (BOO) contracts. Under BTO contracts the investors build the network and transfer title to the state, but continue to operate the network and share revenues from its operation with the state. This allows the state to have ownership and control over the network from the start, typically reflecting a reluctance of the state to relinquish control of key infrastructure, but is detrimental to the investors, who bear most of the costs without the benefit of ownership. A BOO is, essentially, the contractual equivalent of a licence, in that it simply authorizes an entity to build and operate its own network. However, unlike many licences,69 it typically includes a revenue-​ sharing obligation similar to those found in BOTs and BTOs. In recent times, significant government-​sponsored fibre initiatives materially changed the investment landscape and PPPs became more widespread. Care is needed to ensure that the resurgence of concession-​t ype arrangements through PPPs, driven by broadband roll-​out imperatives, can co-​exist with the pro-​competitive licensing regimes established in most countries over the last two decades. For example, it is important to ensure that a PPP does not result in the creation of new monopolies in relation to infrastructure or the provision of broadband services. As a new generation of state-​ owned or partially state-​ owned enterprises emerges in the broadband space, it becomes essential to ensure that proper sector and competition regulation is applied to these state-​owned market segments, that all PPPs are properly licensed and have entered into interconnection agreements, 68  Bray, J, ‘International Companies and Post-​ Conflict Reconstruction Cross-​ Sectoral Comparisons’, at  19,  . 69   Although licences may also contain revenue sharing obligations: see eg the 20% revenue share obligation in the mobile licence won by a consortium led by Turkcell in Iran. See ‘Turkcell Enters Iranian Mobile Market’, Telecom Worldwide, 19 February 2001.

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and that PPPs are subject to the same regulatory controls as other market participants. Additional questions about on-​going investment in the underlying infrastructure, including the decision making and financing of upgrades, will have to be addressed in these PPP structures.

17.4.3  Divesting state ownership of PPPs If the government intends at some point in time to divest its interest in a PPP, it will have to consider how to package the asset for sale, much as it might have done when corporatizing or privatizing the state-​owned incumbent. Corporatization has the effect of separating ownership and management functions, thereby enabling the appointment of professional managers instead of political appointees. This encourages decision-​making based on the interests of the business, rather than on a politically motivated agenda focused on wider social or economic goals. Corporatization can also free the business from public sector borrowing and procurement constraints, and will subject the entity to corporate accounting and reporting disciplines. While for the most part PPPs are by definition already partially in private hands, the divestment of a government interest in the PPP would usually be considered a privatization and may be subject to local laws on privatizations. However, whereas first-​generation privatizations of state-​owned incumbents might have been motivated by a desire to maximize revenue from the sale of shares, introduce management expertise in the operation of the company, or improve corporate governance of the incumbent, these issues would presumably already have been addressed as part of the formation of the PPP and therefore the sale of the government stake might be more straightforward than the original privatization of a state-​owned incumbent.

17.5  SE COND -​G ENER ATION R EF OR MS Telecommunications operators and regulators across the world are witnessing a radical change in the market and business models on which the first generation of legal and regulatory reforms were based. The old telecommunications business model was a race to connect customers through investment in infrastructure, as the basis of earning revenue. Today, network operators are increasingly competing for customer revenues against the so-​c alled ‘over-​t he-​ top’ (OTT) providers. Furthermore, providers are increasingly finding that the revenues that can be generated from subscriber connections are increasingly eclipsed by the revenues able to be generated by the sale of content and in the

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advertising revenues that come with the content (and, by extension, in the customer data that enables the targeting of that advertising). Online content standards, questions around freedom of information and expression (including ‘net neutrality’), and data protection have therefore appeared on the agendas of telecommunications regulators as part of a ‘second wave’ of regulatory reforms. As broadband has enabled commercial transactions and government services to move online, network and information security have also become increasingly important, often necessitating new regulatory reforms to address issues such as network and cyber-​security. In developing countries, despite the fact that certain of these changes are outside what might typically be considered telecommunications regulation, the responsibility to address these non-​telecom specific areas of regulation of modern communications often falls to the telecommunications regulator.

17.5.1  Convergence and technological neutrality The predictions in the early 2000s about the prospect of convergence are now settled reality, largely as a result of the deployment of broadband infrastructure and services. The most common regulatory response to convergence is primary legislation that is technology-​neutral and covers all electronic communications transmission networks. In a truly technology-​neutral regulatory system, operators are free to use the most appropriate technology for service delivery. Recognizing the agility and complexity of the telecommunications sector, the EU’s 2002 package moved away from distinctions based on technology or network type. Instead, the starting point under the 2002 package was that all electronic communications transmission networks (whether fixed, mobile, satellite, internet or broadcasting transmission) should be regulated consistently. Similar approaches are contained in Malaysia’s 1998 Multimedia Act and South Africa’s 2005 Electronic Communications Act. Other countries attempted to deal with convergence by adapting their licensing regimes, such as India with its Unified Licenses. For users across the globe, a social media post or search engine inquiry are part of a seamless digital experience. Yet from a regulatory perspective, the post or inquiry might implicate the telecommunications regulator, the data commissioner (if there is one) and possibly other official agencies of the State. Despite the reality of convergence, many countries continue to license and regulate a variety of electronic communications technologies, networks and services in differing ways or have multiple institutions dealing with network and services licences, data (including data protection), access to information, and the like—​treating these issues as though they are not part of an integral whole.

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17.5.2  Data protection and privacy Control of data is a defining feature of modern communications services. One of the key drivers of the digital economy for developed as well as developing countries is the flow of personal data.70 At the same time, obtaining and using personal data illicitly is one of the main targets of cyber-​criminals.71 Data protection provides individuals with reasonable assurances that their rights regarding their personal data and privacy are observed and protected. The EU data protection regime, for example, prohibits transfer of data from EU Member States to a third-​party country unless the third-​party country provides an ‘adequate’ standard of data protection. The complex process of aligning regulatory obligations with international standards of data and privacy protection is increasingly important to enable the free flow of data between jurisdictions, particularly given the increase in restrictions on cross-​border transfers of data (a common feature of data protection and privacy regimes). In developing data protection and privacy regimes, therefore, a key issue for developing countries is likely to be whether it should seek to satisfy high standards similar to those of the EU regime. A body of law around the contestability of personal data is also emerging in the developed world. Two recent cases from Europe—​‘Google Spain’ (confirming the nature of individuals’ ‘right to be forgotten’)72 and ‘Schrems’ (about data security),73 together with the entry into force in 2018 of the General Data Protection Regulation (GDPR),74 reflect this trend. The GDPR is important in terms of telecommunications regulation in Europe as it replaces the Data Protection Directive of 1995 and strengthens data protection rules applying to individuals within the EU. However, this area is undergoing significant reform across the globe, with no one approach as yet emerging as the preferred or dominant approach. Accordingly, it may be best for developing countries to focus first on ensuring that basic privacy principles and the rights of individuals in relation to their personal information are enshrined in law, while this body of law continues to develop.

70  See, World Development Report 2016:  Digital Dividends, (Washington, DC:  World Bank, 2016), at 224 et seq., at (‘WDR’). 71   See, ‘Combatting Cybercrime:  Tools and Capacity Building for Developing economies’:  (Combatting Cybercrime). 72   Case C-​131/​12, Google Spain v Agencia de Protección de Datos, 2014 EUR-​L ex 13 May 2014. European Court of Justice. For a discussion of the case, see, Kelly and Satola, ‘The Right to be Forgotten’, (2017) University of Illinois Law Review 1, at 1. 73   Case C-​362/​14, Maximilian Schrems v Data Protection Commissioner 6 October 2015, ECJ. 74   Regulation (EU) 2016/​679 of the European Parliament and of the Council, (GDPR).

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17.5.3  Access to information and net neutrality Among human rights, the right to communicate is a particularly interesting one, as it is not only substantively fundamental (the right to communicate is a right in itself), but it is also procedurally fundamental (as it is also an ‘enabler’ of other fundamental rights).75 Access to information and freedom of expression are also key drivers of the innovation economy.76 The term ‘net-​neutrality’ is a shorthand for the regulatory debate about the management and prioritization of data traffic over the internet.77 In the United States, where the debate began, the issue was whether to regulate modern, broadband enabled communications as a telecommunications service (which would imply regulation) or as a data service (which implies a ‘lighter touch’ regulatory regime) under the US Telecommunications Act of 1996, as amended. At the end of May 2017, the US FCC voted to move forward with repealing Obama-​era net neutrality rules for internet service providers (ISPs). Those rules ensured that Internet users could access content and service without their ISP interfering; with speed of access as the primary concern. Certain ISPs would like to charge their users premiums for faster Internet speed—​effectively creating levels of access to the Internet with different price points. President Obama’s ‘Open Internet’ rules prohibited this practice based on the premise that everyone should have equal access. Regulators in developed and developing countries alike will have to balance, on the one hand, the legitimate need of operators to exercise technical traffic management to deal with varying levels of content flowing over their networks, with, on the other hand, the need to ensure that traffic management practices do not undermine end users’ rights to access information (including social media).

17.5.4  Cyber-​security and protection of online transactions Cyber-​attacks against business interests around the world are on the rise and represent a threat to global economic security. As increasing numbers of people move their commercial dealings online, and governments move their public services online, information and network security become strategically far more important. Broadband-​ enabled and IP-​ based communications networks and services are qualitatively different than the POTS networks and services of even a few years ago. Traditionally, telecommunications regulation could largely ignore cyber threats. Today’s networks imply different requirements for security of the   Combatting Cybercrime, n 71, at 184.  See World Bank, World Development Report 2016: Digital Dividends, (Washington, DC: World Bank, 2016), at 221 et seq., at (‘WDR’). 77   WDR, at 227. 75 76

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infrastructure and the communications (ie the data) flowing over them. Whether these issues are undertaken by telecommunications regulators or not, today’s networks and services demand a more holistic, comprehensive, and coherent regulatory approach across a variety of disciplines. Developing countries can become, even if unwittingly, ‘safe-​havens’ for cyber-​ criminals due to outdated regulatory structures or a lack of enforcement capability. Governments will, accordingly, need to examine their legal frameworks to ensure an adequate regulatory regime is in place (including in relation to digital authentication, electronic transactions, information security, critical infrastructure protection and data and privacy protection), enabling them to remain good ‘citizens’ in the global community. Increasingly, elements of cybercrime legislation (eg penalties for unauthorized access to networks or data, or interference with networks, data or communications) will need to be included in telecommunications or electronic transactions (e-​commerce) laws or as a package of legislation coordinated with telecommunications legal reforms.78

17.5.5  Consumer protection and information rights Sector-​specific consumer protection remains important in the broadband era (particularly where a country lacks horizontal consumer protection rules). Consumer protection measures typically require regulatory approval of operators’ standard customer contract, though in some cases it might be simpler to require operators to publish a (binding) customer charter and to establish consumer complaints procedures meeting minimum regulatory standards. The latter, if effectively implemented, can help relieve the burden on the regulatory authority by promoting industry resolution of consumer complaints wherever possible. Other traditional consumer measures include provisions for directory and operator assistance and requirements for per second and itemized billing. In the broadband era, consumer protection issues are broadening in scope beyond the historical focus on information disclosure and dispute resolution procedures relevant to the purchase of the carriage service alone. The proliferation of transactions using communications devices, and the quantity and quality of data that service providers now handle, are driving this trend. Developing country governments should consider allowing regulators to develop secondary regulations and policy instruments to address and manage evolving consumer protection matters in a fast-​changing technological environment.

78   For an example of how cybercrime elements are included in e-​t ransactions laws, see eg Arts 34 et seq., of the Electronic Transactions Law (No 5 of 2004) of Union of Myanmar; and the Kingdom of Tonga’s reforms included updating its telecommunications law together with a new cybercrime law.

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Privacy obligations in relation to consumer information, and in particular restrictions on an operator’s use and disclosure of consumer information without the consumer’s consent (other than for the purposes of providing a requested service, including the ability of the operator to conduct reasonable credit checks), now feature in many regulatory regimes. While the benefits to consumers are clear, there is also a significant impact on operators who are required to implement new systems and processes to ensure compliance with these regulatory obligations. The concept of ‘privacy’ (and the debate as to what constitutes privacy) is a key feature of modern regulatory reform (see also Section 17.5.2 above). In order to effectively implement these principles, a combination of constitutional, legislative, and industry self-​regulatory approaches will be required.

17.5.6  Internet governance issues Increasingly, telecommunications regulators have been asked to regulate another ‘scarce resource’:  country code top-​level domain names (ccTLDs). In very simplified terms, the two-​letter designations for ccTLDs, such as ‘.za’ for South Africa, are established by the International Standards Organization and are allocated to countries by the Internet Assigned Numbers Authority (IANA), a subsidiary of the Internet Corporation of Assigned Names and Numbers (ICANN). In each country, ICANN/​I ANA has established (by contract) a registry operator for the particular ccTLD which administers the domain in that country. Typically, the administrator is a not-​for-​profit entity operating under a government mandate (with components of the registry service outsourced to the private sector). While many countries think of ‘their’ ccTLD like any other scarce resource, and therefore attempt to ‘regulate’ it like spectrum or numbers, ccTLD regulation is not obviously in the purview of the telecommunications regulator. It is governed through a contract with ICANN/​I ANA and the telecommunications regulator might simply not have the technical expertise to manage the domain. If a government wishes to change the ccTLD administrator to the telecommunications regulator, the contractual arrangements with ICAAN/​I ANA would need to be changed. Some countries have attempted to assign or transfer these ccTLD functions to the telecommunications regulator by statute. Given the contractual nature of the rights, changes to the administrator of a country’s ccTLD should be done through a contractual mechanism rather than through the legal and regulatory framework governing the sector.

17.6  CONC LUDING R EM A R K S Reform of the telecommunications sector can lay the foundations for the reform of other sectors of the economy, attracting new (foreign and domestic) investment,

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facilitating transactions and reducing transaction costs in other sectors, creating jobs, and fostering access to and the dissemination of information. As such, it can be one of the most important factors in the economic development of developing countries. The first generation of reform measures is intended to regulate the sector once state control (through ownership of the incumbent) is relinquished, enhance the attractiveness of the sector for new entrants, and improve the performance of the incumbent, all of which should promote wider economic and social development. A comprehensive reform agenda will include the formulation of a clear sector policy statement, managed liberalization of all telecommunications markets, the enactment of a modern regulatory framework, the creation of an autonomous regulatory authority, modernization and privatization of the state-​owned incumbent, and the holding of transparent competitive selection processes to ensure new licences (where licence numbers are limited) are allocated to the most appropriate candidates. The deployment of fibre networks and the increasing availability and importance of broadband services have resulted in a second wave of reform initiatives in the sector. Whereas regulatory priorities used to lie primarily in the promotion of structural reform, investment and opening the market to competition, increasingly regulatory reforms in developing countries also need to address issues regarding access to broadband, convergence, data protection, cyber-​security, and the internet to enable developing countries to fully participate in the modern global economy. For both first-​generation and second-​generation reforms, their successful design and implementation will ultimately depend on there being the requisite political support at the highest levels of government.

984

859

Index Abuse of dominance (Art 102)  see also Agreements in restraint of trade (Art 101); Merger control ‘abuse’ defined  access  561–​3 no legislative definition  557–​8 pricing  558–​61 barriers to entry  37–​9 countervailing buyer power  39–​40 defining the relevant market  554–​5 ‘dominance’ defined  555–​7 electronic content  571–​4 general principles  29 importance of market structure  36–​7 key issues  40 rationale for economic regulation  28–​9 ‘significant market power’  173–​8 three-​step analysis  553–​4 Access  abuse of dominance (Art 102)  561–​3 applicability of competition law  534–​5 capacity agreements  613–​14 competition law  444–​5 contractual issues for IP agreements  overview  481–​2 paying transit agreements  487–​9 peering agreements  482–​7 reliance on sector-​specific rules  489 contractual issues for switching systems  bespoke contracts  478–​81 overview 478 reference offers  482 convergence in UK  706–​8 different transmission systems  6 Equality of Access Board  127 EU licensing regime  Authorisation Directive  316–​18, 322 Licensing Directive  311 UK implementation of Authorisation Framework  341, 345

EU regulation  current regulatory obligations  453–​65 lead-​up to Access Directive  451–​3 evolving policy within EU  149 interconnection between networks  cost methodologies  64– ​8 key issues  97 UK approach  68–​96 Interconnection Directive  general principles  445–​6 UK implementation  446–​51 UK position prior to  444–​5 key powers  17 multinational enterprises (MNEs)  634–​6 overview  435–​7 reform in emerging markets  890 regulatory interventions  local loop bundling  138–​9 reliance on sector-​specific rules  489 spectrum management  424–​7 switching systems  interconnection of circuit switched networks  438–​9 interconnection of packet-​s witched networks  439–​41 other access arrangements  441–​3 packet-​s witched and circuit-​s witched networks distinguished  438 United Kingdom  Art 5 access-​related conditions  474–​5 Art 6 access-​related conditions  476–​7 broadband  477–​8 dispute resolution  477 facility sharing  466–​7 general interconnection obligation  467–​8 overview  465–​6 SMP obligations  469–​74 US approach  fixed networks  242–​57 history and development  197–​9 mobile networks  242–​57

896

896 Index Accounting  access and interconnection  473 capacity agreements  607 establishing costs  21 international rates  821–​7 peering agreements  482 separation  46, 69 soft law measures  158–​9 Advertising regulation  broadcasting  advertising regulation  724 content 724 general application  723–​4 scheduling  724–​5 consumer protection provisions  EU protection provisions  504 UK provisions  505–​11,  519–​22 non-​broadcast advertising  721–​2 other schemes  719–​20 television  participation in programmes  726–​7 sponsorship 727 teleshopping 726 UK consumer protection for broadband speed  507–​9 VOD advertising  722–​3 Agreements in restraint of trade (Art 101)  infrastructure sharing agreements  545 IP licensing  547–​51 network interconnection agreements  543–​5 overview  538–​42 premium content  569–​70 roaming agreements  545–​7 standard setting agreements  551–​3 Appeals  594–​5 Australia  licensing  legal issues  303 policy objectives  11 protection of submarine cables  805 Universal Services Obligation (USO)  61 Authorities see Institutions and authorities Authorization see Licensing Autorité de Régulation des Télécommunications 19 Barriers to entry  abuse of dominance  37–​9

Authorisation Directive  317 licensing  early powers and purposes  294–​5 overview  285–​7 notification of ‘significant market power’  174–​5 spectrum  131–​2 Billing systems  fundamental technology  5 importance 7 subscriber–user privacy relationship  674 UK consumer protection provisions  523 UK implementation of Authorisation Framework  349–​50 Body of European Regulators for Electronic Communications (BEREC)  185–​6,  777–​9 Brexit  impact on broadcasting regulation  692 key issues  143–​5 probability of continued harmonization 788 British Broadcasting Corporation  14, 119, 377, 502, 684, 698–701, 703–4, 706, 708–9, 711, 730  British Telecom (BT)  convergence 52 industry developments  BTA 1981  111–​12 establishment of DGT  114 privatization  112–​13 statutory reform under 1984 Act  113–​17 interconnection between networks  early days of local loop unbundling (LLU) 72 leased lines regulation  72–​4 strategic review of digital communications  84–​8 wholesale broadband access market reviews  80–​2 wholesale local access (WLA) market reviews  78–​80 wholesale narrowband market reviews  76–​7 liberalization of EU competition law  160–​1 number portability  133–​5

879

Index privatization and early development of competition 49 recognition of global issues  24–​5 relationship between liberalization and privatization 11 strategic review by Ofcom  123–​8 tariff rebalancing  59 Universal Services Obligation (USO) 134 Broadband  access and interconnection  477–​8 Deployment Directive  463–​5 industry developments  111 reform in emerging markets  divesting state ownership of PPPs  887 emergence of PPP models  885–​7 new dynamics  882–​4 revenue maximizing  300 UK consumer protection for broadband speed  507–​9 US approach  deployment of IP  209–​19 evolution of wireless broadband  206–​7 regulatory debate  196–​7 Broadcasting  advertising regulation  content 724 general application  723–​4 participation in programmes  726–​7 scheduling  724–​5 sponsorship 727 teleshopping 726 Authorisation Directive  314 capacity agreements  616 carriage and content distinguished  8–​9 competition law  534, 541–​2, 556–​8 convergence  AVMSD approach generally  684–​93 AVMSD requirements for TV  708–​11 Broadcasting Code  711–​14 on-​demand programmes  714–​19 other schemes  719–​20 overview  683–​4 premium rate services  728–​30 television licensing in UK  693–​703 convergence with IT and telecoms in UK  51–​4 EU law  152

ex ante/​ex post controls  163 future directions  193–​4 liberalization 169 licensing 308 sector regulation  14 spectrum management  16–​17 terminology  5–​8 US approach  207–​9, 232 BT see British Telecom (BT) Cable networks  applicability of competition law  534–​5 capacity agreements  599 dark fibre  607 indefeasible rights of use  604–​7 industry developments  109 US approach  history and development  200–​3 Caller identification  privacy  subscriber–​user relationship  675 user–user relationship  677–​8 UK implementation of Authorisation Framework 352 Capacity agreements  contractual issues  access  613–​14 mobile networks  616–​18 particular terms  613 relocation of apparatus  614 satellite networks  614–​16 service levels  611–​13 testing 614 contractual issues for switching systems 480 emerging trends  566–​7 history and development  600–​2 meaning and scope  599–​600 reform in emerging markets  865–​6 regulatory issues  618–​21 types  dark fibre  607 indefeasible rights of use  604–​7 leased lines  602–​3 mobile networks  608–​11 satellite networks  608 Cellular networks see Mobile networks

897

89

898 Index Cleanfeed  748, 750, 756, 760–​1 Competition and Markets Authority (CMA)  BT undertaking in lieu of reference  125–​6 enforcement  592–​4 licensing 299 market investigations  585–​91 merger control  575–​9 mobile network charges  156–​7 notification of ‘significant market power’  173–​8 powers 125 price review  91 sectoral inquiry  158 Competition Directorate-​General 156 Competition law  abuse of dominance  ‘abuse’ defined  557–​63 barriers to entry  37–​9 countervailing buyer power  39–​40 defining the relevant market  554–​5 ‘dominance’ defined  555–​7 general principles  29 importance of market structure  36–​7 key issues  40 rationale for economic regulation  28–​9 remedies  563– ​6 ‘significant market power’  173–​8 three-​step analysis  553–​4 access  444–​5 agreements in restraint of trade  infrastructure sharing agreements  545 IP licensing  547–​51 network interconnection agreements  543–​5 overview  538–​42 premium content  569–​70 roaming agreements  545–​7 standard setting agreements  551–​3 applicability to telecommunications  533–​5 authorization powers  14 competition law and regulation distinguished  potential for overlap  536–​7 role of NRAs  537–​8 electronic content  abuse of dominance (Art 102)  571–​4 anticompetitive agreements and premium content  569–​70

definition of markets  567–​9 impact of convergence  566–​7 enforcement  appeals  594–​5 concurrent powers  592–​4 importance 596 overview  591–​2 ex ante/​ex post controls  21 general principles  29 government management of markets  481–​2 harmonization measures  170–​3 importance 596 liberalization within EU  equipment  165–​8 impact on BT  160–​1 key concept of essential requirements  164–​5 services  168–​70 withdrawal of ‘special or exclusive rights’  162–​3 main concerns  8–​9 market investigations  Competition and Markets Authority (CMA)  585–​91 European Commission  583–​5 general powers  582–​3 merger control  changes to market structure  574–​9 full function joint ventures  579–​81 media plurality  581–​2 rationale for consumer protection  493–​4 reform in emerging markets  859–​60 regulation distinguished  enforcement  537–​8 key questions  535–​6 potential for overlap  536–​7 sources of EU law  155–​6 tariff controls  21 United States  anti-​competitive agreements  267–​8 investigations  269–​70 licensing of common carriers  234–​5 merger control  270–​4 penalties for non-​compliance  269 price discrimination  268–​9 regulatory double jeopardy  270 role of DoJ  267

89

Index Competition Commission see Competition and Markets Authority (CMA) Consortia  capacity agreements  601 privatization of BT  48 Consumer protection  conclusions  479–​80 ‘consumer’ defined  494 EU protection provisions  bundled offers  504 minimum contract terms  495–​500 non-​d iscrimination  504 number portability  503–​4 service levels  502–​3 switching providers  503 transparency  500–​1 licensing 297 rationale  competition  493–​4 utility 492 reform in emerging markets  891–​2 shift in focus  491–​2 UK provisions  contracts  511–​23 implementation of Authorisation Framework  338–​40,  345–​6 marketing  505–​11 United States  legal constraints on regulation of telemarketers  274–​5 overview 274 proprietary network information  279–​8 2 unsolicited calls and texts  275–​7 unsolicited emails  278–​9 unsolicited faxes  278 Content  competition law  abuse of dominance (Art 102)  571–​4 anticompetitive agreements and premium content  569–​70 definition of markets  567–​9 impact of convergence  566–​7 convergence  AVMSD requirements for TV  708–​11 Broadcasting Code  711–​14 on-​demand programmes  718–​19

899

difficulties of distinguishing carriage and content  8–​9 evolving policy within EU  152–​3 ISP liability  conclusions  787–​8 defining ISPs  734–​5 EU approach to network neutrality  775–​87 EU regulation  739–​52 French ‘HADOPI’ law  753–​4 graduated national response  752–​3 hotlines for illegal content  756–​8 legal debate regarding traffic management  763–​8,  768–​75 UK response  754–​5 US approach  735–​9 television  advertising regulation  724 AVMSD requirements  708–​11 Broadcasting Code  711–​14 Contractual issues  see also Agreements in restraint of trade (Art 101) access to switching systems  bespoke contracts  478–​81 overview 478 reference offers  482 capacity agreements  access  613–​14 mobile networks  616–​18 particular terms  613 relocation of apparatus  614 satellite networks  614–​16 service levels  611–​13 testing 614 consumer protection provisions  EU protection provisions  495–​500 UK provisions  511–​23 IP interconnection agreements  paying transit agreements  487–​9 peering agreements  482–​7 reliance on sector-​specific rules 489 licensing  302–​3 multinational enterprises (MNEs)  commercial clauses  640–​1 problem of multiple locations  637–​8 technical clauses  638–​40

90

900 Index Convergence  advertising regulation  non-​broadcast advertising  721–​2 other schemes  719–​20 VOD advertising  722–​3 AVMSD  adoption 685 applicability  685– ​6 country of origin and freedom of reception  688–​90 jurisdiction rules  690–​1 key debate  687 scope  686–​8 source of law  684–​8 summary table  692 Television without Frontiers  686 content  AVMSD requirements for TV  708–​11 Broadcasting Code  711–​14 continued adoption of on-​demand services  730–​1 evolving policy within EU  149 industry developments  119 on-​demand programmes  714–​19 overview  683–​4 premium rate services  728–​30 reform in emerging markets  888 technologies 730 UK law  infrastructures  705–​8 radio licensing  703–​5 television licensing  693–​703 video recordings  719–​20 Cookies  675–​6 Cost  see also Accounting; Economic regulation abuse of dominance  28–​9 accounting requirements  21 auction of spectrum  130–​1 capacity agreements  613 interconnection between networks  fully allocated costs (FAC)  64–​5 marginal and incremental costs  65–​7 mark-​ups for common cost recovery  67–​8 local loops  65 number portability  133, 253–​4

peering agreements  487 price capping  consumer choice  45 movements of costs and productivity  43 valuation basis for capital costs  44 transmission systems  6 Universal Services Obligation (USO)  60–​1, 134,  190–​1 US approach to USO  E-​rate  263–​4 funding difficulties  265–​7 high-​cost scheme  262–​3 low-​i ncome scheme  260–​2 Countervailing buyer power  39–​40 Courts see Judicial challenges Criminal sanctions  738–​9 Dark fibre 607 Data protection see also Privacy ‘controllers’ and ‘processors’ distinguished  664–​5 Data Protection Directive  649 data security  667–​8 different facets  681–​2 processing restrictions  665–​6 reform in emerging markets  889 Deep Packet Inspection (DPI) 750 Deregulation see Liberalization Developing countries  absence of competition law  22 broadband  divesting state ownership of PPPs  887 emergence of PPP models  885–​7 new dynamics  882–​4 first-​generation reforms  design and process  851–​5 EU model  855–​6 impetus for reform  849–​51 regional influences  856–​7 foundational regulatory components  capacity-​building  865–​6 competition law  859–​60 dispute resolution  879–​82 facility-​sharing and co-​location  873–​4 interconnection between networks  870–​3 licensing  866–​8

910

Index number portability  877–​8 pricing  868–​70 property rights  879 regulatory architecture  857–​88 regulatory authorities  861–​4 roaming 874 spectrum management  874–​7 Universal Services Obligation (USO)  878–​9 national frameworks for regulation  14 public policy concern  8–​9 reform in emerging markets  broadband  882–​7 conclusions  887–​93 first-​generation reforms  849–​57 foundational regulatory components  857–​82 introduction  847–​8 second-​generation reforms  887–​93 second-​generation reforms  access 890 consumer protection  891–​2 convergence and technological neutrality 888 data protection and privacy  889 internet governance issues  892 security  890–​1 Director General of Telecommunications  concerns about BT merger  25 duties  115–​16 establishment 113 influence of personality  19 judicial challenges  116–​17 local loop bundling  138 number portability  133–​5 powers  116–​17 statutory provisions  114–​17 take-​over by Ofcom  120 Directories  additional services  188 service provider–​user privacy relationship  671–​2 Disabled persons see Persons with disabilities Discrimination  access and interconnection  446, 449, 472 accounting separation  69

901

Authorisation Directive  319 common carriers  197 competition law  587 consumer protection provisions  EU protection provisions  504 effect of convergence  52 Equality of Access Board  127 functional separation  53 interconnection between networks  access 81 charge controls  83 leased lines  73 on-​going concerns about non-​price discrimination 75 wholesale broadband market review 74 ISPs 768 models of separation  46 price discrimination  31 ‘significant market power’  172 UK implementation of Authorisation Framework 344 voice telephony  187 Dispute resolution  access and interconnection  477 foundational regulatory component for emerging markets  879–​82 Ofcom function  122 UK consumer protection  523–​9 UK implementation of Authorisation Framework 350 World Trade Organization  840–​3 Dominance see Abuse of dominance (Art 102) Economic regulation  see also Licensing Authorisation Directive  314–​15 fast-​moving sector  97–​8 first-​generation reforms in emerging markets 852 forms of control  40–​1 general principles  29 interconnection between networks  cost methodologies  64–​8 need for effective interconnection  63–​4 UK regulation  68–​97

920

902 Index Economic regulation (cont.) introduction  27–​8 models of regulation  separation  46–​8 various forms  46 price capping  consumer choice  45 duration of control  43 grouping of services  42–​3 impact on quality  44–​4 importance  41–​2 movements of costs and productivity  43 valuation basis for capital costs  44 rationale  28–​9 scope  assessment of competition in each market  36–​41 market definition and SSNIP test  34–​5 sector controls  common costs  30–​1 economies of scale and scope  33–​4 network externalities  32–​3 pricing when demand exceeds capacity levels  31–​2 tariff rebalancing  58–​9 UK  convergence between telecoms, broadcasting, and information technology  51–​4 end of duopoly policy  49–​51 privatization and early development of competition  48–​9 retail price regulation  54–​7 tariff rebalancing  59 Universal Service Obligation (USO)  59–​62 Emergency planning 343 Emerging markets see Developing countries Enforcement  competition law  appeals  594–​5 concurrent powers  592–​4 importance 596 overview  591–​2 United States  268–​70 competition law and regulation distinguished  key questions  535–​6

copyright liability against ISPs  713–​19 L’Oréal v eBay  745–​7 Newzbin  749–​52 Scarlet Extended (2011)  747–​9 DGT role  116–​17 EU initiatives  European regulatory authority and advisory bodies  185–​7 ex ante/​ex post controls  175 NRA independence and harmonization  179–​8 4 EU licensing regime  Authorisation Directive  330–​1,  365–​76 Licensing Directive  312 Federal Communications Commission  222–​3 layering of regulatory bodies  14 licensing  298–​9 proceedings before ECJ  156–​7 Entry barriers see Barriers to entry Environmental protection 17 Equipment see Technologies European Bank of Reconstruction and Development (EBRD) 14 European Union (EU)  access  current regulatory obligations  453–​65 lead-​up to Access Directive  451–​3 Authorisation Directive  amendments and modification of rights  328–​9 application and scope  314–​15 billing requirements  349–​50 calling line identification  352 conditions of entitlement  319–​28 dispute resolution  350 enforcement  330–​1 evolution of law and practice  379–​80 fees 332 framework  313–​14 general authorizations  316–​18 horizontal approach  315–​16 individual rights  318–​20 mobile networks  354–​5 persons with disabilities  351 recent developments  333–​5 reporting obligations  329–​30

930

Index switching systems  352–​4 transparency  347–​9 UK implementation  336–​46 competition law  market investigations  583–​5 merger control  575 consumer protection provisions  bundled offers  504 minimum contract terms  495–​500 non-​d iscrimination  504 number portability  503–​4 service levels  502–​3 switching providers  503 transparency  500–​1 convergence (AVMSD)  adoption 685 applicability  685– ​6 content requirements for TV  708–​11 country of origin and freedom of reception  688–​90 jurisdiction rules  690–​1 key debate  687 on-​demand programmes  714–​15 scope  686–​8 source of law  684–​8 summary table  692 Television without Frontiers  686 convergence between telecoms, broadcasting, and information technology 51 enforcement  European regulatory authority and advisory bodies  185–​7 ex ante/​ex post controls  175 NRA independence and harmonization  179–​8 4 evolving policy  148–​55 future directions  193–​4 harmonization  future directions  193–​4 licensing 304 national regulatory authorities  179–​8 4 public policy drive towards liberalization 12 sources of EU law  156

903 harmonization measures  170–​3 incorporation of Directives into Communications Act 2003  120 Interconnection Directive  general principles  445–​6 UK implementation  446–​51 UK position prior to  444–​5 ISP liability for content  copyright enforcement  745–​52 Directive on Electronic Commerce (ECD)  739–​42 French ‘HADOPI’ law  753–​4 graduated national response  752–​3 hotlines for illegal content  756–​8 network neutrality  775–​87 recent developments  761–​3 revision of ECD  744–​5 US approach compared  742–​4 liberalization of competition law  equipment  165–​8 impact on BT  160–​1 key concept of essential requirements  164–​5 services  168–​70 withdrawal of ‘special or exclusive rights’  162–​3 licensing 631 Authorisation Directive  313–​79 current relevance  293–​302 early trade restrictions  287–​90 forms and processes  304–​8 legal issues  302 Licensing Directive  310–​11 overview  285–​7 overview of Framework  310 Licensing Directive  conditions of entitlement  310–​11 enforcement 312 harmonization 312 scope 310 model for developing countries  855–​6 national frameworks for regulation  14 New Regulatory Framework for interconnection  72–​4 privacy  Data Protection Directive  649 user–State privacy relationship  654–​7

904

904 Index European Union (cont.) public policy drive towards liberalization  13 recognition of global issues  24 ‘significant market power’  173–​8 sources of law  155–​60 spectrum management  402–​8 Universal Services Obligation (USO)  186–​93 Ex ante/​ex post controls  broadcasting 163 EU law  149–​54 future directions  193–​4 importance 21 notification of ‘significant market power’  173–​8 terminology 21 user–​State privacy relationship  interception, acquisition and equipment interference  662–​3 technical capability and data retention  659–​62 Federal Communications Commission  bureaux and offices  221–​2 Commissioners  220–​1 enforcement powers  222–​3 jurisdiction  212–​13 key debate on deregulation  10 merger control  273–​4 network neutrality  enforcement actions  769–​70 Open Internet Order 2015  771–​2 Open Internet Report and Order 2010  770 zero-​rating  772–​5 pre-​emption doctrine  230–​2 recognition of global issues  24 review of actions  229–​30 role 220 spectrum management  398 structure and method  19 Fees  see also Pricing EU licensing regime  Authorisation Directive  329, 332 Licensing Directive  311–​12 spectrum management  411–​12 revenue maximizing  300 Fixed networks 

capacity agreements  dark fibre  607 indefeasible rights of use  604–​7 leased lines  602–​3 government management of markets  435–​7 industry developments  108–​10 interconnection between networks in UK  early days of local loop unbundling (LLU)  71–​2 evolution of regulation  75–​8 4 history and development  68–​9 implementation of European Directives  72–​4 key considerations  88–​90 leased lines regulation  72–​4 new regime of controls  70–​1 strategic review of digital communications  84–​8 UK consumer protection  515–​16 Universal Services Obligation (USO)  188 US approach  calls to mobiles  250 co-​location  245– ​6 dialling parity  253 intercarrier compensation  247–​50 interconnection  246–​7 licensing of common carriers  234–​5 network neutrality  258 number portability  253–​4 poles ducts and rights of way  251–​3 re-​sale  250–​1 unbundled elements  243–​5 ‘Four Freedoms’ policy 2004–5 768 Frameworks  evolving policy within EU  149–​54 varied approaches  14–​16 France  Autorité de Régulation des Télécommunications 19 Universal Services Obligation (USO) 137 Full function joint ventures  579–​81 Fully allocated costs (FAC)  64–​5 Functional separation  47, 53 General Post Office  evolution  106–​7

950

Index history of spectrum management  400–​2 origins 102 Globalization  expansion of sector regulation  4 issues arising from  24–​5 Harmonization  EU licensing regime  Authorisation Directive  317 Licensing Directive  312 future directions  193–​4 Interconnection Directive  445 licensing 304 national regulatory authorities  179–​8 4 public policy drive towards liberalization  12 sources of EU law  156 spectrum management  402–​17, 432 High seas  key powers  17 protection of submarine cables  804 Human rights  increased concerns  17 privacy  EU approach to user–State privacy  655 scope  648–​9 user–State privacy relationship  653 Indefeasible rights of use  604–​7 Information technology  convergence with broadcasting and telecoms in UK  51–​4 Infrastructure  agreements in restraint of trade (Art 101)  545 Infrastructures  convergence in UK  705–​8 EU licensing regime  Licensing Directive  311 facility-​sharing and co-​location in emerging markets  873–​4 harmonization measures  171–​2 interconnection between networks  cost methodologies  64–​8 need for effective interconnection  63–​4 UK regulation  68–​97 international networks  satellite regulation  793–​802 submarine cables  802–​6

905

key debate on liberalization  9–​11 key powers  17 network management systems  5, 7 next generation networks  139–​41 outsourcing  collaborative environments  633 free movement of service  631 PPP arrangements  885 reform proposals  852 regulatory capacity-​building  865 special treatment of MNEs  627–​9 technical clauses  638 US approach  carrier rule-​making  199 poles, ducts, and rights of way  251–​3 siting of towers and antenna  254–​7 Institutions and authorities  Body of European Regulators for Electronic Communications (BEREC)  185– ​6 Competition and Markets Authority (CMA)  BT undertaking in lieu of reference  125– ​6 licensing 299 merger control  575–​9 mobile network charges  156–​7 notification of ‘significant market power’  173–​8 powers 125 price review  91 sectoral inquiry  158 different regulatory models  19–​21 Director General of Telecommunications  concerns about BT merger  25 duties  115–​16 establishment 113 influence of personality  19 judicial challenges  116 local loop bundling  138 number portability  133–​5 powers  116–​17 statutory provisions  114–​17 take-​over by Ofcom  120 European Bank of Reconstruction and Development (EBRD)  15 Federal Communications Commission  bureaux and offices  221–​2 Commissioners  220–​1

906

906 Index Institutions and authorities (cont.) enforcement powers  222–​3 jurisdiction 220 key debate on deregulation  10 merger control  273–​4 pre-​emption doctrine  230–​2 recognition of global issues  24 review of actions  229–​30 role 220 spectrum management  398 structure and method  19–​21 importance 13 independence and harmonization  179–​8 4 International Finance Corporation (IFC)  14, 15 International Telecommunication Union (ITU)  accounting rates  821–​7 establishment 806 financial contributions  809 fundamental principles  806–​7 legal instruments  815–​21 membership  807–​9 radiocommunications  811–​15 as a regulatory institution  827 spectrum management  396 standards  809–​11 notification of ‘significant market power’  173–​8 Ofcom  access and interconnection  469–​73 business connectivity market reviews (BCMR)  82–​4 comments on USO  134 consumer complaints  525 convergence between telecoms, broadcasting, and information technology  52–​3 digital communications review  127–​8 early days of local loop unbundling (LLU)  71–​2 functions  120–​2 leased lines regulation  72–​4 national frameworks for regulation  14 self-​regulation  11 spectrum management  420–​4 strategic review of digital communications  84–​8

strategic review of industry  123–​8 take-​over of DGT’s functions  120 wholesale broadband access market reviews  80–​2 wholesale local access (WLA) market reviews  78–​80 wholesale narrowband market reviews  76–7, 82–​4 Office of Fair Trading  assessment of market power  40 ISP liability  744 market investigations  586 national frameworks for regulation  14 powers to enforce consumer law  721 Oftel  see also Ofcom accounting separation  69 end of duopoly policy  50 implementation of the European Directives  74–​5 leased lines regulation  73–​4 local loop unbundling (LLU)  71–​2 market reviews  51 market study of competition  55 mobile interconnection  90 new regime of network charge controls  70–​1 operation of USO  61 price review  54 rebalancing 59 reform in emerging markets  861–​4 United States  Congress and President  225–​6 courts 225 Federal Communications Commission  220–​3 National Association of Regulatory Utility Commissioners  227 National Telecommunications and Information Administration  223 other federal agencies  223–​5 Public Utility Commissions  226–​7 World Trade Organization  defining moment for sector development 4 dispute resolution  840–​3 establishment  827–​8 GATS  829–​32

970

Index GATS Fourth Protocol  833–​7 impact on EU law  149 licensing requirements  304 ongoing liberalization  801–​2 role  828–​9 spectrum management  390 status of WTO law  837–​40 telecommunications Annex  832–​3 US licensing of common carriers  240–​1 Intellectual property  copyright enforcement against ISPs  L’Oréal v eBay  745–​7 Newzbin  749–​52 Scarlet Extended (2011)  747–​9 licensing  547–​51 Interception, monitoring, and recording  current relevance of licensing  300–​1 Deep Packet Inspection (DPI)  750 service provider–user privacy relationship  669–​71 UK reform  787–​8 user–State privacy relationship  662–​3 Interconnection between networks  Access Directive  current regulatory obligations  453–​65 lead-​up to  451–​3 agreements in restraint of trade (Art 101)  543–​5 contractual issues for IP agreements  paying transit agreements  487–​9 peering agreements  482–​7 reliance on sector-​specific rules  489 contractual issues for switching systems  bespoke contracts  478–​81 overview 478 reference offers  482 cost methodologies  fully allocated costs (FAC)  64–​5 marginal and incremental costs  65–​7 mark-​ups for common cost recovery  67–​8 Interconnection Directive  general principles  445–​6 UK implementation  446–​51 UK position prior to  444–​5 need for effective interconnection  63–​4 reform in emerging markets  870–​3 reliance on sector-​specific rules  489

907

switching systems  interconnection of circuit switched networks  438–​9 interconnection of packet-​s witched networks  439–​41 other access arrangements  441–​3 packet-​s witched and circuit-​s witched networks distinguished  438 UK approach  fixed communications  68–​90 key issues  97 mobile networks  90– ​6 UK implementation of Authorisation Framework 342 United Kingdom  Art 5 access-​related conditions  474–​5 Art 6 access-​related conditions  476–​7 broadband  477–​8 dispute resolution  477 facility sharing  466–​7 general interconnection obligation  467–​8 overview  465–​6 SMP obligations  469–​74 US approach  fixed networks  242–​57 history and development  197–​9 mobile networks  242–​57 International Finance Corporation (IFC) 14 International regulation  see also International Telecommunication Union conclusions 802 infrastructure network  satellite regulation  793–​802 submarine cables  802–​6 overview  791–​3 spectrum management  radio communications  393– ​6 telegraph systems  391–​3 US licensing of common carriers  234–​5 WTO  defining moment for sector development 4 dispute resolution  840–​3 establishment  827–​8

908

908 Index International regulation (cont.) GATS  829–​32 GATS Fourth Protocol  833–​7 licensing requirements  304 ongoing liberalization  843–​4 role  828–​9 status of WTO law  837–​40 telecommunications Annex  832–​3 US licensing of common carriers  240–​1 International Telecommunication Union (ITU)  accounting rates  821–​7 establishment 806 financial contributions  809 fundamental principles  806–​7 legal instruments  815–​21 membership  807–​9 radiocommunications  811–​15 as a regulatory institution  827 spectrum management  396 standards  809–​11 Internet  competition issues  23 competition law  definition of markets  567 impact of convergence  566–​7 continued adoption of on-​demand services  730–​1 contractual issues for IP interconnection agreements  paying transit agreements  487–​9 peering agreements  482–​7 reliance on sector-​specific rules  489 convergence  715–​16 domain name and IP addressing scheme 17 fundamental technologies  5, 7 global communication systems  15 importance of standards  22–​3 increasing use  5–​7 key issues  139–​41 local loop unbundling (LLU)  72 market disruption  10 multinational enterprises (MNEs)  need for special type of service  628–​9 voice and video communications  631–​2

reform in emerging markets  governance issues  892 security  890–​1 technological phenomenon  9 third party content  conclusions  787–​8 EU approach to network neutrality  775–​87 EU regulation  739–​52 French ‘HADOPI’ law  753–​4 graduated national response  752–​3 hotlines for illegal content  756–​8 legal debate regarding traffic management  763–​8 UK response  754–​5 US approach  735–​9 US approach to network neutrality  768–​75 unsolicited emails in US  278–​9 VoIP  137–​9 wholesale local access  76 Internet Watch Foundation  758–​61 IP-​enabled services see Internet Joint dominance  174–​5 Joint ventures  579–​81 Judicial challenges  Director General of Telecommunications 116 key powers  18 United States  225 Kingsbury Commitment 197 Law see Sources of law; Telecommunications law Legal activism see Judicial challenges Legal separation 47 Liberalization  EU competition law  equipment  165–​8 impact on BT  160–​1 key concept of essential requirements  164–​5 services  168–​70 withdrawal of ‘special or exclusive rights’  162–​3

90

Index evolution of GPO  106 evolving policy within EU  148–​55 first-​generation reforms in emerging markets 853 future directions  193–​4 impact on ITU  808 impetus for reform in developing countries 851 industry developments in UK  BTA 1981  111–​12 establishment of DGT  114 privatization of BT  112–​13 statutory reform under 1984 Act  113–​17 key policy debate  9–​11 need for legal intervention  8–​9 need for privacy protection  646 relationship with privatization  11–​12 ‘significant market power’  174 spectrum management  overview  387–​8 UK framework  427–​32 UK developments  convergence between telecoms, broadcasting, and information technology  51–​4 end of duopoly policy  49–​51 privatization and early development of competition  48–​9 United States  carrier rule-​making  199 competition 1950–​1996  197–​9 local-​exchanges  199–​200 WTO  828,  843–​4 Licensing  access and interconnection  449 agreements in restraint of trade (Art 101)  547–​51 common carriers in US  234–​5 convergence in UK  radio licensing  703–​5 television licensing  693–​703 EU regime  Authorisation Directive  313–​79 evolution of law and practice  379–​80 Licensing Directive  310–​11 overview of Framework  310 spectrum management  402–18

909 evolving policy within EU  149 history  evolution of GPO  106 radio  107–​8 telegraph systems  104–​5 history and development  current relevance  293–​302 early powers and purposes  290–​3 early trade restrictions  287–​90 forms and processes  304–​8 legal issues  302–​3 industry developments  fixed networks  108–​10 mobile networks  109–​10 international law and standards  308–​10 key powers  16 mobile networks  131–​2 multinational enterprises (MNEs)  collaborative environments  633–​4 cross-​border authorization  630–​1 voice and video communications  631–​2 overview  285–​7 radio licensing in UK  703–​5 reform in emerging markets  866–​8 role of law  13 spectrum  131–​2 UK implementation of Authorisation Framework  billing requirements  349–​50 calling line identification  352 conditions of entitlement  337–​65 dispute resolution  350 enforcement  365–​76 fees  376–​9 future revisions  379 mobile networks  354–​5 notification procedure  336–​7 persons with disabilities  351 statutory provisions  335–​6 transparency  347–​9 UK TV  DTPS and DTAS  698 fit and proper persons  695–​6 ITV  701–​2 local TV  702 multiplexes and digital TV  698–​9 overview  693–​4

901

910 Index Licensing (cont.) programme services  703 public service television  699–​701 TLCSs  696–​8 US approach  common carriers defined  233 domestic fixed services  234 foreign ownership requirements  239–​41 international services  234–​5 local entry licences  239 spectrum licensing  235–​9 Local loops  abuse of dominance (Art 102)  556–​7 access and interconnection  436, 442, 449–​50,  459 costs 65 EU licensing regime  232 key issue  133 local loop unbundling (LLU)  71–​2, 89 shift in policy  138–​9 US approach  243–​5 Mark-​ups  47,  67–​8 Market issues  see also Liberalization abuse of dominance (Art 102)  defining the relevant market  554–​5 electronic content  567–​9 three-​step analysis  553–​4 access and interconnection  market definitions  473–​4 applicability of competition law  533–​5 assessment of competition in each market  barriers to entry  37–​9 countervailing buyer power  39–​40 importance of market structure  36–​7 key issues  40 barriers to entry  licensing  285–​8 notification of ‘significant market power’  174–​5 spectrum  131–​2 first-​generation reforms in emerging markets 852 fixed network interconnectivity in UK 

business connectivity market reviews (BCMR)  82–​4,  87–​9 wholesale broadband access market reviews  80–​2,  86–​7 wholesale local access (WLA) market reviews  78–​80,  85–​6 wholesale narrowband market reviews  76–​7,  84–​5 general principles of economic regulation 29 investigations  Competition and Markets Authority (CMA)  585–​91 European Commission  583–​5 general powers  582–​3 market definition and SSNIP test  34–​5 merger control  574–​9 mobile voice call termination  129–​30 rationale for consumer protection  493–​4 ‘significant market power’  173–​8 abuse of dominance  173–​8 current regulatory obligations  456–​8 reference offers  482 sources of EU law  155–​6 spectrum management  EU licensing regime  413 UK framework  427–​32 Media plurality  581–​2 Merger control  see also Abuse of dominance (Art 102) changes to market structure  574–​9 full function joint ventures  579–​81 media plurality  581–​2 recognition of global issues  25 United States  role of FCC  273–​4 statutory provisions  270–​2 Mobile networks  Access Directive  462–​3 agreements in restraint of trade (Art 101)  545–​7 capacity agreements  contractual issues  616–​18 regulatory issues  618–​21 types of agreement  608–​11 emerging markets 

91

Index first-​generation reforms in  852–​3 roaming 874 fundamentals 6 harmonization measures  171 history  107–​8 industry developments  109–​10 industry developments in UK  128–​32 interconnection between networks in UK  90–​6 special treatment of MNEs  629–​30 UK implementation of Authorisation Framework  354–​5 Universal Services Obligation (USO)  188 US approach  calls to mobiles  250 history and development  204–​6 number portability  254 poles, ducts, and rights of way  251–​3 roaming 257 siting of towers and antenna  254–​7 US licensing of common carriers  234–​5 zero-​rating  772–​5 Monitoring see Interception, monitoring, and recording Multinational enterprises (MNEs)  contractual issues  commercial clauses  640–​1 problem of multiple locations  637–​8 technical clauses  638–​40 licensing  collaborative environments  633–​4 cross-​border authorization  630–​1 voice and video communications  631–​2 need for special type of service  cross-​border nature  626–​7 mobile networks  629–​30 outsourcing  627– ​8 system integration  628 unified communications  628–​9 numbering  636–​7 wholesale access regulation  634–​6 National Association of Regulatory Utility Commissioners 227 National regulatory authorities see Institutions and authorities

911

National security see Security National Telecommunications and Information Administration 223 Network management systems see Wireless networks Network neutrality  EU approach  775–​87 reform in emerging markets  890 US approach  768–​75 Networks see Infrastructures; specific networks New Zealand  licensing, forms, and processes  305 need for legal intervention  9 protection of submarine cables  805 reliance on traditional competition law  21 Next generation networks  access and interconnection  437, 461–​2 challenges for UK  139–​41, 141–​2 Non-​d iscrimination see Discrimination Number portability  consumer protection provisions  EU protection provisions  503–​4 UK provisions  514–​15 cost  133,  253–​4 foundational regulatory component for emerging markets  877–​8 key issue  133–​5 multinational enterprises (MNEs)  636–​7 UK implementation of Authorisation Framework  344–​5 US approach  fixed networks  253–​4 mobile networks  254 Ofcom  access and interconnection  469–​73 comments on USO  134 competition law enforcement  592–​4 consumer complaints  525 convergence between telecoms, broadcasting, and information technology  52–​3 functions  120–​2 interconnection between networks  business connectivity market reviews (BCMR)  82–​4

921

912 Index Ofcom (cont.) early days of local loop unbundling (LLU)  71–​2 leased lines regulation  72–​4 strategic review of digital communications  84–​8 wholesale broadband access market reviews  80–​2 wholesale local access (WLA) market reviews  78–​80 wholesale narrowband market reviews  76–7, 82–​4 market investigations  585 national frameworks for regulation  14 self-​regulation  11 spectrum management  420–​4 strategic review of industry  123–​8 take-​over of DGT’s functions  120 Office of Fair Trading  assessment of market power  40 ISP liability  744 market investigations  586 powers to enforce consumer law  721 Oftel  see also Ofcom accounting separation  69 end of duopoly policy  50 implementation of the European Directives  74–​5 leased lines regulation  73–​4 local loop unbundling (LLU)  71–​2 market reviews  51 market study of competition  55 mobile interconnection  90 new regime of network charge controls  70–​1 operation of USO  61 price review  54 rebalancing 59 Open Network Provision  172–​3 Outer space  international law  794–​8 key powers  17 Outsourcing  collaborative environments  633 free movement of service  631 freedom of the parties  14

PPP arrangements  885 reform proposals  852 regulatory capacity-​building  865 special treatment of MNEs  627–​9 specialized communications providers 625 technical clauses  638 Paying transit agreements  487–​9 Peering agreements  482–​7 Persons with disabilities  Communications Act 2003  337–​8 consumer premises terminal equipment 168 Provision of services and access  337–​8 UK implementation of Authorisation Framework 351 Universal Services Obligation (USO)  188–​9,  322 Policy see Public policy Pools see Consortia Pre-​emption doctrine  230–​2 Premium rate services  728–​30 Pricing  see also Fees abuse of dominance (Art 102)  exclusionary pricing practice  558–​60 interplay with regulatory price controls  560–​1 CC determination of charges  94 considerations when setting controls  duration of control  43 grouping of services  42–​3 impact on quality  44–​4 importance  41–​2 movements of costs and productivity  43 valuation basis for capital costs  44 importance of regulation  21 paying transit agreements  489 premium rate services  convergence  728–​30 rebalancing of prices  58–​9 reform in emerging markets  868–​70 retail price regulation in UK  core principle  54–​6 key issues  57 operation of regime  57

931

Index tariff controls  importance 21 importance of regulation  21 provision of universal services  191 tariff rebalancing  58–​9 Privacy  see also Data protection Deep Packet Inspection (DPI)  750 different facets  681–​2 evolving policy within EU  149 historical development  645–​7 reform in emerging markets  889 scope  content  651–​3 Data Protection Directive  649 ‘electronic communication service’  649–​50 human rights  648–​9 operators and suppliers  651 ‘public availability’  650–​1 service provider–user relationship  ‘controllers’ and ‘processors’ distinguished  664–​5 data security  667–​8 directories  671–​2 monitoring  669–​71 processing restrictions  665–​6 transparency 669 subscriber–user relationship  call-​blocking  675 complexities 672 itemized billing  674 lawful business practices  672–​4 US consumers  legal constraints on regulation of telemarketers  274–​5 overview 275 proprietary network information  279–​82 unsolicited calls and texts  275–​7 unsolicited emails  278–​9 unsolicited faxes  278 user–State privacy relationship  EU law  654–​7 relevance  653–​4 UK law  657–​63 user–user relationship  caller identification  677–​8

913

cookies  675–​6 limited direct impact  675 unsolicited communications  679– ​81 Privatization  British Telecom (BT)  112–​13 early development of competition in UK  48–​9 impetus for reform in developing countries 851 need for privacy protection  646 relationship with liberalization  11–​12 Public policy  see also Universal Services Obligation (USO) changes within the EU  148–​55 drive towards liberalization  12–​14 duopoly  117–​18 EU advisory bodies  186 licensing  early trade restrictions  290 main concerns  8–​9 recognition of global issues  24–​5 role of FCC  220 Public security see Security Public Utility Commissions  226–​7 Quality of service see Consumer protection Radio see Broadcasting; Wireless networks ‘Ramsey pricing’  31,  67–​8 Rate-​of-​Return (RoR) regulation 41 Rebalancing of prices  58–​9 Recording see Interception, monitoring, and recording Reference offers 482 Revenue maximizing 300 Rightswatch 742 Roaming  access and interconnection  475–​6 agreements in restraint of trade (Art 101)  545–​7 obligation to provide  130–​1 reform in emerging markets  874 sources of EU law  157 US approach  257 Routing systems see Switching systems ‘RPI –​X’ formula 41

941

914 Index Satellite networks  capacity agreements  contractual issues  614–​16 types of agreement  608 international regulation  international conventions  798–​802 overview  793–​4 space law  794–​8 United States  207–​9 Sector regulation  defining moment  4 economic controls  common costs  30–​1 economies of scale and scope  33–​4 network externalities  32–​3 pricing when demand exceeds capacity levels  31–​2 Security  see also Data protection; Privacy access and interconnection  486 capacity agreements  613 data security  667–​8 importance  164–​5 improvements 6 reform in emerging markets  890–​1 Service levels  capacity agreements  611–​13 consumer protection provisions  EU protection provisions  502–​3 UK provisions  463–​4,  506–​7 effect of price capping  42–​3 liberalization of EU competition law  168–​70 paying transit agreements  489 special treatment of MNEs  cross-​border nature  626–​7 mobile networks  629–​30 outsourcing  627–​9 system integration  628 unified communications  628–​9 UK implementation of Authorisation Framework  342–​3 Universal Services Obligation (USO)  costs  60–​1 drive towards liberalization  12–​14 funding 61 importance of regulation  19–​21

operation in UK  61–​2 public policy concern  8–​9 social obligations on retail prices  59– ​6 0 Service provider–​user privacy relationship  675–​6 see also User–​State privacy relationship; User–user privacy relationship ‘controllers’ and ‘processors’ distinguished  664–​5 data security  667–​8 directories  671–​2 monitoring  669–​71 processing restrictions  665–​6 transparency 669 ‘Significant market power’  abuse of dominance  173–​8 access and interconnection  469–​74 Access Directive  456–​8 EU licensing regime  324–​6 reference offers  482 Sound broadcasting see Broadcasting Sources of law  European Union (EU)  155–​60 World Trade Organization  GATS  829–​32 GATS Fourth Protocol  833–​7 status  837–​40 telecommunications Annex  832–​3 Space  international law  794–​8 key powers  17 Spectrum management  see also Broadband conclusions  394–​5 control through licensing  286 EU framework  402–​18 expansion of mobile telephony  131–​2 foundational regulatory component for emerging markets  874–​7 history of regulation  international radio communications  393–​6 international telegraphy regulation  391–​3 national frameworks for regulation  396–​400

951

Index licensing  current relevance  295 legal issues  303 revenue maximizing  300 Licensing Directive  310 overview  allocation for public sector purposes  386–​7 benefits of technology  382–​3 harmonization  384–​5 importance of medium for transmission  381–​2 increased demand  381 liberalization  387–​8 regulatory options  383–​4, 387 trading and farming  413 UK approach  131–​2 UK framework  grants of recognized access  424–​7 market mechanisms and liberalization  427–​32 Ofcom powers  420–​4 regulatory scope and powers  419 statutory provisions  418–​19 US approach  history and development  206–​7 licensing  235–​9 overview  241–​2 wave frequencies  388–​90 WTO regulation  390 SSNIP test  34–​5, 556, 567 Standards  agreements in restraint of trade (Art 101)  551–​3 contractual issues for switching systems 480 harmonization measures  170–​3 importance  22–​3 International Telecommunication Union (ITU)  809–​11 licensing  308–​10 recognition of global issues  24–​5 Structural separation 47 Submarine cables  802–​6 Subscriber–​user privacy relationship  see also User–State privacy relationship; User–​user privacy relationship

915

call-​blocking  675 complexities 672 itemized billing  674 lawful business practices  672–​4 Surveillance see Interception, monitoring, and recording Switching between providers  EU provisions  503 UK provisions  522–​3 Switching systems  Authorisation Directive  315 fundamental technologies  5–​7 interconnection of circuit switched networks  438–​9 interconnection of packet-​s witched networks  439–​41 packet-​s witched and circuit-​s witched networks distinguished  438 UK implementation of Authorisation Framework  352–​4 Technologies  access and interconnection  470–​2 barriers to entry  38 challenges for UK  internet telephony  139–​41 next generation networks  139–​41, 141–​2 competition issues  23 convergence 730 Deep Packet Inspection (DPI)  750 difficulties created for public policy  8–​9 evolving policy within EU  152 importance of standards  22–​3 imposition of eligibility requirements  297–​8 internet 9 liberalization within EU  ‘essential requirements’ approach  164–​5 primary focus on free movement  165–​8 multinational enterprises (MNEs)  contractual issues  638–​40 need for special type of service  628 need for effective interconnection  64 radio 108 rapidly changing environment  5 reform in emerging markets  888

961

916 Index Technologies (cont.) spectrum management  EU framework  403–​4 importance  382–​3 wave frequencies  388–​90 underlying fundamentals  5 Telecommunications law  see also Competition law EU initiatives  enforcement  185–​7 future directions  193–​4 harmonization measures  170–​3 notification of ‘significant market power’  173–​8 sources of law  155–​60 Universal Services Obligation (USO)  186–​93 impact of broadcasting on convergence  advertising regulation  720–​7 AVMSD  684–​93 content  708–​14 infrastructures  705–​8 on-​demand programmes  714–​19 overview  683–​4 premium rate services  728–​30 radio licensing in UK  703–​5 television licensing in UK  693–​703 importance of standards  22–​3 key powers  17 licensing  international law and standards  308–​10 nature of licences  302–​3 national frameworks for regulation  14 ongoing liberalization  843–​4 pace of change  25–​6 preferred terminology  5–​8 recognition of global issues  24 sources  European Union (EU)  155–​60 sources of international regulation  GATS  829–​32 GATS Fourth Protocol  833–​7 status of WTO law  837–​40 telecommunications Annex  832–​3 structure and method  19–​21 UK regime  development of industry  108–​11

early history  101–​2 key issues  133–​45 late 20th century development  112–​17 Telegraph systems  history  introduction of railways and electricity  101–​2 regulation  102–​3 introduction of radio  107–​8 licensing  104–​5 spectrum management  international regulation  391–​3 UK development of regulation  400–​2 United States  196–​7 Telephony  EU licensing regime  Authorisation Directive  314–​15 evolution of GPO  106–​7 evolving policy within EU  148–​55 fundamental technologies  7 history  103–​5 Licensing Directive  310 numbers  key powers  17 Open Network Provision  172–​3 service provider–user privacy relationship  directories  671–​2 monitoring  669–​71 transparency 669 special treatment of MNEs  628–​9 subscriber–user privacy relationship  call-​blocking  675 itemized billing  674 lawful business practices  672–​4 United States  196–​7 user–​user privacy relationship  caller identification  677–​8 unsolicited communications  679– ​81 Television  advertising regulation  ASA and associated bodies  720–​1 content 724 general application  723–​4 on-​demand programmes  714–​18 other schemes  719–​20 participation in programmes  726–​7 scheduling  724–​5

971

Index sponsorship 727 teleshopping 726 content regulation  AVMSD requirements  708–​11 Broadcasting Code  711–​14 on-​demand programmes  implementation of directive  714–​15 Scope Guidance  715–​18 UK licensing  DTPS and DTAS  698 fit and proper persons  695–​6 ITV  701–​2 local TV  702 multiplexes and digital TV  698–​9 overview  693–​4 programme services  703 public service television  699–​701 TLCSs  696–​8 Terminal equipment  evolving policy within EU  152 fundamental technologies  5–​8 Termination charges  charge controls on mobile networks 130 contractual issues for switching systems  479–​80 ‘significant market power’  176 Terminology  evolving policy within EU  152–​3 ex ante/​ex post controls  21 telecommunications  5– ​8 Transparency  access and interconnection  472 consumer protection provisions  EU protection provisions  500–​1 UK provisions  508–​10 customer choice  45 EU approach  172 EU licensing regime  Authorisation Directive  317, 319 Licensing Directive  311 UK implementation of Authorisation Framework 343 licensing  294, 304–​5, 308 objectives 21 Ofcom’s strategic review  124 removal of anti-​competitive practices  20

917 service provider–​user privacy relationship 669 UK approach  124 UK implementation of Authorisation Framework  347–​9

United Kingdom  see also Ofcom access and interconnection  Art 5 access-​related conditions  474–​5 Art 6 access-​related conditions  476–​7 broadband  477–​8 dispute resolution  477 facility sharing  466–​7 general interconnection obligation  467–​8 overview  465–​6 SMP obligations  469–​74 challenge of new technologies  internet telephony  139–​41 next generation networks  139–​41, 141–​2 consumer protection provisions  marketing  505–​11 convergence  infrastructures  705–​8 radio licensing  703–​5 television licensing  693–​703 development of industry  fixed networks  108–​10 early history  evolution of GPO  106–​7 introduction of radio and mobile communications  107– ​8 origins of GPO  102 telegraph systems  102–​3 telephony  103–​5 economic regulation  convergence between telecoms, broadcasting, and information technology  51–​4 end of duopoly policy  49–​51 privatization and early development of competition  48–​9 implementation of Authorisation Framework  billing requirements  349–​50 calling line identification  352 conditions of entitlement  337–​65

981

918 Index United Kingdom (cont.) dispute resolution  350 enforcement  365–​76 fees  376–​9 future revisions  379 mobile networks  354–​5 notification procedure  336–​7 persons with disabilities  351 statutory provisions  335–​6 switching systems  352–​4 transparency  347–​9 industry developments  broadband 111 Communications Act 2003  120–​3 converged networks  119 duopoly  117–​18 expansion of mobile telephony  128–​32 mobile networks  109–​10 strategic review by Ofcom  123–​8 interception, monitoring, and recording  reform of law  787–​8 interconnection between networks  fixed communications  68–​90 implementation of EU Directive  446–​51 key issues  97 mobile networks  90– ​6 position prior to EU Directive  444–​5 ISP liability for content  application of ECD  744 copyright enforcement  749–​52 Internet Watch Foundation  758–​61 legal debate regarding traffic management  763–​8 statutory provisions  754–​5 key debate on deregulation  10 key issues  Brexit  143–​5 internet telephony  139–​41 next generation networks  141–​2 number portability  133–​5 Universal Services Obligation (USO) 134 liberalization  establishment of DGT  114 privatization of BT  112–​13 licensing (see also implementation above) current relevance  293–​302

early trade restrictions  287–​90 forms and processes  304–​8 market investigations  585–​91 merger control  575–​9 national frameworks for regulation  14 Ofcom  comments on USO  134 digital communications review  127–​8 functions  120–​2 national frameworks for regulation  14 strategic review of industry  123–​8 take-​over of DGT’s functions  120 recognition of global issues  24–​5 regulatory interventions  local loop bundling  138–​9 retail price regulation  core principle  54–​6 key issues  57 operation of regime  57 spectrum management  grants of recognized access  424–​7 historical development  400–​2 interpretation of ‘Refarming Directive’  385–​7 market mechanisms and liberalization  427–​32 Ofcom powers  420–​4 regulatory scope and powers  419 statutory provisions  418–​19 structure and method  19–​21 tariff rebalancing  58–​9 telegraph systems  licensing  104–​5 TV licensing  overview  693–​4 UK licensing  DTPS and DTAS  698 fit and proper persons  695–​6 ITV  701–​2 local TV  702 multiplexes and digital TV  698–​9 programme services  703 public service television  699–​701 TLCSs  696–​8 Universal Services Obligation (USO)  costs  60–​1 funding 61

91

Index operation in UK  61–​2 social obligations on retail prices  59– ​6 0 user–State privacy relationship  interception, acquisition, and equipment interference  662–​3 range of powers  657–​9 technical capability and data retention  659–​62 United States  access and interconnection  fixed networks  242–​57 mobile networks  242–​57 administrative procedure  issuance of orders  229 review of FCC action  229–​30 rulemaking  228–​9 statutory basis  227–​8 competition law  anti-​competitive agreements  267–​8 investigations  269–​70 merger control  270–​4 penalties for non-​compliance  269 price discrimination  268–​9 regulatory double jeopardy  270 role of DoJ  267 consumer privacy  legal constraints on regulation of telemarketers  274–​5 overview 275 Federal Communications Commission  key debate on deregulation  10 merger control  273–​4 overview  219–​20 recognition of global issues  24 spectrum management  398 structure and method  19 future challenges  282 history and developments  cable networks  200–​3 carrier rule-​making  199 competition 1950–1996  197–​9 local-​exchanges  199–​200 overview  196–​7 satellite networks  207–​9 telegraph and telephone pre-​1934  196–​7 wireless networks  204–​7

919 importance of ex ante controls  21 institutions and authorities (see also Federal Communications Commission) Congress and President  225–​6 courts 225 National Association of Regulatory Utility Commissioners  227 National Telecommunications and Information Administration  223 Public Utility Commissions  226–​7 ISP liability for content  EU approach compared  742–​4 intermediary liability  735–​9 legal debate regarding traffic management  763–​8 network neutrality  768–​75 licensing  common carriers defined  233 current relevance  294 domestic fixed services  234 foreign ownership requirements  239–​41 forms and processes  306–​7 history and development  287–​90 international services  234–​5 legal issues  302 local entry licences  239 powers and purposes  292 spectrum licensing  235–​9 spectrum management  295 licensing of common carriers  234–​5 national frameworks for regulation  14 paying transit agreements  487 pre-​emption doctrine  230–​2 provision of universal services  190 relationship between liberalization and privatization 12 spectrum management  241–​2 Universal Services Obligation (USO)  137 E-​rate  263–​4 funding difficulties  265–​7 high-​cost scheme  262–​3 low-​i ncome scheme  260–​2 policy and legislative background  258–​60 rural health care programme  264

290

920 Index Universal Services Obligation (USO)  Authorisation Directive  327–​8 consumer protection  492 costs  60–​1 drive towards liberalization  12–​14 emerging markets  first-​generation reforms in  853 foundational regulatory components  878–​9 EU initiatives  186–​93 evolving policy within EU  149 funding 61 future directions  193–​4 importance of regulation  19–​21 key issue  134 licensing  current relevance  297 operation in UK  61–​2 public policy concern  8–​9 social obligations on retail prices  59–​60 United States  E-​rate  263–​4 funding difficulties  265–​7 high-​cost scheme  262–​3 low-​i ncome scheme  260–​2 policy and legislative background  258–​60 rural health care programme  264 User–State privacy relationship  see also Service provider–​user privacy relationship; User–user privacy relationship EU law  654–​7 relevance  653–​4 UK law  interception, acquisition, and equipment interference  662–​3 range of powers  657–​9 technical capability and data retention  659–​62 User–​user privacy relationship  see also Service provider–​user privacy relationship; Subscriber–​user privacy relationship; User–State privacy relationship caller identification  677–​8

cookies  675–​6 limited direct impact  675 unsolicited communications  679– ​81 Virtual separation 46 Voice telephony see Telephony VoIP  UK consumer protection  530 US approach  209–​19 Weighted average cost of capital (WACC) 41 Wireless networks  convergence in UK  703–​5 expansion of mobile telephony  128–​32 fundamental technologies  5–​7 importance  107–​8 licensing  current relevance  295–​7 revenue maximizing  285–​8 radio licensing in UK  703–​5 spectrum management  international regulation  393–​6 UK development of regulation  400–​2 US approach  history and development  204–​7 World Bank  strategic role  14 World Trade Organization (WTO)  defining moment for sector development 4 dispute resolution  840–​3 establishment  827–​8 impact on EU law  149 impetus for reform in developing countries 850 licensing 630 licensing requirements  304 ongoing liberalization  843–​4 role  828–​9 sources of law  GATS  829–​32 GATS Fourth Protocol  833–​7 status  837–​40 telecommunications Annex  832–​3 spectrum management  390 US licensing of common carriers  240–​1